Senate Democrats took a first step Wednesday toward raising taxes by introducing a bill to amend voter-approved Initiative 960 to temporarily get rid of its requirement for a two-thirds vote for tax increases.
In the House, Finance Committee chairman Ross Hunter introduced a separate measure that would raise or protect up to $363 million in revenue in the next year by eliminating a series of tax exemptions. He said his measure can’t be passed without changes to I-960.
Hunter’s tax plan includes provisions to undo the effects of a court ruling in the Dot Foods case that affects supplies for door-to-door sales as well as provisions to tax out-of-state companies that do a certain amount of business in the state. Others would tax airplane ownership and close a sales-tax exemption for out-of-state residents such as Oregonians who shop here. Others would affect mortgage deductions, tax debts and foreclosures.
The Senate bill will get a hearing today in the Senate Ways and Means Committee, and the full Senate could vote on it as soon as next week. It would loosen what Sen. Lisa Brown has called a “straitjacket” for budget writers who face a $2.2 billion shortfall once potential new federal aid is factored in.
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Brown played down the significance of amending a voter-approved initiative, telling reporters during a weekly briefing that it was more a question of “what kind of budget are we writing. Does it reflect our values? Did we protect the right things?”
Senate Republican Leader Mike Hewitt of Walla Walla lashed out at the proposals, joining this year’s partisan battle on taxes and fees:
“I am incredulous that Democrats are setting the stage for raising taxes in this economy. People are terrified right now. Everybody knows someone who’s lost a job. Working people and employers are just trying to survive in this economy. They should not be asked to bail out poor state spending decisions through higher taxes,” Hewitt said.
Because two years have passed since sponsor Tim Eyman won voter passage of I-960 in 2007, majority Democrats can amend it with a simple majority vote, while protecting vulnerable members from having to vote. Eyman has been readying for the repeal, and is pushing Initiative 1053 to reinstate the two-thirds tax vote requirement in January 2011.
Both Brown, the Senate majority leader, and House Speaker Frank Chopp, D-Seattle, say the I-960 changes are needed to allow passage of bills that close tax loopholes and raise other revenue to avoid cuts to health care, education and college student aid.
Both have rebuffed Eyman’s claims that voters have spoken, drawing attention to the voter rejection of Eyman’s last tax-limiting measure in November.
As outlined in Senate Bill 6843, which Sen. Margarita Prentice sponsored, Democrats would suspend the two-thirds vote requirement through the fiscal year ending in June 2011. It also changes the definition of a tax increase to exclude revenue needed to replace an adverse court ruling on tax collections – such as Dot Foods.
It also would exclude from I-960’s requirements any bills that close tax “loopholes” or tax preferences, as well as fund transfers.
Brown said her caucus has two divergent points of view on the I-960 issue, with some favoring the changes and others favoring a simple suspension of the measure.
Eyman said in an e-mail to supporters that the Democrats’ action was “galling” and he claimed SB 6843 reduces “sunshine” on tax decisions by eliminating some of the public notice requirements every time a tax bill is introduced. Brown said the goal is to require the state budget office to estimate a tax bill’s cost only when it is given a hearing, on grounds that only one in four tax bills gets that far.
Democrats have majorities of 61-37 in the House and 31-18 in the Senate. But Hunter’s package of tax increases would not be possible until after I-960’s provisions are changed, because the GOP does not support many of its taxes.
And Hunter said I-960 is unworkable.
“People who voted for I-960 voted in principle for transparency, fiscal restraint and accountability,” he said in a news release. “But I-960 in practice is an impenetrable roadblock to thoughtful, reasoned governing. Not only does it keep us from making sensible fixes to our tax code, the two-thirds majority requirement leads to the worst kind of politicking and vote-trading, as witnessed in national efforts to pass health care reform, or in efforts to pass a budget in California where a two-thirds majority is required.”
He also said that after cutting roughly $4 billion from the budget last year to bridge a $9 billion shortfall, “I don’t know how we cut another $2.8 billion without damaging our education system and ripping away the basic safety net keeping thousands of families afloat during these tough times. It’s time to look at revenue options.”
Gov. Chris Gregoire also wants to amend I-960. “Most of the things laid out by the Senate initially seem like reasonable things to pursue,” spokesman Viet Shelton said.
Marty Brown, legislative director for Gregoire, said Hunter’s tax package includes a few suggestions the governor has already forwarded. Brown said she must look at some of the separate ideas added by Hunter, which include an excise tax on airplanes to raise $4.5 million and an end to the out-of-state exemption on sales taxes worth $37 million for Oregonians and others.
Brad Shannon: 360-754-1688