March 2, 2010 in City

House enters tax plan fray

Plan raises $758 million to cover budget shortfall
By The Spokesman-Review
 

Here are the three proposals for raising taxes as part of a plan to fill a $2.8 billion hole in the state budget.
(Full-size photo)

OLYMPIA – People who smoke, chew gum, drink bottled water or get a face lift would pay more taxes this year under a plan by House Democrats to find extra money to balance the state’s budget.

Lawyers, accountants and marketing specialists would see their taxes go up. So would airplane owners and anyone buying customized software.

Out-of-state shoppers would pay the same sales tax as Washington residents, and out-of-state businesses could face higher taxes under new formulas. But Washington shoppers would continue to pay the same sales tax they currently pay.

Those are some of the ways House Finance Committee Chairman Ross Hunter, D-Medina, proposed Monday to raise an extra $758 million in taxes through June 2011 to help with the state’s $2.8 billion budget hole. The rest of the estimated shortfall would have to be covered with budget cuts, federal money and shifting money from other accounts.

Like Gov. Chris Gregoire and Senate Democrats, who previously released budgets that contain a mixture of tax increases, program cuts and federal money, Hunter called the House Democrats’ proposal a balanced approach. But all three strike the balance differently.

Some of the taxes are similar – cigarette smokers get hit hard in all three plans, as do out-of-state companies that do business in Washington – but there are significant differences. Gregoire would nearly triple the hazardous substance tax, which would increase the cost of refining oil and could lead to a 3-cent or more per gallon increase on gasoline. Senate Democrats called last week for an across-the-board, three-tenths of a cent increase in the sales tax for the next three years.

Hunter said he needed the last week to put together a plan that reached consensus among House Democrats, who have nearly a two-thirds majority in that chamber. He said he was close to having the simple majority needed to pass the plan.

“I can’t tell you I’ve got exactly 50 today,” he said when he presented the plan at noon Monday.

Senate Democrats passed a spending plan on Saturday with the bare minimum they needed – 25 votes – but don’t yet have that many votes for their tax plan.

Republicans in both chambers say they’re opposed to tax increases until the state cuts spending and reforms operations.

“My struggle with all three of these budgets is, raising taxes ought to be the last option, and instead it was the first,” said state Rep. Kevin Parker, R-Spokane, a member of the Finance Committee, which will hold a hearing on the House tax plan this morning. “It does not foster job growth. Historically, it is jobs that bring us out of a recession.”

Hunter’s proposal could hit businesses in Spokane and other communities near a state border harder, Parker said, by raising taxes on things that people could easily drive over a state line to get, like cigarettes, bottled water or candy, and discourages out-of-state shoppers from coming in.

The question now is what parts of each proposal will be blended into an overall plan that can pass the Legislature, which is scheduled to adjourn on March 11.

Gregoire said Monday she prefers the House approach on taxes, which like hers raises smaller amounts from a longer list, but likes the spending proposals in the Senate. She opposes a general sales tax increase, saying it would be especially hard on the recovering construction industry, but stopped short of threatening a veto.

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