Want more tax relief? Legislators will get back to you on that in 2008 ... or 2009

Property-tax relief is headed back to the Capitol in January. The question is what brand of tax relief.

One thing is clear for 2008 after Thursday's special session: Legislators who broke camp after a one-day blitz have a raft of leftover ideas that go well beyond the two property-tax measures that won passage and that Gov. Chris Gregoire signed into law.

Many lawmakers, just like activists and interest groups, are far from content with what they accomplished: reinstating a 1 percent property-tax cap and creating a tax deferral program.

"We've got some work to do to figure out what we can get a majority around" for the next step, Senate Majority Leader Lisa Brown said late Thursday as the House voted on the property-tax deferral bill. "Everyone wants to provide relief to low- and middle-income citizens."

Indeed, Brown's caucus of 32 members is far from agreement on any one idea — whether it might be a homestead exemption shielding the first $75,000 of home value from taxes or a "circuit breaker" that gives tax rebates to lower income homeowners when their tax bills hit 5 percent of income.

One Democrat, Sen. Tim Sheldon of Potlatch, wants a constitutional amendment to limit yearly valuation increases to 1 percent. House Majority Leader Lynn Kessler of Hoquiam wants to renew her proposal for a California-style freeze on property valuations as long as a buyer keeps a home.

Republicans have different ideas. In the House, the GOP leader, Rep. Richard DeBolt of Chehalis, wants to hand out $400 rebates to all homeowners. Some Senate Republicans want to slash or eliminate the state's share of the property tax.

Other Republicans, joined by initiative promoter Tim Eyman, want to get rid of local governments' ability to tap into unused tax capacity that was left over from the years before 2002.

That's the year Initiative 747's 1 percent property tax cap went into law. It was reinstated by lawmakers Thursday in response to a court ruling striking it down.

Tax experts call that leftover taxing authority "banking," and Republican lawmakers and Eyman say it is a huge problem.

Joining their call to do away with "banking" is Republican candidate for governor Dino Rossi, who wants Gregoire to make it her first priority in January.

House Speaker Frank Chopp has said it might be a problem but Gregoire is skeptical.

Julie Murray of the Washington State Association of Counties testified Thursday that "banking" is a form of rainy-day reserve for local governments, which are sometimes hard-pressed to deliver services.

Even if they don't get their way on "banking," Eyman and tax activists sound thrilled by what they see as a shift of the Democrats' agenda toward tax relief.

"It's huge, and they put down so many markers — 'it's just the beginning, it's just the beginning,' " Eyman said Friday during a victory lap around the Capitol's press corps. "In politics you're not supposed to raise expectations, but that's what they did."

Kessler, a Democrat, agreed that a shift is under way — predicting "lots and lots of discussion" of taxes in January.

"People are finally seeing it is a big deal. I don't know why they haven't before," she said of fellow House Democrats. "This is an issue where it's time for us to do some serious study. I don't think we would have seen an Eyman initiative if we had spent more time on it before."

There are plenty of other ideas out there — if the more than 50 property tax bills introduced in the 2007 regular legislative session are an indication.

Sen. Karen Fraser, D-Olympia, said there is a need for more flexibility for cities, counties and fire districts to keep up with inflation, since close to two-thirds of the revenue for counties comes from property taxes.

Democratic Sen. Jim Hargrove of Hoquiam pointed out in a floor speech Thursday that county budgets are more than 70 percent devoted to criminal justice, which needs to be funded.

Business groups led by the Association of Washington Business want yearly valuations to smooth out distortions in tax values. They also want to change the burden of proof, making it easier for property owners to challenge bad tax assessments.

Rep. Ross Hunter, the Medina Democrat who chairs the House Finance Committee, said he expects lawmakers to look at big-picture changes to the system.

"I think once a generation we should look at our policies and decide: Is this what we want to do?" Hunter said. "You get one opportunity a decade to do something like this. I don't want to screw it up."

Hunter predicted that the work in January might not bear fruit in 2008 — or even go to the ballot next fall, because "any big change to property taxes requires an amendment" to the constitution.

Instead, 2009 is probably the soonest voters might get to decide the fate of any big change in tax law, he said.

Gregoire hasn't charted her course yet, said Marty Brown, her veteran legislative director who has seen dozens of property-tax ideas swirl around the Capitol in the past decades.

Still, Brown thinks the environment is more receptive for trying changes, just because property taxes got so much attention in the three weeks since the Supreme Court threw out I-747.

"I think folks understand the system a little bit better now just from some of the ideas thrown out, the debate and conversations in the caucuses. A lot of the time it's sort of a visceral reaction every time taxes are brought up. But it is a complicated issue," Brown said Friday.

Brown said it's hard to know what direction lawmakers will take.

"There were so many ideas bandied about the week before that I don't have a good idea which ones were well-thought-out, which ones weren't," he said. "I think it's too early to tell. I'm long past being surprised — at anything."