Sales tax increase proposed - Democrats also call for 50-cent rise in cigarette tax

Originally published Wednesday, April 16, 2003

The Olympian Online

State House Democrats are prepared to call for a small state sales tax increase -- and a 50-cent per pack increase in the state cigarette tax -- when they unveil their two-year budget proposal this morning. Money raised by the new taxes would be earmarked for education and health care programs for kids.
The tax increases proposed would raise about $730 million during the next two years.

The current state sales tax of 6.5 percent would increase by two-tenths of a cent on the dollar -- in other words, 2 cents for every $10.

The sales tax would also be extended to candy and chewing gum, which currently enjoy an exemption.

Those two moves alone would raise about $378 million, with another $83 million from the tobacco tax increase.

Rep. Jeff Gombosky of Spokane, the House Democratic point man on taxes, said the new taxes are "all in the mix."

"They're all roughly a part of the package," Gombosky said, quickly adding that last-minute additions or subtractions still are possible as caucus leaders try to get the 50 votes required to raise taxes.

The 50-cent increase in the cigarette tax would be on top of the current $1.43 state tax on cigarettes, already one of the highest in the nation.

Another so-called "sin tax" -- a 5 percent sales tax increase on liquor -- also is under consideration, but faces stronger opposition. Tied to this change would be a move to open state liquor stores on Sundays.

Under the Democratic plan, the rest of the projected $2.6 billion state revenue shortfall would be erased by:

- Freezing pay for state workers this year.

- Reducing funding for several education initiatives.

- Cutting 2,300 jobs from the state work force.

The Democratic calls for a 2 percent pay boost for state workers in September 2004 as well as raises for K-12 teachers and community college employees of 2 percent in January 2004 and another 1.9 percent in January 2005.

Gov. Gary Locke and Senate Republicans want to suspend all across-the-board public employee pay increases this year and next.

"They're the only ones proposing a pay increase at all, so we're thankful for that," said Lynn Maier, governmental relations director for the Washington Public Employees Association.

Locke and Republicans are also on the same page in proposing no tax increases, instead erasing the revenue shortfall entirely through pay freezes, program cuts and job reductions.

House Democrats want to offset some of the more drastic cuts with the proposed tax increases, elimination of about $100 million in tax exemptions, and other possible revenue sources.

They would also expand gambling by offering Washington State Lottery keno drawings every five minutes, which they project would raise about $39 million.

"In general, we feel it will be a much better budget for our kids," said House Speaker Frank Chopp, D-Seattle.

The new revenue would be earmarked for two pots. The larger, an education trust fund, would pay for class-size reduction and other education programs.

There reportedly are still deep divisions in the Democratic caucus on whether to pay for at least some of the teacher salary increases called for in Initiative 732, or to split any money for salary increases evenly between teachers and state employees.

The second, smaller pot would go to health programs, with the money directed toward a salary increase for home-care workers and to restore some of the cuts to children and infant health care programs approved by the Senate.

Rep. Barry Sehlin, the lead House Republican on budget issues, said that on first review, the Democratic plan looked too tax-heavy for his caucus to support.

"They want to spend significantly more money, and they need to raise taxes significantly to do so," said Sehlin, of Oak Harbor. "It looks to me like these taxes are going to affect just about everybody."

The Senate already has approved its $22.8 billion budget for 2003-05.

Once the House version is on the table, the two sides are likely to begin negotiations with a goal of reaching agreement before April 27, the final day of the regular legislative session.

Patrick Condon can be reached at 360-753-1688 or


House Democrats back tax hikes

The Associated Press
4/15/03 10:21 PM

OLYMPIA (AP) -- House Democrats will propose a $24 billion state budget Wednesday that would boost taxes by about $650 million, with the money earmarked for education and health care.

The tax package includes a 50-cent-a-pack cigarette tax increase, a two-tenths of a cent increase in the state sales tax and a tax on candy bars. It includes expansion of the state-run Keno lottery game, a tax surcharge on liquor and elimination of the business tax deduction for country club membership.

