This year’s tax ideas delay needed talk on spending

Scott Brown’s remarkable victory in Massachusetts changed the national political conversation. It also introduced even more budget uncertainty in Olympia. That’s because Gov. Chris Gregoire had hoped for nearly $1 billion from the health care bill derailed by the election of Senator 41.

Earlier this month Gregoire asked lawmakers to restore $779 million of the spending cut in her initial “current revenues” budget. At the same time, she proposed $105 million in new taxes. She said then that she might have word on what the feds would provide as early as tonight’s State of the Union address. The congressional cash would have allowed her to increase spending without additional taxes. Now, even if the feds come through, it’s unlikely we’ll have the money in time for lawmakers to put it in the budget.

Although Gregoire sounded ready to take the feds money and call it a wrap, key legislative leaders were neither counting on the federal money nor considering it a solution if it did arrive. Senate Majority Leader Lisa Brown said last week, “Even if there are federal dollars, we don’t think that’s enough.” Coming at it from the other direction, Sen. Joe Zarelli, the top Republican budget writer on the Ways and Means Committee, pointed out that another dose of one-time money just kicks the problem forward.

Still, few lawmakers would turn the money down. Kicking problems forward is a time-honored election year practice. Even the folks in the Legislature’s progressive camp would prefer to minimize the tax bite by padding the ledger with a cushion from D.C.

Politicians know voters don’t like higher taxes. That’s why they work overtime to figure out how to package the unpalatable. With federal money in doubt, the creativity will only accelerate.

There’s the buck-a-pack cigarette tax hike introduced in the House. Sponsors want to discourage smoking and boost tax revenues. The tax would generate about $100 million to help with the current budget shortfall, with a slice targeted to fund programs to get people to stop smoking. By legislation and initiative, Washington voters have boosted the state tax to $2.025 a pack, dedicating it to health care, water quality, programs to stop youth violence and education. Of course, it’s a dwindling-by-design revenue source. The high tax both reduces consumption and increases tax avoidance.

Another bit of creative packaging would put the sales tax on candy and gum, earmarking the money for public health. It doesn’t raise a lot of money — some $30 million a year — but it lets lawmakers congratulate themselves for combating cavities and obesity. It would also confuse consumers and penalize candy retailers and Washington manufacturers like Brown &Haley. Turns out it’s not easy to define candy. Association of Washington Business lobbyist Amber Carter pointed out that the proposed bill would tax Baby Ruths but not Twix bars.

Bottled water also emerges this year as a boutique tax target. Good for as much as $35 million, the tax plays well with environmentalists. From snuff to muffins, anything that somebody thinks is bad for you justifies a tax for something good.

It’s all marketing. Matching taxes with popular social or political objectives to minimize opposition has been elevated to an art form in Olympia. A few years ago voters signed off when the governor linked the estate tax to school funding.

While they may work for a while, the ploys lack gravity. They amount to a wink and a nod toward the state’s serious budget problems, a sly finesse and a hasty exit before the roof collapses.

Rarely do these revenues match expectations. Punitively taxing something you want to destroy tends to drive down consumption, at least taxable consumption. Crossing the state line has never been difficult. Online shopping is done from home.

Moreover, when times are tough, the dedicated money quickly gets swept into the state’s operating budget. The promised protection lasts only as long as it’s convenient or necessary to close the sale.

Unfortunately, a series of these gimmicks may delay, yet again, the spending reform required to put the state on a sustainable budget trajectory. Voters don’t want major tax hikes. They do want serious budget proposals. We’ve yet to see them.

Richard S. Davis writes on public policy, economics and politics. His e-mail address is richardsdavis@gmail.com.