Gregoire: More tax reform after special session?

Gov. Chris Gregoire says a bigger look at Washington’s property tax system “absolutely” is needed next year, but she isn’t yet putting forward her own ideas for fixing the system.

Her legislative director, Marty Brown, explained Monday that the Democrat might offer her own proposals to the 2008 Legislature in January. But it’s still too early to say for sure what she’ll do in the election-year session.

In the meantime, she’s focused on getting two bills passed Thursday when lawmakers meet for a special one-day session triggered by the Supreme Court ruling two weeks ago that struck down the state’s five-year-old cap on property-tax increases.

One is a simple re-enactment of Initiative 747, which capped yearly increases in local governments’ property-tax collections to 1 percent, plus extra for the value of new construction. The other is a Senate proposal to let people with incomes below the state median, $57,000, defer a quarter of their home-tax payments until the homes are sold.

“I think she’s talking to folks after the special session about what’s next,’’ Brown said Monday. “Everyone she talked to said this is just the tip of the iceberg …”

The Senate came up with the idea of the tax deferral program. Gregoire agreed to ask for it only after Senate leaders asked her last week, Brown said.

The governor told reporters Monday that 7,500 people would likely take advantage of that program in 2009, if legislators approve it, and the state would need to pay about $3.5 million to $4 million to bridge local governments’ delayed revenues.

Initiative sponsor Tim Eyman cited an anti-tax mood in the Nov. 6 election results. Voters approved another of his tax-limiting measures while also rejecting a massive transportation tax package for King, Pierce and Snohomish counties.

Two weeks later the Supreme Court threw out Initiative 747’s 1 percent cap on property tax increases, which put Gregoire on the spot.

Gregoire has been under intense pressure from Republicans, including gubernatorial challenger Dino Rossi, and I-747 sponsor Tim Eyman to call for the special session and adopt the 1 percent cap. Senate Majority Leader Lisa Brown, D-Spokane, and House Speaker Frank Chopp, D-Seattle, both polled members and have enough votes to pass it, Gregoire said.

But Gregoire has resisted the idea of going further to block local governments from using unused or “banked” tax capacity that they were allowed before I-747 was passed in 2001. The initiative did not bar use of “banked” taxing authority, but Eyman considers it loophole and has called for lawmakers to do away with it.

“Anyone who doesn't see a pattern of voters saying 'no' to higher taxes and demanding that government make due with existing revenues is in massive denial,” Eyman screamed in an email on Monday. “State and local governments impose and collect over $50 billion every year. Even without tax hikes, that amount increases. If prioritized, that's more than enough.”

Brown, the legislative director, said the governor is not considering the banking issue because, after the Supreme Court ruling, everyone wanted to re-enact exactly what the voters had approved.

Gregoire did acknowledge to reporters Monday that some legislators don’t want to re-enact the 1 percent property tax cap. But she thinks there is no choice.

“The fact of the matter, the people spoke … It passed overwhelmingly,” Gregoire said, explaining why she favors a flat 1 percent cap on increases and does not want to consider other approaches that might give cities, counties and fire districts more flexibility to meet their financial needs. “I’m saying the will of the voters needs to be carried out.’’

Gregoire later told a gathering of service clubs Monday — including Olympia Rotary — that she thinks voters did not merely reject taxes on Election Day.

The governor noted that voters approved all four measures the Legislature put on the Nov. 6 ballot — including the “rainy day” savings account for government and lower vote requirements for passing school levies.

Voters will support taxes if they are confident about what the money is going for, Gregoire said. She hearkened back to the phased-in gas tax package of 9 ½ cents that lawmakers approved in 2005; it survived a citizen initiative to repeal it.

“I have not lost confidence that if we’re in tune with the public, they’ll invest,” Gregoire said of future tax increases for education or transportation.