State Rep. Eileen Cody offered a bill today to end tax breaks for the TransAlta coal plant and big banks and to raise taxes on airplane owners and cosmetic surgery patients. The Democrat from West Seattle would devote the money – likely more than $100 million a year – to saving the state Basic Health Plan.
But in a sign of how many hurdles the tax changes face in the Legislature, Cody introduced House Bill 1847 just hours before Democratic Gov. Chris Gregoire told an audience of more than 11,000 retirees that voters don't want tax increases.
Gregoire was addressing AARP Washington members who dialed in this morning for a telephonic "town hall" meeting that included a straw poll showing 68 percent support for a mixture of tax increases and spending cuts to bridge the $4.6 billion budget deficit that Gregoire now estimates for the next two years.
AARP's state director, Doug Shadell, said the group commissioned a statewide poll of 803 people after the Nov. 2 election that showed 77 percent support for a combination of new revenues and cuts to close the budget gaps. Shadell said 45 percent favored a “balanced” approach with new taxes and cuts, 32 percent wanted new revenue to plug budget holes and 16 percent wanted cuts only.
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And, Shadel added, AARP members on the live call with Gregoire were voting with their phone keypads by higher margins for a tax solution: 68 percent favored the so-called balanced approach, 22 percent favored new revenues only, and 10 percent favored cuts only.
Gregoire said she was surprised at the poll, which found the most revenue support, 56 percent, for closing (unspecified) tax breaks for businesses. She said some of the tax breaks offered in Cody’s bill had failed last year and that voters sent a message in opposition to taxes that lawmakers are now echoing.
"The problem is those legislators upstairs (in the Capitol) believe, as I did, they heard 'three strikes' when it comes to revenue," Gregoire said.
Gregoire itemized the "three strikes": voter rejection of a 2 cents per can tax on soda that drew a $17 million repeal campaign paid by the national soda industry; voter rejection of a high-earners income tax that would have paid for education and health programs; and voter approval of Tim Eyman’s Initiative 1053, which reinstated a two-thirds vote requirement for tax increases in the Legislature.
The governor said that makes closing tax breaks very hard to do politically. Gregoire also noted that some of the tax breaks in Cody's bill were tried last year without success – and if successful would be only a "drop in the bucket" next to the gaping, $4.6 billion shortfall in 2011-13.
Based on past efforts to pass elements of Cody's bill, it appears her proposal could raise more than $100 million a year. It would limit the mortgage-interest exemption at $100 million for large banks. It would put sales tax on cosmetic surgeries. It would remove a sales tax exemption for coal brought from Wyoming for the TransAlta power plant in Centralia. And it would impose a half-percent, value-based or excise tax on privately owned airplanes, similar to what Democratic Rep. Ross Hunter of Medina proposed but couldn't get passed last year.
Ingrid McDonald, outreach director for AARP Washington, said "the major challenge this year is Tim Eyman's initiative which would require a two-thirds majority to pass even common sense changes" to the tax code.
But McDonald also told the town hall attendees that Cody's bill is a sign that lawmakers are starting to see the light on the need for revenues to avoid deep cuts to the social services safety net that Gregoire expressed chagrin at having to cut.
Lawmakers still have the option under I-1053 to pass a tax referendum on to voters with just a simple majority vote and then tie it, as Cody proposes, to saving specific programs.
"It's too early to tell how seriously they will consider this kind of option," McDonald said.
UPDATE: Democratic Rep. Sam Hunt of Olympia is among those who signed on as co-sponsors of the Cody bill.