State Dems tied up over taxing questions

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By CURT WOODWARD Associated Press Writers

Summary

With less than two weeks left in their election-year legislative session, Democratic state lawmakers are tied in knots over which taxes to raise to keep their preferred state programs afloat.

Story Published: Feb 26, 2010 at 7:26 PM PST

State Dems tied up over taxing questions
OLYMPIA, Wash. (AP) - With less than two weeks left in their election-year legislative session, Democratic state lawmakers are tied in knots over which taxes to raise to keep their preferred state programs afloat.

The state Senate has presented a plan for financing this year's budget but already is backing away from at least one key portion. The House remains divided, postponing public discussion of its approach.

With March 11 as the last day allowed for a regular session under the state constitution, this week's political gridlock is giving life to annual speculation about overtime.

Gov. Chris Gregoire's chief of staff, Jay Manning, became perhaps the most prominent official to predict a special session during a Thursday appearance at the Association of Washington Business' regular policy luncheon.

"It's rough up there," Manning said, according to the AWB's Olympia Business Watch blog. "I don't think we've quite plumbed the depths. And I don't think we're going home on the 11th."

The problem for ruling Democrats is clear. To solve the $2.8 billion gap between current spending and tax income through June 2011, majority lawmakers say they must trim spending, raise taxes and use short-term accounting maneuvers.

Both have reasonably complete lists of how they would go about cutting spending. There are some notable disagreements, but the hang-up is taxes.

The two chambers each want roughly $900 million in revenue, with two main avenues legislators could take: Jack up the state sales tax, or go for a "cats and dogs" approach that raises a bevy of targeted taxes.

Gregoire prefers the latter. Stopping short of a veto threat, she says she's worried about the sales tax's effect on the fragile economic recovery, suffering from weak consumer spending amid the worst state unemployment rate in 25 years.

Senate Democrats have unveiled a combination approach. Their plan would temporarily raise the sales tax three-tenths of a penny, raising about $300 million and pushing the state rate to 6.8 percent.

That would be tied to about $500 million in reduced tax exemptions and an additional $1-per-pack cigarette tax, along with a rebate targeted at lessening the sales tax bite on poorer residents.

But even with a plan in public view, the Senate is not claiming its opening bid will remain intact. Senate Majority Leader Lisa Brown, D-Spokane, pointed to a $92 million plan to end the sales-tax exemption on trade-in cars as something that's already being reconsidered.

House Democrats appear to be all over the map. The caucus finally met this week to discuss five tax options presented by House Finance Committee Chairman Ross Hunter, D-Medina.

Anything approaching consensus appeared out of immediate reach as of Friday afternoon, although Hunter confirmed a sales-tax approach seems relatively unpopular in the House.

"There are a lot of people who don't support a sales tax, and trying to get that done, I think, would be difficult," Hunter said Friday. "I think it's bad policy, and I think the politics are very bad as well."

On the other side are Democrats from conservative areas and swing districts who say a sales tax is fairer and easier to implement, given the myriad of interest groups and voters who might object to any of a number of specific taxes or closed loopholes.

"Everybody pays a little, and everyone benefits a little, and it's very simple to explain," said House Ways and Means Committee Chairwoman Kelli Linville, D-Bellingham. "We haven't had a general sales tax increase for almost 30 years, so it's not like we raise it every day."

Republicans and the business lobby say they still haven't seen enough emphasis on reinventing government and getting state employee costs under control.

"Small businesses are having to make tough decisions every day, and we think state government ought to do the same thing," said Patrick Connor of the National Federation of Independent Business.

But privately, even some anti-tax advocates agree with liberal observers that a sales tax hike could be the only feasible way to solve the budget problem on time.