OLYMPIA – Halfway through the legislative session, Democratic state lawmakers continue to keep alive nearly $1 billion in proposed tax increases as a means of balancing the budget, serving the needs of residents and satisfying demands of political allies.
Legislation looms to boost the cost of candy, pop, booze and cigarettes along with new taxes on cosmetic surgery, card rooms and doctors as revenue sources for the state’s next two-year budget.
| Several tax increases are under consideration this year. Below are brief descriptions of the most significant, and the estimated revenue that each would yield in two years (the final item, the personal income tax, lists revenue for one year).
HB 1087: Imposes a nickel tax on each 12-ounce can of soda pop. $300 million. HB 1088: Imposes a 1 percent hike in B&O tax paid by physicians. $94 million. HB 1089: Increases tax on wine and hard liquor. $203 million. HB 2075: Increases tax on cigarettes to $2.50 a pack. $300 million. SB 5829: Increases tax on cigarettes to $2.02 a pack. $167 million. SB 5287: Imposes a new 10 percent state tax on social card games. $38 million. SB 5451: Requires sales tax be charged for cosmetic surgery. $39 million. SB 5973: Requires sales tax be charged on sales of candy. $34 million. Senate Joint Resolution 8211: Creates personal income tax. *$400 million. *if approved by voters, it would take effect second year of biennium. HB: House Bill SB: Senate Bill. |
Individually, Democrats are picking taxes that they can endorse. Collectively they hold the majority in the Legislature and are not pushing for any package until they see what Gov. Christine Gregoire puts in her budget plan, due in late March.
Gregoire repeatedly says she’s seeking a spending plan that does not raise any taxes.
At the same time, taxes would protect against cuts in education and health care, and grant raises to teachers and public workers.
“This budget will test our humanity,” said Sen. Rosa Franklin, D-Tacoma, author of three tax bills. “You’ll hear people say ‘cut the fat, cut the fat.’ We have no fat anymore. People are constantly coming to my office and saying, ‘Please don’t cut any more, you’re hurting us.’”
The pressure to deliver is clearly on Democrats, who hold the majority in both chambers of the Legislature.
“There are a lot of progressive people in Olympia with their hands out who are not begging but demanding,” said Cindi Laws, executive director of the Rainier Institute, a nonpartisan public policy think tank in Seattle.
Republicans are content to let Democrats do all the talking on taxes and will wait to see what they offer in a budget before responding.
“Democrats know the public does not want taxes to be raised and they know that they made promises that require raising taxes. They find themselves in a pickle,” said Rep. Doug Ericksen, R-Ferndale, the House Republican floor leader.
Gregoire was to release her budget 10 days ago. She delayed a month, wanting to calculate in the latest economic data that the Forecast Council will issue March 17. Republicans say that’s only part of the reason for postponement.
The governor has two budgets, contended Rep. Rodney Tom, R-Eastgate. “She has a revote budget and nonrevote budget,” he said. “If there’s a revote, there’ll be no taxes. If there’s no revote, hold the barn door.”
Victor Moore, director of Office of Financial Management, said that’s not the case.
The governor wants to use the same economic assumptions in her budget that will be used when legislators debate their versions, he said.
Also, if the report shows the state will have more revenue to work with, it will affect what steps are taken to prepare a balanced budget.
The state anticipates having $24.7 billion to spend in the next two years. While it is more than was available for the budget in 2003, it is not enough money to maintain what the state offers today.
If no new programs are started, the state will be $1 billion shy of what it needs to cover the cost of teaching new students, housing more prisoners, caring for the sick and funding public employee pensions.
That deficit becomes $2.2 billion after adding in the loss of the estate tax, the price of public workers contracts and the sum of an array of proposed programs.
Gregoire instructed Moore to prepare a budget that is balanced without raising any taxes.
To do it, he’s looking at cutting some programs, scraping dollars from others and proposing policy decisions such as deferring hundreds of millions of dollars in payments into the pension.
Democrats will parse through the taxes for those that are politically palatable to prevent cuts in social programs and ensure promises for teacher and worker raises.
When former Gov. Gary Locke departed office, he left behind a budget plan that called for taxes on soda pop, beer, wine and hard liquor plus a 1 percent increase in the B&O tax paid by doctors. Those would generate about $600 million over two years.
This session, Democratic legislators have proposed a tax on candy, on cosmetic surgery such as Botox treatments and nose jobs, and on card games conducted in minicasinos. These are projected to generate $111 million.
Democrats also proposed a 60-cent-a-pack tax increase on cigarettes while Tom went further, and proposed that the increase go up by $1.08. The former is predicted to generate $167 million, the latter nearly $300 million, in the biennium.
Franklin also proposed taxing income earned from investments, plus a constitutional amendment to create a personal income tax and halve the state portion of the sales tax.
“My bills are for dialogue and for thinking,” Franklin said. “It is about our state tax structure. The B&O is an albatross around the neck of businesses. The sales tax hits the poorest of the poor. We need to recognize just how bad off we really are.”
Some Republicans oppose any tax.
Others said their opposition is not absolute if Democrats agree to overhaul how the state deals with issues such as health care and workers compensation.
“If they do some compromises with structural changes, and some small taxes, that is something we can look at,” Ericksen said.
Lawmakers should proceed with caution and without fear when considering whether new or higher taxes are needed, Laws said.
For example, people are willing to pay higher gas taxes if it is clear how the money is spent, she said.
Lawmakers are pushing on that front. There are bills that would let cities and counties levy a local gas tax and hike vehicle license fees to pay for road projects. There are also rumblings that legislators will push for a statewide gas tax increase.
Laws called Tom’s tobacco tax bill a “bold” act. “People know the impact and the cost of risky behavior,” she said.
At the same time, she said, legislators need to make cuts.
Laws said she opposes Republican suggestions of privatizing health care and workers compensation programs. She suggested looking at other gestures such as ending the state’s running of liquor warehouses.
Legislators said decisions on taxes and the budget may not be resolved until the session’s final hours.
“We need to be out of here at midnight April 24,” said Rep. Ed Orcutt, R-Kalama, the ranking minority member on the House Finance Committee. “We don’t have enough money to run state government now. I don’t think we should go into overtime spending money we don’t have.”
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