Politics & Government

Taxes praised, attacked

During her post-special session press conference Tuesday Gov. Chris Gregoire re-emphasized her position that the only alternative to no additional taxes would have been cuts in services.
During her post-special session press conference Tuesday Gov. Chris Gregoire re-emphasized her position that the only alternative to no additional taxes would have been cuts in services. The Olympian

Gov. Chris Gregoire praised the Democrat-controlled Legislature on Tuesday for passing a package of tax increases and budget cuts before adjourning their special session at 1:10 a.m.

The Democratic governor also pledged to help at-risk lawmakers defend their votes in the fall election.

She might have to defend the taxes to voters too. Tim Eyman, the professional ballot measure organizer, filed eight separate measures Tuesday to attack different pieces of the Democrats’ tax package that had earned the governor’s compliments.

“They made tough choices; they took tough votes. And so my hat goes off to them for a job well done,” Gregoire said of House and Senate Democrats who mustered votes late Monday to narrowly approve tax increases and a $31 billion operating budget. Republicans fought the taxes all the way.

“The people of the state of Washington need to know we did right by them. The work begins now. The budget will be hard to implement and require some very unpopular and very difficult decisions,” Gregoire added.

Gregoire warned of government job cuts totaling 1,500 people and reductions in services for public schools, universities and other programs.

Almost immediately after the votes were taken, Eyman filed the measures, each of which seeks to repeal a separate slice of the $631 million in new revenues. (Lawmakers preserved an additional $163 million in revenue by rewriting tax policies that three court rulings had overturned, bringing total revenue packages to about $794 million.)

Eyman’s measures individually go after the following taxes:

A 28-cent per-six-pack increase on mass-marketed beer.

A 2-cent-per-can increase in tax on soda pop.

A $1 per-pack increase in taxes on cigarettes and increases on other tobacco products.

Sales taxes on candy and bottled water.

A broad business and occupation surcharge on services businesses.

The taxes take effect at different dates, some on May 1, June 1 or July 1. More than $360 million of the total – including the 0.3 percent services surcharge and the taxes on soda, beer and bottled water – are temporary, lasting until June 2013. The value of the taxes grows to about $1.5 billion for the 2011-13 budget, when state budget writers expect another shortfall in excess of $2 billion.

One of Eyman’s measures is already dead. He admitted it targets a tax break for banks’ earnings on home mortgages that Democrats didn’t even pass into law.

Eyman said his filing of multiple measures is preliminary, part of his research into what ballot measures might be most viable. It might be a month before he decides which ones to pursue further.

In the meantime, he is collecting signatures for Initiative 1053. That initiative would reinstate the two-thirds vote requirement for legislative tax increases. Before enacting tax increases this year, Democrats in the Legislature voted to temporarily suspend that two-thirds requirement until mid-2011.

“We believe that these additional initiatives illustrate to the voters how costly this legislative session was … and without (I-1053), look what these dirty dogs did to you,’’ Eyman said Tuesday.

Eyman said that even if he does pursue tax-repeal initiatives, the state can keep collecting the taxes at least until December – even if he is successful on any of the measures. And he thinks the $484 million Democrats left in reserves should be ample to cover any tax cuts he is able to win at the ballot.

But Gregoire told reporters in a post-session briefing that the tax increases are essential to sustaining the kind of Washington she’s willing to live in.

If Eyman’s measures get on the ballot and pass, “then you’ll see an all-cuts budget. I mean, that’s the choice,” Gregoire said. “And the consequences of that will be immediate and long-term to the state of Washington. And it is not a state of Washington that I want to be part of.”

Gregoire said the tax increases assure funding for education and the safety net. She singled out the Basic Health Plan, which provides subsidized health insurance to about 60,000 residents; the state need grant for low-income college students; levy equalization for tax-poor school districts; maternity services for about 50,000 “at-risk” mothers; and hospice care for the poor.

“I don’t want to see people without hospice care. I don’t want to fail to provide the employees of tomorrow because we didn’t give a little one at 3 years of age preschool. I don’t want to say to Microsoft and Boeing, no you’re not going to have an engineer because that kid couldn’t afford to go to college,” Gregoire said.

Interest groups have lined up on both sides of the tax increases. Beverage-industry interests say the beverage taxes hurt local bottling companies and put jobs at risk, and Washington Realtors says the business and occupation tax surcharge on real estate businesses puts an already battered industry further at risk.

The business and occupation tax surcharge cuts across a wide swath of business activity, hitting virtually all service enterprises, according to the Department of Revenue. Affected businesses range from accountants, lawyers and architects to horse boarders, interpreters, janitors and veterinarians.

On the other side, the left-of-center Washington Budget & Policy Center reported this week that without the new taxes, vital services would go away.

It referred to Gregoire’s no-new-taxes budget of December, which proposed to cut preschool options for 1,500 3-year-olds in low-income families; suspend levy aid to tax-poor schools; eliminate money for class-size reductions in early grades; cut gifted-education help to 23,000 students; eliminate need grants for 12,300 college students and cut grants to thousands more.

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