Sales-tax increase could reach ballot

OLYMPIA – Dozens of health care workers and advocates for the poor Friday urged state lawmakers to push ahead with a proposed $1 billion sales-tax increase over the next three years.

If voters approve the plan in November, people would pay an extra 3 cents on a $10 purchase. The roughly $350 million a year raised would go to hospitals, nursing homes, mental health services and other health care to partially offset the effects of state budget cuts. Low-income families would also get a state tax rebate to offset the additional cost.

The alternative, proponents said Friday, is deep budget cutting that would leave thousands of people without health coverage, elderly people unable to get care, hospitals struggling with insolvency and mentally ill people untreated.

“We are in a position where, make no doubt about it, people will die,” said the prime sponsor of the sales-tax plan, Rep. Eric Pettigrew, D-Seattle. Without more state revenue, “There will be emergency rooms that will bulge, nursing homes that will bulge, there will be people in the street.”

At a legislative hearing Friday on Pettigrew’s proposal, House Bill 2377, the crowd was overwhelmingly in favor of the increase.

“Nobody likes higher taxes, in general or on themselves,” said Nick Federici, a lobbyist for low-income housing and nursing homes. But he said lawmakers must find a way to protect vulnerable people.

To make the point that the cost would be minimal, Federici held up a DVD of the movie “Twilight.”

“I would have had to pay only 7 cents more in buying this movie for my daughter,” he said.

For people on the state’s Basic Health Plan or needing care in hospitals and nursing homes, he said, that small amount “literally is the difference between life and death.”

Half the state’s hospitals are losing money, said Leo Greenwalt, president of the state hospital association. And they’re slated to lose $350 million or more in state aid under the legislative budgets, he said. If voters approve the sales-tax increase, he said, they would lose less: $110 million.

“Spokane has already begun laying off workers,” Greenwalt said. “It’s happening in Seattle, it’s happening all over the state. It’s just beginning.”

Among the critics: initiative promoter Tim Eyman, who accused lawmakers of continuing to pay for nonessential government functions while using the sick and elderly to win sympathy for a tax increase. Eyman cited Dante’s seven circles of hell.

“There needs to be an eighth circle added and reserved for politicians who are willing to throw the elderly and the disabled under the bus, defund their programs, and then exploit them, using them as props and pawns in their never-ending pursuit of higher taxes,” Eyman told lawmakers Friday. “Have you no shame?”

Pettigrew said later that legislators looked hard at cuts and made them where they could.

North Bend resident David Spring was also critical. Spring wants lawmakers to do away with the state tax break on “intangibles,” an accounting category that includes stocks and bonds. Spring says that would raise billions without touching retirement funds and lower- and middle-class savings.

The poor and middle class already pay too much, Spring said. Pettigrew’s plan, he said, “raises taxes on the middle class to protect tax breaks for millionaires.”

Proponents acknowledge that the sales tax is regressive, but say the tax rebate would partially offset that. People who qualify for the federal Earned Income Tax Credit, such as a family of four earning up to $43,415, would get a 5 percent match from the state. According to the private Washington State Budget and Policy Center, that works out to up to $250 a year for more than 350,000 households in Washington. Thousands of those families live in and around Spokane.

“This will be a significant tax cut for working families with lower incomes,” said the center’s Remy Trupin.

House Speaker Frank Chopp has said he supports sending the idea to voters. Senate Majority Leader Lisa Brown has been floating the idea of a state income tax, but she indicated that the tax rebate might make a sales tax increase more acceptable in the Senate.

Pettigrew said he has no idea if voters would approve the plan.

Some Republicans think that’s unlikely, given the recession. They want the state budget scrubbed harder to avoid the sorts of cuts the tax hike would offset.

“Gentlemen, what do we do when the voters say no?” asked Rep. Maureen Walsh, R-College Place. “Then these folks fall further and further into poverty and more health issues.”

“The public is skeptical, I’m not denying that,” said social services advocate Tony Lee. “But I think it is our job and it is the job of the Legislature to educate people about the impact of these cuts.”