The new revenue would be split two ways. The larger share would create Gov. Gary Locke's new Education Trust Fund, which would be used to pay for voter-approved Initiative 728, the class-size reduction plan. The other major use would be a bailout of the state's health-care fund.

"It's a kid-friendly budget," House Majority Leader Lynn Kessler, D-Hoquiam, said Tuesday.

"Kids are the big priority for our caucus," said House Appropriations Chairwoman Helen Sommers, D-Seattle.

But Senate budget Chairman Dino Rossi, R-Sammamish, said it's not a taxpayer-friendly budget.

The Republican-controlled Senate has approved a no-new-taxes budget patterned after one suggested by the Democratic governor. It closes a $2.6 billion spending gap by freezing salaries, only partially financing voter-approved education initiatives, laying off 2,400 workers and cutting a variety of state programs, including health care.

Democratic lawmakers briefed on the new House budget said it restores some of the Senate's more controversial cuts, including children's Medicaid funding for more than 40,000 kids and prenatal care for undocumented aliens, and largely pays for class-size and teacher-pay initiatives.

Finance Chairman Jeff Gombosky, D-Spokane, said the tax package would raise about $650 million, although he said the sales tax increase is "problematic" and might not pass the full House.

"Things are very fluid right now," he said in an interview.

The package includes a sales tax boost of 0.2 cents on the dollar, up from 6.5 cents, extension of the sales tax to candy and gum and a boost in the tax on hard liquor and cigarettes.

Democrats would raise about $28 million by expanding the state-run Keno. A handful of tax exemptions would be repealed.

Locke has said he could support some "sin tax" increases and expanded Keno, but not a general tax increase like the sales, business or property taxes. But Gombosky said his caucus leaders are asking the governor to go along with the small sales tax hike in order to fund his Education Trust Fund.

The Senate opposes a sales tax increase, Rossi reaffirmed Tuesday.

The extra revenue would enable the House Democrats to plow money into two key areas -- education and children's health.

In addition to financing the class-size reduction initiative, the overall budget plan includes pay increases for teachers, effective in January 2004 and January 2005. Under terms of Initiative 732, the raises normally would take effect this September and one year later; the delay would save millions.

The Senate budget includes pay hikes for beginning teachers and for non-teaching personnel like cooks and custodians.

The House plan includes a 2 percent pay raise for state workers and college professors and employees in the second year of the biennium. Bev Hermanson of the Washington Federation of State Employees said the union wants parity for state workers -- "Whatever the teachers get, we should get," she said.

"`Kids' is the theme of our budget," Kessler said in an interview. "Kids, as in education and in health care."

House Speaker Frank Chopp, D-Seattle, picked up on the theme.

"We feel it will be a much better budget for our kids, both in terms of children's health services and support for schools," he said in an interview.

"There will be much better funding for education as a whole, particularly K-12 but some with higher education as well," he said.

Sommers said her budget has more balance than the Senate plan, including both spending reductions and new revenue.

Kessler conceded that, as of Tuesday, her caucus hadn't put together the requisite 50 votes to pass the full revenue package through the House.

Rossi said he won't begin negotiating on the budget until the House sends him its full budget and tax plan. He said he's skeptical the Democrats have enough votes to pass the taxes.

He didn't flatly rule out a revenue increase, but said both the governor and Senate have shown a way to balance the budget within existing revenue.

Rep. Richard DeBolt, R-Chehalis, deputy Republican leader, said his caucus will offer a substitute budget that restores children's health care without raising taxes.

"We don't necessarily think now is the time to be raising taxes when there is so much unemployment ... so they can give raises to people who have jobs," he said in an interview.

The Senate Democrats' budget leader, Darlene Fairley of Lake Forest Park, said she mostly likes what she knows about the House plan.

Meanwhile, the state's chief economist, Chang Mook Sohn, had both some good news and a warning for lawmakers. He told the legislative members of the Revenue Forecast Council that tax collections are up $12.5 million over projections.

That's a tiny amount, compared with a $22 billion budget, but a relief to lawmakers. Still, Sohn said the economy remains rocky and the Legislature should create a sizable reserve account.


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