There's no shortage of ideas for how to fix state's budget shortfall

Gov. Chris Gregoire made clear Thursday that she wants new state revenues to avert some of the $2 billion in cuts needed to put the state’s finances back in balance.

She said she does not have specific new tax or fee ideas to champion. But she won’t have to look far for ideas in the special legislative session that starts Nov. 28. Plenty of advocates are lining up with tax and revenue ideas – some new, some worn.

Two oldies from the electoral recycle bin are a temporary one-penny increase in the state’s 6.5-cent sales tax – which could raise $1 billion a year – and an expansion of tribal style electronic slot machines to taverns and bars. The latter might raise more than $100 million.

Then there is the labor movement’s favorite that plays on anger at Wall Street: ending a bank-tax break worth $172.6 million on home-loan interest earnings.

“I’ve been in serous coalition meetings where people want to put a revenue measure on the ballot in March,” said Greg Devereux, executive director for the Washington Federation of State Employees. “From what I’ve heard so far and from polling, I think people are serious about the sales tax” as a temporary remedy.

Another idea pitched by the federation, whose members are taking 3 percent reductions in pay, is a 3 percent “haircut,” or reduction in tax breaks, for what it calls special interests.

Republicans oppose raising most taxes, despite Gregoire’s cut “options” that include slicing levy-subsidy money in half for tax-poor school districts.

“We indicated that we were not in favor of new taxes, but we would consider certain revenue sources,” said Rep. Gary Alexander, House Republicans’ leader on budget issues. “One of those was extension of electronic gaming to the non-tribal (venues). That was a $100 million-plus item.”

Alexander said House Republican leader Richard DeBolt also told Gregoire the GOP would consider looking at ending tax incentives that didn’t show they were creating jobs. Senate Republican Leader Mike Hewitt of Walla Walla has made similar statements all year.

Remy Trupin of the left-of-center Washington State Budget and Policy Center said the governor should think short and long term – with an eye to making the tax system more fair over time.

“I think it is a great opportunity for her to provide some leadership on both,” Trupin said, adding that the tax system is not producing enough money to support programs even in good times.

“The worst thing we can do to our economy in the state of Washington is to keep laying people off” from schools and agencies, Trupin said.

For the short term, Trupin suggested a one-cent sales-tax increase; adding the sales tax to professional services such as legal and accounting; and closing tax exemptions that aren’t working. Because the sales-tax increase would be harder on the poor than the rich as a percentage of income, Trupin said it could be phased out and replaced by taxes that are fairer and better for economic growth.

The labor-backed Economic Opportunity Institute offered other ideas worth $1.5 billion a year. Among them: repeal of the mortgage interest exemption for banks; reinstatement of a pop tax; repeal of a jet-fuels exemption; a surcharge of 10 percent on sales of cars, boats and planes valued at more than $50,000; a 5 percent state admissions tax that excludes youth and K-12 sports events; and repeal of the excise-tax exemption for motor-fuels.

The Legislature’s Citizen Commission on Performance Measurement of Tax Preferences recently finished a review of about 25 of the state’s more than 500 tax breaks. The panel voted to keep most of those exemptions but said lawmakers should tighten the one for jet fuel taxes that is worth $300 million.

It also wants a closer review at the impact of the mortgage-interest tax break for banks worth $172.6 million over two years. But the commission said lawmakers should let a $40.8 million exemption expire for sales of energy machinery and equipment used to generate renewable energy.

House Majority Leader Pat Sullivan, D-Covington, said “everything is on the table” for his caucus. “You look at $2 billion in cuts, and absolutely revenue is on the table and something we will be looking at.’’

Sullivan said he expects any significant tax measure would go to the statewide ballot – a move that requires just a simple majority vote in the House and Senate to do.

Business groups have fought tax increases. Often forgotten by activists fighting for new revenues is the fact that lawmakers approved a nearly $800 million revenue package in 2010 that included a temporary 0.3 percent business-tax surcharge on service-sector businesses.

Voters last year repealed the piece of the package that put a two-cent tax on soda pop and a sales tax on candy bars. But what remains from that tax package is predicted to pump about $1.35 billion into state coffers during the 2011-13 budget cycle, according to the Department of Revenue.

“Gov. Gregoire’s announcement Thursday further underscores the gravity of our state’s budget troubles and amplifies the importance of the decisions that lie ahead,” Don Brunell, president of the Association of Washington Business, said in a statement that did not specifically declare war on new taxes.

Brunell has said in the past he is open to looking at reviewing tax exemptions that don’t produce jobs. But his statement went on to say that “one of the best ways to prevent the kinds of cuts the governor outlined to education, public safety and social services is to find new ways of creating private sector jobs, which provide the tax revenue for state programs.”

Brad Shannon: 360-753-1688

bshannon@theolympian.com

ww.theolympian.com/politicsblog