Washington could see new taxes in a host of areas

OLYMPIA — You could pay more for candy, soda pop or bottled water next year to help dig the state out of another gaping budget hole.

Barbers, beauticians and lawyers may be told to start charging sales tax for their services as well.

Some legislators want Oregon residents to pay sales tax when shopping Washington — they don’t now — while others think legalizing and taxing the sale of marijuana could generate chunks of money to cover the projected $2.6 billion budget deficit.

“There’s no idea too harebrained for us to think about,” said state Sen. Margarita Prentice, D-Renton, chairwoman of the Senate Ways and Means Committee.

While closing loopholes and ending exemptions are being scrutinized, it’s taxes, new ones and higher ones, which will stir up the most heated debate when the Legislature convenes its 2010 session in January.

Gov. Chris Gregoire and fellow Democrats in the state Legislature are looking for enough new money to preserve an array of social programs now on the chopping block. Republicans, who are the minority in the Legislature, oppose new taxes and think the state can no longer afford some of the programs targeted for saving.

At this point, there are numerous tax ideas on the table. Each will produce a different amount of cash.

There are some politically improbable ones such as an income tax or four-hour Keno, both of which have been summarily rejected by legislative leaders for 2010.

There are the politically volatile options like hiking the state’s sales, property or business and occupation taxes.

There are politically difficult choices such as adding a sales tax on services of lawyers, accountants, dentists and other business and financial professionals. It’s been tried before without success.

And finally there are the politically possible items, or, as some would say, the low-hanging fruit. These include ratcheting up the cigarette tax, imposing a fee on soda pop and bottled water and charging sales tax on candy, gum, muffins and other food products.

Not all of these taxes pay the same dividends, according to estimates prepared in November by the state Department of Revenue.

Increasing the sales tax is a big money-maker, for example. If it went up a penny from its current 6.5 cents, it would bring in roughly $1 billion to the state treasury between July 1, 2010, and June 30, 2011. Make it half a cent and half as much is raised, according to the department calculations.

Tacking a 10 percent surtax onto the business and occupation tax would net about $267 million, while a quarter point-boost in the real estate excise tax could produce nearly $125 million. Those steps are unlikely to be taken by lawmakers fearful of harming the economy and their political careers.

If they put a sales tax on candy and gum — as has already been proposed in legislation — it could bring in $28 million. By comparison, adding it to cosmetic surgery will gross about a quarter of that.

If lawmakers decided to charge wholesalers of soda pop a nickel per 12-ounce can of soda pop, they’d raise about $94 million. With making wholesalers of bottled water pay a penny per ounce, an estimated $135 million in new money could be generated.

While sin taxes often get mentioned first, they don’t do much for the bottom line Adding another quarter to the cigarette tax — which is now hovering at about $2 a pack — might bring in $25 million.

State revenue officials point out these numbers are guideposts provided lawmakers. Detailed fiscal notes would be prepared for taxes given serious consideration in the session.

That may not occur until the final days of the session.

“Taxes really are meant to benefit the people,” Prentice said. “If we made an all-cuts budget and no taxes, it would be so nightmarish as just about everything we’re trying to do to help people would be gone. We will have great difficulty agreeing to which taxes.”

Jerry Cornfield: 360-352-8623, jcornfield@heraldnet.com.

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