Speaker Chopp unfurls his tax roadmap

Democrats are in a ticklish spot about the budget deficit. So they will shy away from a general tax increase and instead focus on "tax fairness," sticking it to out-of-state companies and airplane owners.
Speaker Frank Chopp leads House Democrats.

Speaker Frank Chopp leads House Democrats. Washington State House Democrats

A blunt lawmaker once told me that Democrats in Olympia walk around with two numbers stamped on their foreheads: 1994 and 133.

1994 is the year Democrats over-reached, raised taxes, and lost their majority status; 133 is number of votes by which Gov. Chris Gregoire eventually won the 2004 gubernatorial election. Those numbers serve as haunting reminders to Democrats — at least those who experienced the 1994 bloodbath and the 2004 embarrassment — of days they hope not to relive.

It is against this historical backdrop that the majority party enters the 2010 legislative session. There’s reason for Democrats in Olympia to be concerned. Nationally, political analysts are watching for signs that another 1994-style voter backlash against Democrats is fomenting.

All this helps explain why last week Speaker of the House Frank Chopp sent strong signals that a general sales tax increase is all but dead on arrival this year. Lawmakers, who just convened for a 60-day election year session, must close another $2.6 billion hole in the budget. On TVW’s “Inside Olympia program, I asked Chopp if a sales tax hike is on the table, off the table,or on the edge of the table. “Well, I think it’s more on the edge of the table,” answered Chopp. “I think most folks worry that it might add to the more regressive nature of our tax system. So a general sales tax, I think there are a lot of people concerned about that.”

Chopp did acknowledge that one sales tax proposal remains in the mix. That’s a temporary one-cent increase coupled with a tax credit for lower-income working families based on their federal Earned Income Tax Credit. This is a concept Senate Majority Leader Lisa Brown, D-Spokane, has mentioned and the Budget and Policy Center in Seattle is pushing. The liberal think tank projects it would raise $1 billion in revenues in fiscal year 2011.

But even this idea, with its offset for the working poor, would be risky for Democrats. And Chopp told me, in the “final analysis,” he doubts it will pass. Polling last year showed the electorate is very cool to any type of sales tax hike, especially one that would push the combined state and local sales tax in King County over the dreaded 10-percent mark.

Furthermore, consumer spending is a key part of the economic recovery and Democrats have to be mindful of the psychological impact of any tax increases on consumers, not to mention voters.

So instead of looking at general tax increases, the code term of the session for Democrats is going to be “tax fairness.” What this means is Democrats are going to target people and businesses they think aren’t paying their fair share — and that’s how they’re going to sell it to the public. Who do Democrats have in their sights? For starters: out-of-state corporations, airplane owners, and sinners.

Gov. Gregoire has a proposal to charge the B&O tax on services and royalties to out-of-state companies that do big business in Washington. This would mostly snare banks and credit card issuers.

In the Senate, Ed Murray, D-Seattle, the go-to guy on revenue options, thinks Democrats will have to do more than just close loopholes in order to solve the budget gap. That doesn't necessarily mean an across-the-board tax hike, but Murray mentions two ideas that are floating around the legislature: taxing water bottles and soda pop syrup. Both could raise considerable revenue. Murray is particularly concerned that state's capital construction budget is now imperiled by the state of the operating budget.

Speaker Chopp told me about a plan to charge an annual excise tax for privately owned airplanes similar to what boat owners pay. He said he doesn’t think “wealthy” aircraft owners deserve a break when public education is being cut. There are also proposals to increase the cigarette tax and end the sales tax exemption for gum, candy, and bakery goods.


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Comments:

Posted Tue, Jan 19, 4:56 a.m. Inappropriate

I watched the Jenkins TVW Chopp interview, IIRC I watched last year's as well.

Chopp, as usual, has a very good read on the appropriate course. Personally, I'd be all for increasing the sin taxes on junk food way above sales tax levels. Though this would have business effects it is an investment in health that will pay off financially and in other ways as well. Chopp's desire to link these taxes to health care financing is just plain smart, hopefully somebody in DC will notice.

I, like Jenkins, was intrigued by Chopp's assertion that our worker's compensation system is the cheapest in the nation, after including the cost of lawsuits. The option to allow private insurers to compete should be on the table, but in the larger context of health care reform. We need a level playing field for both a public and private option and giving the private's access to a traditional public market while they are spending so much in DC to make the playing field tilt in their direction would not be appropriate.

Posted Tue, Jan 19, 6:19 a.m. Inappropriate

From the Story:

"The key here, at least as Chopp envisions it, is to raise money for specific programs the public cares about. For instance, the tax on sweets might go to pay for dental care for the poor; the cigarette tax increase could be earmarked for the Basic Health Plan."

I wonder if Chopp is going to suggest a special tax on "Preparation H for the swollen ego's in the Democratic Caucus in Olympia?

