This is an update to my blog post from March 3, "Tax hikes? Who, us?
I have finally received my weeks-old public records request from the Department of Revenue — along with a letter thanking me for my patience. I had asked for information on tax-increase proposals the agency has analyzed on behalf of members of the Legislature and the Governor since January 1.
To recap a bit: This is relevant since the state faces an $8 billion shortfall in the next two-year budget cycle and majority Democrats have hinted that taxes will likely be part of the solution, but have not been forthcoming about what kind of taxes are under consideration.
There was a several-week delay in processing my public records request while the Legislature decided whether to invoke "legislative privilege," a controversial move that allows lawmakers to block the release of certain records. In the end, "legislative privilege" was not invoked.
So what’s in the hundreds of pages of documents? Some interesting back-of-the-napkin ideas, plus a few proposals we already know about. But bottom line: there’s no evidence Democrats have been working with the Department of Revenue on a specific tax hike package to help balance the budget.
If and when Democrats decide to put a tax vote to the people, chances are they will use an off-the-shelf tax proposal rather than inventing a new one. The Department of Revenue maintains a comprehensive list of possible taxes — everything from raising the sales tax 1 percent to adding a tax on bottled water — and how much each would mean to state coffers.
Nevertheless, here’s a sampling of what’s in the documents I received:
A $1 per-pack cigarette tax increase for health care. Senator Rodney Tom, D-Medina, has proposed this, so no surprise there, but so far it hasn’t gotten any traction in the Legislature. Joe Turner with the Tacoma News Tribune predicts this will be part of any tax package that goes to the public. It would raise about $180 million over two years.
For Sen. Phil Rockefeller, D-Bainbridge Island and Sen. Kevin Ranker, D-San Juan Island: several tax options to raise funds for the state’s oil spill response and prevention program. This year Ranker is sponsoring legislation that would require shipping lines to pay for a permanent rescue tug to be stationed at Neah Bay. (UPDATE Thursday: The bill has passed both chambers.)
Also for Senator Rockefeller: the fiscal impact if the state repealed the sales-tax exemption on hybrid vehicles. The answer was $20 to $25 million dollars a year — although those numbers are probably lower now because of the economic downturn and its hard hit on car sales. Rockefeller has proposed a repeal of the hybrid sales tax break, but at the same time he’s proposing to extend a tax credit to people who buy electric vehicles. Rockefeller says his bill is designed to "encourage the next generation of alternative fuel vehicles."
For an unnamed Senator: a proposal dubbed the "Primary Plastics Tax." Basically this would be a tax on companies that makes plastic products and containers. I didn’t see any details about the proposed tax rate, but based on the Department’s analysis about 200 companies in Washington would be impacted by such a tax.
Impact of adopting the recommendations of the "Citizen Commission for Performance Measurement of Tax Preferences." A tax preference is government-speak for tax loophole. Currently the Commission is conducting a 10-year review of the state’s roughly 600 tax loopholes. However, closing tax loopholes is now considered a tax hike under Tim Eyman’s I-960, which passed in 2007. Thus to erase any of these tax breaks requires a hard-to-get two-thirds vote in the Legislature or a vote of the people.
For Rep. Ross Hunter, D-Medina, chair of the House Finance Committee: extending the sales tax to include digital goods such as downloaded music, video and books. Rep. Hunter is advancing a digital-goods bill this year on the recommendation of a commission that studied this issue. Hunter says he has the support of the Association of Washington Business and that this is not about raising new revenues, but about creating rules that everyone can follow in this new era of digital goods.
So there you have it. A sampling of the kinds of taxes and tax increases Democratic lawmakers have been running the numbers on these days. Most have not been formally proposed. And probably none of them are the silver bullet that might help Democrats balance the budget.
At this point it seems probable that Democrats will turn to a temporary sales tax increase or, in the alternative, a menu of smaller so-called sin taxes that combined raise enough money to put a bit of a dent in the $8 billion shortfall.
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