Washington lawmakers split on sales tax hike for budget


by Associated Press and KING5.com


Posted on February 24, 2010 at 5:45 PM

OLYMPIA, Wash. -- State leaders are split over the idea of a sales tax increase to help balance Washington's $2.8 billion budget deficit.
State Senate Democrats want to temporarily raise the sales tax by three-tenths of a penny, hike the cigarette tax by $1 per pack and close a long list of tax exemptions to help balance the state budget. But Democratic Gov. Chris Gregoire doesn't like that approach. And House Democrats still haven't settled on a tax package.

Legislative leaders are revealing their dueling budget-balancing plans Tuesday in Olympia.

The House version would cut less from state spending, and seek fewer tax hikes than the Senate version. Instead, House Democrats want to rely more heavily on one-time fund transfers and federal money.
The Senate's budget proposal calls for about $920 million in additional tax revenue, including the temporary sales tax increase and more than $500 million in closed tax exemptions.

The tax plan is larger than one proposed last week by Democratic Gov. Chris Gregoire but smaller than what many education and social service advocates have been pleading for since the legislative session began.

The budget also would cut about $840 million in spending, including closing or downsizing prisons and facilities for the developmentally disabled.

One-time fixes, such as draining the Rainy Day Fund, would account for about $500 million of the budget-balancing solution. Senators also count on additional bailouts from the federal government, led by roughly $480 million in extra money for the Medicaid program.

Senate Majority Leader Lisa Brown, D-Spokane, said Senate Democrats wanted a plan that was "balanced and responsible," particularly after bridging a $9 billion deficit last year without tax hikes.

"There will be further reforms, there will be further reductions in state services, and there will be revenues as well," she said.

As proposed, the sales tax hike would last until 2013. But Senate Democrats also want to include a "working families" tax rebate, intended to take the bite out of a sales tax hike for people on the lower end of the income scale. They also propose a tax business-and-occupation credit for small businesses trying to create jobs during the slow economy.

Among the tax exemptions targeted for elimination is a break on the value of trade-in cars, worth about $92 million for the current budget. Senators also would raise about $24.5 million by dumping a tax exemption for certain out-of-state shoppers and replacing it with a refund program.

Democrats are free to go for revenue hikes after voting to suspend Initiative 960, the Tim Eyman measure that required a two-thirds majority vote for the Legislature to raise taxes. The Senate gave final approval to the I-960 suspension Monday night, with Gregoire expected to sign it into law Wednesday.

Public release of the Senate's budget plan kicks off final negotiations over how to balance the state's books, with House Democrats planning to unveil their version of a balanced budget at midday.

The Legislature is scheduled to adjourn its short, election-year session March 11.

Republican legislators have been firmly against additional taxes to help balance the budget, saying the fragile economic recovery calls for more attempts to reform government spending.

While their minority status affords them little power to affect the final outcome, Republican lawmakers have been energized by the fight over suspending I-960, which they dragged out for several days.

"To me everybody has to suffer some pain, and I don't believe we've done enough," said Rep. Gary Alexander, R-Olympia, the ranking Republican on the House Ways and Means committee.

Rep. Alexander said he would have liked to have seen deeper cuts to health and social services.

Republicans have said the budget should be passed without any tax increases.

"Any general tax that applies directly to the consumer is going to have some type of impact on the economy," said Sen. Joe Zarelli, R-Clark County.