Lawmakers are inching toward closing Washington's $600 million, short-term budget gap without reaching for new revenue.
But a few Democrats are reviving the idea of closing tax exemptions to save prized programs such as the Basic Health Plan. They know they face a serious battle to preserve the safety net for the poor and vulnerable as they take up a $4.6 billion shortfall for the next two-year budget cycle later in the 105-day legislative session.
Democratic Rep. Eileen Cody of West Seattle filed the first “tax-loophole” bill last week. It targets specific exemptions and tests the idea that tax increases are off the table this year.
Her proposal, House Bill 1847, would end tax breaks for plastic surgery, for banks’ mortgage-interest earnings above $100 million a year, for the Centralia power plant’s purchases of coal and for privately owned airplanes. All four proposals to change those taxes were killed last year, some under intense lobbyist and industry pressure.
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Cody said the bill would raise about $150 million over two years. She said that is enough to keep Basic Health alive until the state can pay for the program using federal money expected from the recent national health-reform bill.
“It would be fine with me if it was just for the two years (as a temporary tax change), because that is how long we need it,” Cody said Friday. “My issue is just getting enough money for the Basic Health Plan for the two years. There may be other tax breaks we could close for two years that people would go for.”
Advocates with AARP Washington say Cody’s bill opens the door to a broader discussion about taxes as a part of the budget solution. And they say their polling shows a plurality of voters actually favors a blend of spending cuts and tax increases to balance the budget.
But Republicans, such as Rep. Gary Alexander of Thurston County, already are speaking against the move to close tax exemptions. Alexander said Cody’s coal-tax proposal could force an early closure of the TransAlta power plant in his 20th District, costing a few hundred jobs that pay $85,000 a year.
Similarly, Democratic Gov. Chris Gregoire said during a telephone “town hall” meeting for AARP Washington members Thursday that closure of tax exemptions is not much of an option.
More than 13,000 AARP Washington members called in to listen to the governor and ask questions. Gregoire said November’s vote on three tax measures sent a clear, “three strikes” message against new taxes.
The Democratic governor itemized the strikes:
• Voter rejection of a 2-cent-per-can tax on soda pop and other taxes on bottled water, candy and gum.
• Voter rejection of a high-earners income tax that would have paid for education and health programs.
• Voter approval of Tim Eyman’s Initiative 1053, which reinstated a two-thirds vote requirement for tax increases in the Legislature.
Gregoire also said the money raised by Cody’s bill is “a drop in the bucket” for what the state would need to avert deep cuts.
AARP state director Doug Shadell said his group paid for a poll of 803 voters statewide in late November and December that shows 77 percent of registered voters support new tax revenue; the poll’s error margin was 3.5 percent.
Shadell said 45 percent favored a “balanced” approach that included new revenue and spending cuts. Thirty-two percent wanted the governor and Legislature only to find new revenue, and 16 percent wanted the cuts-only approach favored by Gregoire, Republicans and some Democrats.
The proposal has more than 20 Democratic co-sponsors, including Rep. Sam Hunt of Olympia. Cody said she is just trying to provide options for saving BHP and just wants a serious debate about how to save it.
If the two-thirds requirement becomes a barrier, lawmakers could send something to the ballot with a simple majority vote.
But House Speaker Frank Chopp, D-Seattle, and House Majority Leader Pat Sullivan, D-Covington, both said their caucus leadership is not having discussions about raising taxes, closing exemptions or a tax referendum. They’ve been working on unemployment insurance and an “early-action” budget that the Senate approved earlier in the day to bridge most of the state budget gap through June.
“In terms of Eileen’s proposal, I’ll take a look at it,” Chopp said noncommittally.
Chopp said he is working on a new way to spare Basic Health, which serves more than 50,000 low-income people, without raising new revenue. He wants to keep the program alive until money that U.S. Sen. Maria Cantwell secured in the national health-reform bill becomes available for what today is an entirely state-funded program.
In the Senate, Ways and Means chairman Ed Murray, D-Seattle, said there is a working group looking at the state’s tax system and exemptions.
But Murray said portions of last year’s tax-package were challenged at the ballot and that voters in only five legislative districts – all in Seattle – rejected the repeal of pop, candy gum and bottled water taxes.
Eyman, the professional initiative promoter, has weighed in on what message voters were saying, too. Initiative 1053 lets tax increases go to voters on a legislative vote of 50 percent plus one, but Eyman said voters were not trying to say that tax proposals should come to them for approval.
Instead, Eyman said, they were sending a message that they want tax increases to be as difficult as possible to pass.
Which just about everyone now agrees is the case.
Brad Shannon: 360-753-1688 email@example.com www.theolympian.com/politicsblog