Olympia talks nervously of tax hikes
OLYMPIA, WA-- Is it finally safe to talk taxes?
Democrats, newly in charge of both the Legislature and the governor's mansion, are widely expected to embrace at least a modest tax hike before adjournment this spring. The early talk is ``sin taxes'' and an array of fees, and not an increase in the Big 3 -- sales, business and property taxes.
Two-term Gov. Gary Locke proposed a $600 million package just before leaving office this month, and Democrats' key allies aren't shy about promoting a tax increase to help patch a $1.8 billion spending gap.
Still, Democrats are gun-shy, perhaps remembering that their last big tax gulp, a $1 billion hit in 1993, paved the way for a Republican landslide in 1994. And voters just turned down a tax increase for education and have adopted a series of tax-limit initiatives.
``It's always an interesting dance,'' says House Finance Chairman Jim McIntire, D-Seattle.
Newly inaugurated Gov. Christine Gregoire, who won by only 129 votes and still has a cloud hanging over her young administration, reflects her party's initial reluctance to talk about taxes.
Gregoire campaigned on a loosely worded no-new-tax platform, saying that the state is just pulling out of recession and shouldn't be raising taxes. But she didn't -- and still doesn't -- rule out a tax hike.
``It's just premature'' to speculate, she said the other day, adding ``My goal is a no-new-revenue budget.'' But she always adds a carefully worded afterthought that holds the door ajar. She said she'll produce a no-new-tax budget late next month and then see what the implications are for higher education, schools, health care and other priorities.
She told reporters that ``when'' she looks at ideas for new revenues, she won't accept anything that harms the economy. But midthought, she interrupted herself, saying ``if I ever do'' go there. In a later interview, she said she wouldn't accept a sales or business tax increase.
Legislative leaders aren't much more willing to talk explicitly about taxes yet, although Senate Majority Leader Lisa Brown, D-Spokane, and House Speaker Frank Chopp, D-Seattle, acknowledge heavy spending pressures.
Their budget leaders, House Appropriations Chairwoman Helen Sommers, D-Seattle, and Senate Ways and Means Chairwoman Margarita Prentice, D-Renton, are more candid if asked directly about taxes.
``It's impossible to whack your way out of this -- that can only go so far,'' Prentice says.
Legislative Democrats, like Gregoire, are following the customary timeline of the reticent. The idea is to avoid talking about the endgame now, and to carefully sequence the show.
First, they'll spend the lion's share of the session laying the groundwork with members and the public, ``scrubbing'' the budget for savings. Then they tally the wishlists, including the expensive requests of their political allies, such as salary increases for teachers and state employees, and decide whether it can all be accommodated within existing revenue.
If the gap is considered politically impossible to close without additional revenue, then lawmakers quietly, privately begin crafting tax plans -- and how to market them to their own members, an occasional crossover Republican, and a skeptical public.
They'll take the easy gap-closing steps first: using reserves, fund-transfers, and reduction in overhead. Then they'll make selected service cuts. Then ingenuity sets in and budget staffs find other ideas. Locke's budget office, for instance, grabbed a $289 million savings by sliding some pension contributions into the future.
Then the T-word.
Prentice says legislators are shopping a variety of ideas, including Locke's proposal for taxes on pop, beer, wine, hard liquor, and doctors' receipts. She says nearly every idea has problems, but that a broad-based approach of nickel-and-diming a lot of taxpayers probably is the way legislators will go.
``We must really make the case for why we're doing it,'' Prentice says. ``We can't lie to people. They won't like it at all, but we have to be clear about what the alternative is.''
Some lawmakers want to raise the real estate excise tax. Others talk about taxing mini-casinos. Fee increases and tuition are a foregone conclusion.
``They will try to put together something without hacking off too many groups,'' says political scientist Todd Donovan of Western Washington University.
In the past, lawmakers simply jacked up the sales tax or added a surcharge on all taxes. But Gregoire and others are reluctant to raise the already-high sales tax or to further burden businesses. Gregoire actually wants to cut taxes for small and startup businesses.
Meanwhile, Gregoire rival Dino Rossi and the legislative Republicans advocate a no-new-tax budget, believing tax hikes could squelch the state's economic recovery. But they predict that Democrats won't be able to resist taxes.
``Everything I've heard is that it's not a matter of whether they raise taxes, but which ones,'' says Sen. Joseph Zarelli, ranking Republican on the Senate budget panel.
Two years ago, Rossi and the Republican-controlled Senate linked with Democrat Locke to block taxes.
``This time the Democrats don't have anyone to blame for not raising taxes, and there is more pressure from their constituency groups to raise revenue,'' Zarelli said.
It's the first time in 12 years that taxes are seriously on the table.
Over the past decade, Democrats joined Republicans in granting $2 billion in tax rollbacks, as well as assorted tax breaks, mostly recently a $3.2 billion package for Boeing and the aerospace industry.
Voters also have weighed in, passing Tim Eyman's initiatives giving $30 car tabs and limiting property tax growth. Just two months ago, they rejected a one-cent increase in the state sales tax, earmarked for schools.
Sommers called the sales-tax vote ``very discouraging,'' and some of her members say they're worried that a no-new-tax sentiment will settle in and harden legislative positions.
``It concerns me if we can't even get involved in that discussion,'' says Rep. Kathy Haigh, D-Shelton.
Independent pollster Stuart Elway senses that tax-cut fever is easing, and that lawmakers aren't as inclined to fear it.
``It's not easy, but maybe it's easier,'' Elway said. ``And the Democrats will be under enormous pressure: `We got you in there and now it's time to pay up.'''
Charles Hasse of the Washington Education Association isn't that blunt, but does say the union expects fair treatment on wages and other budget support.
For now, legislators are in the early stage where nothing looks acceptable, either the potential of ugly cuts or raising taxes, says Marty Brown, the former budget director and Senate administrator who now serves as Gregoire's legislative director.
``There's January talk and there's April talk,'' Brown said. ``Nobody ever wants to raise taxes. It's always a tough vote,'' he says.
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