OLYMPIA – A proposal to raise the state sales tax by 1 cent, and tie it to high levels of unemployment, was introduced Thursday in the state House of Representatives.
Rep. Timm Ormsby, D-Spokane and one of the House Bill 3183’s 15 co-sponsors, calls it “an interesting concept” while conceding the sales tax is “a terrible revenue source.”
“I’m not crazy about the sales tax. But it’s one of the very few options available to the state,” he said.
The bill would raise the state’s share of the sales tax by 1 penny per dollar starting June 30, with 80 percent of the estimated $1 billion in new revenue raised each year going to the state’s general fund, and most of the rest being set aside for roads and bridges. It would keep that extra penny per dollar in place until the state’s unemployment rate dropped to 6.5 percent for four straight months, when it would drop by a half cent. The other half-cent would come off after the unemployment rate dropped to 5 percent.
The state currently collects 6.5 cents per dollar, though the total rate paid by consumers is generally higher because of local-option increases imposed by cities and counties. Each penny increase in the state’s sales tax generates about $1 billion in revenue.
Minutes after the bill was introduced, the Washington Policy Center, a conservative organization, warned the sales tax could be in place for a long time. The state’s unemployment rate is 9.5 percent and a tax increase of this magnitude could cost the state thousands more jobs, said the center’s Jason Mercier.
Ormsby said the bill was introduced in the hope of getting a hearing in the House Ways and Means Committee and generating discussion: “I’ll be interested to see what kind of reaction is out there.”
There is no similar proposal in the Senate. Gov. Chris Gregoire has said she’d consider any options the Legislature sent her but has not called for a sales tax increase.
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