Cameron

Posted Tue, Jan 19, 7:13 a.m. Inappropriate

I watched both interviews, too. Until the Republicans can offer a private alternative to the state worker's comp that does not involve entities that participate in riskless risk taking then Mr. Chopp will be able to keep it as it is.
Privatization that the Republicans have been selling for the past quarter century has already had massive failures. Bernie Madoff put a name on the Dems argument in many cases.
Picking and choosing is what the state should be doing is more of an open question right now, but not open to ignoring the head-first dive into the toilet the private insurers just took.

That said, retail booze sales being run by the state is just dumb. If a poorly run store went out of business the risk to the state wide economy would be quite small.

Changes to the current system that limit on-going claims is something he agreed to look at a month ago at the Spokane forum (thanks again TVW).

Mr Baker

Posted Tue, Jan 19, 12:50 p.m. Inappropriate

Oh, this is a great idea. A more convoluted tax systems. Do not increase the taxes on my airplane. I pay a huge amount of my income in taxes. Selective taxation is not a good plan, nor is it fair. We all need the services that our taxes support, not just airplane owners. How fair is that?
Do you recall the excise tax on yachts that was tired a few years back? It killed the yacht business and put many, many people out of work. It was a total failure of an idea and was eventually repealed.

Here is a better idea--cut expenses. Get some fiscal discipline. Instead of looking for all kinds of new taxes, try cutting the budget. I am a business owner and the more you tax me the less likely it is that I will hire more employees. Money is fungible. It does not matter what form the taxes take (i.e., airplane tax), what matters is how much I pay. And if you increase my taxes I am less likely to expand my business and hire more workers. The biggest problem in America right now is jobs. Higher taxes of any kind inhibit job creation. Cut the budget.

Tom Metz

taupe

Posted Tue, Jan 19, 1:19 p.m. Inappropriate

Sin taxes on cigs & junk food are the most regressive taxes of all. The rich can afford to pay them, the poor cannot. If you want to raise some serious cash, and I'm talking billions, do a one-time asset-tax on people like Bill Gates. Say 10%.

Alex

Posted Tue, Jan 19, 1:20 p.m. Inappropriate

tommetz - there is nothing left to cut. Services are already operating on bare bones. Police presence is way down I've noticed. Roads are not being repaired. Make the filthy rich pay their fair share as the price for living in our society.

Alex

Posted Wed, Jan 20, 9:27 a.m. Inappropriate

I agree with the idea of not relying on federal dollars to get through the rough year. By all appearances this challenging budget era is going to last for at least another year, and who knows how much longer than that, and so the legislature really needs to focus on setting the budget on a sustainable course, rather than have every year be a crisis year.

I will be advocating for the $1 per barrel petroleum fee at the environmental lobby day next week, and on top of that I do agree with most of Speaker Chopp's revenue plans.

However, I do have concerns about general tax increases, due to the stress that so many Washington families already experience. I would like to see an income tax, but only if the first bracket is fairly high and there is an equivalent reduction in the sales tax. But let us not fall into the trap of thinking that the wealthy comprise a piggy bank from which funds may be withdrawn without cost to the economy.

Posted Wed, Jan 20, 10:37 p.m. Inappropriate

Someone might want to ask the Speaker whether all the creativity he's evincing in the service of new taxes has any bearing on his support of an alternative for SR 520 that costs $1.3 billion (yes, with a "b") more than the alternative that's favored by transit agencies. In the spirit of connecting taxation to spending, perhaps his wealthy and vocal constituents in Montlake and North Capitol Hill could form a local improvement district to cover the additional costs of a tunnel under the Montlake Cut? Otherwise, taxpayers and travelers will be taking it in the shorts for decades to come so that a whiny few who chose to live within sight and sound of a major highway can have (some of) it hidden underwater, protecting their delicate eyes and ears.

Now THAT's looking out for the little guy. No wonder the Dems are in fear for their majority.

Gadfly

Posted Wed, Jan 20, 11:01 p.m. Inappropriate

An income tax would be litigated for two years at least -- it would have no impact in the next few years. Tax reform is necessary but reform won't help right now. While reform is being planned, we need more revenue, immediately and for the next several years. Cuts won't do it; anyone who says so is either misinformed or inhumane, or both.

sarah

Posted Thu, Jan 21, 5:49 p.m. Inappropriate

To PlugInMonster:
Owning an airplane does not make one rich. I am not rich, not even close. (Some aircraft owners are rich, of course.) I know many airplane owners and none of them are rich. Flying is simply our hobby. Why tax my hobby on not someone else's hobby? Some people have two cars or a vacation house. I have one car and a plane. (I actually sold my second car and bought the plane.) If I didn't buy the plane, I could have bought a nicer house. Should we tax second cars? vacation houses? By the way, I paid a hefty portion in sales taxes when I bought the plane.

One more point. The rich pay way, way more than their share. The top 1% of income earners pay 40% of all income taxes. The top 10% pay 71% of all income taxes. The bottom 50% pay less than 3%. I don't know about you, but that seems way more than fair to me.

taupe

Posted Sat, Jan 23, 3:29 p.m. Inappropriate

Chopp is a Nickels clone, get money from whomever he doesn't like. Time to send him packing like we did Nickels.

dmanjam

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