Democrats mull tax increase as budget woes worsen

Leaders worry about fallout in election year

THE ASSOCIATED PRESS

Originally published Sunday, February 17, 2002

OLYMPIA -- With budget news in the Capitol getting uglier by the day, some Democratic lawmakers are daring to speak the dreaded T-word: taxes. But don't reach for your wallet just yet. Tax votes are tough anytime, and this is an election year.

Democrats in the slim House and Senate majorities find themselves between a very large rock and an especially hard place this year. On one side is the prospect of cutting enough spending to close a hole in the budget. On the other is a tough vote to raise taxes that might infuriate voters in the fall.

Until a few days ago, most lawmakers were focused on balancing the budget without a general tax increase. Democratic Gov. Gary Locke had proposed a combination of deep cuts and some "sin" taxes, including a new state tax on minicasinos, but balked at a general tax increase.

Locke's gambling tax is stalled in committee and Tuesday's scheduled update of the state's revenue forecast could deepen the budget hole by hundreds of millions of dollars, requiring deeper cuts to balance the books.

"When both Republicans and Democrats see the size of the cuts we have to make to pass a balanced budget, creating revenue isn't going to look as bad as it does now," said Sen. Erik Poulsen, D-Seattle, who raised the specter of taxes a few days ago.

"Some people applauded me, for saying what had to be said," said Poulsen, a freshman member of the budget-writing Ways and Means Committee. "Others still want taxes to be the invisible elephant in the living room."

Tough sell

For Democrats, the choice between cuts and taxes is especially tough. Many programs slated for cuts reflect core Democratic values, and interest groups are complaining loudly.

"Taxes are a last resort," said Senate Majority Leader Sid Snyder, D-Long Beach. "But if the cuts get too deep, members are going to say we just can't go that far."

If even one member of the Senate or House majorities balks, Democrats won't have enough votes to pass their budget without Republican votes. Democrats hold just 25 of the 49 seats in the Senate and 50 of the 98 in the House.

But finding the votes could be even tougher. Increase taxes too much, and voters might sweep Republicans back into control of the Statehouse. November's election will decide 24 seats in the Senate and all 98 House slots.

"As hard as it is to get everybody to agree on the cuts, it's that much harder to get people to agree on tax increases," said House Majority Floor Leader Brian Hatfield, D-Raymond.

With such thin margins, more than a few Democrats in swing districts will likely be unwilling to assume the political liability of a tax vote.

GOP backs cuts

Democrats could likely find help from Republicans to cut the budget, but GOP leaders oppose raising taxes.

"We still have a fundamental belief that government is too big," said Senate Minority Leader Jim West, R-Spokane, who contends the budget problem could be solved through cuts, state employee hiring freezes and other austerity measures. "People who don't want to make the difficult choices may find it easier to raise taxes, but not us."

The last big tax increase, in 1993, helped Republicans oust the Democrats from total control of the Legislature for most of a decade.

So state Republican Chairman Chris Vance is hoping Democrats follow what he calls their natural inclinations.

"They're Democrats, their DNA does not allow them to cut spending," Vance said. "They're going to raise taxes, the only question is which taxes."

Higher sales tax?

Which taxes indeed. One idea was floated from a surprising source, Sen. Jim Hargrove, one of the most conservative Democrats in the Legislature. He suggested a temporary increase in the sales tax to cope with the economic effect of the Sept. 11 attacks.

Slashing the budget, Hargrove says, would end up costing more than it saves. The kind of cuts required would involve actions such as repealing the cost-of-living increases for teachers mandated by voters in 2000, releasing prison inmates earlier, and eliminating juvenile intervention programs that cut down on future prison costs, Hargrove said.

Instead, he argues, every Washingtonian can help by paying a few dollars more in sales tax.

"In the spirit of everybody trying to pick up a share of the load, make it as broad as possible and then have it sunset," Hargrove said.

But sales taxes are considered regressive because they fall heavily on the poor, and reluctance to increase that burden has some Democrats looking elsewhere.

"Raising the sales tax sticks it to the poor," said Poulsen, who's been digging around among the dozens of tax exemptions passed over the years to stimulate business and economic development.

Repealing tax breaks

Rep. Jim McIntire, D-Seattle, has sponsored a bill to regularly review all the state's tax exemptions.

The measure wouldn't provide money immediately, and Poulsen said he's trying to put together a package of tax break repeals that would yield $100 million to $150 million this year.

Among the biggest breaks is a sales tax exemption on manufacturing that cost the state more than $300 million in the 1999-2001 biennium, according to the Department of Revenue. Because corporate tax records are confidential, it's difficult to tell who gets the bulk of the benefit.

"Some people argue that the sales tax exemption on manufacturing equipment has not generated the kind of job growth that the studies suggested it would at the time," said McIntire, who was a tax adviser to Gov. Booth Gardner.

However, Republicans would likely fight to retain tax breaks designed to stimulate business.

"Repealing a tax exemption is a tax increase, no two ways about it," said Rep. Jim Buck, R-Joyce.

The Olympian Copyright 2002

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