Building a budget castle on quicksand

commentary by Tim Eyman

3/27/03

Washington State - Voters insist on having the final say on tax and fee increases. Four voter-approved initiatives in four years vividly illustrate that mandate. So lawmakers need to start asking themselves "would the voters authorize this increase during a recession?" If you think the answer will be "no", then you're building a budget castle on quicksand.

Voters agree with Gary Locke and the Senate Republicans that raising taxes and fees during these tough economic times will only hurt cash-strapped working families and further hurt our struggling economy. House Democrats' legislative hostility toward taxpayers is stunning.

Even the most left-of-left Laura Ruderman says that lawmakers lack credibility (see Seattle PI story from today's edition reprinted below). In her words: "People are making very difficult decisions with their household budgets . . . And they don't see the Legislature as being willing to make those same kinds of painful decisions."

Average taxpayers have no sympathy for whining politicians in Olympia who are "struggling" with a "paltry" $1.3 billion increase.

The House Democrats should join Gary Locke & Senate Republicans and accept fiscal and political reality. If they do, the Legislature can finish on time (end of April) and avoid months and months of partisan bickering all at taxpayer expense.

To our thousands of supporters statewide: Initiative 807 requires 2/3's supermajority to raise any tax or fee increase. Locke & the Legislature have an entire arsenal of increases they can shoot at us. I-807 is the only effective way to defend ourselves from ALL OF THEM.

Regards, Tim Eyman, ph: 425-493-9127, email: insignia@greekwatch.com

From Section B, Page 1 of the Seattle PI today:

Olympia seeks way out of red ink: Taxes - Lawmakers try to find right mix for $2.6 billion shortfall

By ANGELA GALLOWAY, SEATTLE POST-INTELLIGENCER CAPITOL CORRESPONDENT

OLYMPIA, WA-- Tax-increase proposals gained new political momentum among some lawmakers this week, with a recent plummet in state revenue projections pushing the budget shortfall past $2.6 billion.

But a fundamental dilemma remains for those willing to raise taxes to avoid deeper cuts in state social service and other programs: Should tax increases target small groups, such as beer drinkers, smokers and gamblers? Or should lawmakers cast a wider net, with a general sales tax increase?

Each approach has its own political advantages, backers and risks -- particularly a potential vulnerability to future citizens' initiatives. In the end, lawmakers may go with a blend of the proposals.

"We're looking at a variety of options," said House Speaker Frank Chopp, D-Seattle. The debate is colored by election politics. Many lawmakers worry about how their votes to raise taxes could affect their re-election campaigns. Also, the proposals raise concerns over which new taxes would best withstand a ballot challenge, widely considered inevitable.

From Section B, Page 4

TAXES: Some lawmakers oppose any increases -- and there's the Eyman factor

On one side, some favor a temporary boost in the state sales tax of about half a percent. Some of the expected $1 billion raised would likely be used to give state workers pay raises, from home care workers making less than $8 an hour to college faculty.

Meanwhile, other lawmakers propose patching together an array of small increases. Those may include boosts in so-called sin taxes, as well as repeals of incremental tax exemptions. In addition, lawmakers might expand gambling for more revenue. Those proposals, too, may be linked to specific spending, such as education or health care.

The two philosophies have split Democrats and a handful of Republicans who are open to tax increases. And plenty of lawmakers, including leading Republicans, remain firmly opposed to any more taxes.

In the end, the final decision may ride on a few key votes from moderates. Approval of tax increases would only require a one-vote majority because lawmakers passed a measure last year to suspend a two-thirds requirement.

"I would say there is a healthy number of people who line up on both sides," said Spokane Democratic Rep. Jeff Gombosky, chairman of the House Finance committee. "I don't think there's any one group that's got an advantage right now."

Spreading the pain

Vancouver Democratic Rep. Bill Fromhold backs a proposal to raise the state sales tax by 0.04 percent to 0.06 percent for several years.

It would be a "bridge over the recession," not a long-term increase, he said. "When we don't need it, get rid of it. I don't think the public would trust anything else."

Fromhold said the surcharge should be linked to a pair of major bipartisan reforms. "It's not intended to be the solution," he said. "It's only a piece of a longer term approach (to) a real fundamental structural problem we have."

Under his proposal, lawmakers would develop a new state spending limit, like the voter-approved Initiative 601, which the Legislature has gradually chipped away. Also, he said, the two parties should establish an agenda for major reform to the state's tax code, broadly criticized as unfair to the poor as well as business.

Lawmakers should avoid targeting specific groups or industries, he said. "It's tough to think about running the state on a variety of sin taxes," Fromhold said.

Gombosky said a surcharge of 0.6 percent would raise slightly more than $1 billion. The state sales tax is now 6.5 percent. (Some local governments tack on more, bringing the tax up to 8.9 percent in some jurisdictions.)

Republican Sen. Don Carlson, of Vancouver, said he supports Fromhold's proposal, particularly if the money is used to give state workers cost-of-living raises.

"The crisis is so severe we can't do it with a no-tax increase (budget)," Carlson said. "I don't think there's any other choice but the potential for a possible sales tax -- and that that will be controversial."

And that's where the Eyman factor comes in. Some say such a broad tax increase would be a sitting duck to anti-tax activists, such as initiative advocate Tim Eyman, who has already threatened to challenge any tax increases on the November ballot.

"My responsibility is to do what I think is the best, right thing and those folks who choose to do referendum, it's their choice," Carlson said. "People elect us to analyze, study, evaluate and make the best decision on the evidence that is presented to us."

Sin taxes

For some legislators, that risk of controversy bolsters the argument to take a more incremental approach.

"I don't think that we have the credibility among the public to raise any significant taxes," said Rep. Laura Ruderman, D-Kirkland. "People are making very difficult decisions with their household budgets . . . And they don't see the Legislature as being willing to make those same kinds of painful decisions."

"Until we do, we cannot have a constructive conversation about whether or not revenues in our state are sufficient for the level of service that people want," Ruderman said.

Faced with potentially painful cuts to programs for the poor and vulnerable, the Democratically-controlled House is unlikely to pass a budget without any new revenue, Ruderman said. "The level of pain that would inflict would be pretty stunning," she said.

Ruderman favors a targeted approach at new revenue, possibly including expanded gambling, boosts to taxes on discretionary products like booze and repeals of small tax exemptions.

Doubling the state booze tax, for example, could raise $204 million over the two-year budget cycle, Gombosky said. The state currently levies a tax of $2.44 per liter of booze, plus a special sales tax. Boosting the cigarette taxes from $1.425 to $1.925 per pack could raise $56 million, he said.

Many of the tax-break repeals on the table would raise relatively little money. One of the biggest payoffs would come from eliminating a sales tax exemption for out-of-state residents, projected to raise $71 million, Gombosky said.

As for gambling, the best political odds right now are for state-run Keno, which would raise about $39 million for the 2003-2005 budget cycle, and significantly more later, Gombosky said.

Some who back the incremental approach also support raising the tax on soda pop, although Ruderman said she worries that poses too much of a threat to business. Over the next two years, a 5-cent tax on every 12 ounces of soda pop could raise $270 million, Gombosky said.

Some lawmakers also worry that the incremental approach raises its own set of ballot measure risks. Any industries that feel singled out for tax increases, from beer bottlers to restaurateurs, might strike back with their own ballot challenge, Gombosky said. "You're probably going to see a good amount of organized opposition," Gombosky said. He said to ignore the risk of ballot challenges to legislative tax increases would be "foolhardy."

"Initiatives and referenda are now the fourth branch of government."