Senate Dems: Swap some sales tax for income tax on rich?

OLYMPIA — Senate Democrats may offer voters a choice: a higher sales tax or an income tax on people making more than $200,000 a year. With very short notice, the Senate Ways and Means Committee held a hearing Thursday on a voter-approved income tax, the latest plan from Democrats to close a projected $2.8 billion budget gap with a balance of program cuts and higher taxes. It was quickly praised by college students and members of progressive groups worried about program cuts, and denounced by business organizations and conservatives saying they are taxed too much already. Sen. Margareta Prentice, chairwoman of the Ways and Means Committee, said it may be the way out of the state’s budget crisis, but added everything in the plan is subject to change. “It allows us to make the tough decisions in Olympia while allowing the voters to decide in November,” said Prentice, D-Renton. With a week remaining in the session, House and Senate Democrats disagree on which taxes to raise, and by how much. While the House is looking at a series of smaller changes, Senate Democrats had a plan to up the sales tax by three-tenths of 1 percent for the next three years. Thursday they offered a revision: raise the sales tax immediately, but give voters a chance in November to decide if they wanted to remove that increase, plus another half-cent per dollar from the sales tax in exchange for an income tax on so-called high earners. If voters say yes, a person making more than $200,000 or a couple making more than $400,000 would pay a 4.5 percent tax on any amount over that limit. Thus, a couple making $450,000 would pay 4.5 percent of $50,000, or $2,250. People making less than that wouldn’t pay the income tax. Senate Majority Leader Lisa Brown, D-Spokane, broached the idea today on her blog, and said she sees it as a possible solution to the state’s financial crisis. She supports the concept but isn’t chained to it. “I would personally feel good about it…I’m not saying it has got to be this way,” she said A few hours later, Sen. Rosa Franklin, D-Tacoma, told the committee it would start bringing the state’s tax system into the 21st Century: “This is a very first step. It is not a magic bullet.” Students from The Evergreen State College, who came to the Capitol earlier in the day to protest higher tuition and cuts to financial aid, said the state’s current tax system unfairly burdens the poor. “A tax on higher earners is preferable to cuts to programs for low earners,” said economics major Matt Boyd. But other speakers said a tax that starts with incomes of $200,000 would quickly spread to everyone, or questioned whether it was even constitutional to impose an income tax this way. Amber Gunn of the Evergreen Freedom Foundation questioned the short notice for a hearing on a bill no one had a chance to read: “I don’t think there’s a more visible way for you to signal to people you’re not concerned with their input.” In a separate interview, Sen. Chris Marr, D-Spokane, said that although it’s good to have the discussion on an income tax, it should have started in January. “I didn’t like the sales tax (increase) and I like the idea of an income tax even less,” Marr said. “I question the willingness of the public to move in the direction of an income tax.” Sen. Mark Schoesler, R-Ritzville, said bringing the bill up on short notice, near the end of the session, belies any suggestion of public involvement: “This is not open government, this is government by convenience.”