State House Finance Chair, Ross Hunter (D-48)
After a week of what state Democratic House members have been calling earnest caucus debates about where to find the $857 million they earmarked in revenue to help close the state's $2.8 billion budget shortfall, House Finance Committee chairman Ross Hunter (D-48) announced a plan today to raise the cigarette tax by one dollar and close tax loopholes and exemptions worth $650 million. The $758 million revenue proposal plus lottery money and capital budget transfers worth about $100 million will fund current levels of service for things like the basic health plan, children's health, student aid, and Medicaid.
The plan would eliminate tax exemptions for things like out-of-state businesses, private planes, corporate board compensation, bottled water, elective cosmetic surgery, candy and gum, investment earnings, and (in one ding against liberals) limits exemptions for renewable energy.
Here are the specifics.
The new revenue is coupled with $653 million in the cuts the House has already announced (including $149 million from K-12 funding, $202 million in human services such as adult day care, $24.2 million in corrections, and $22.5 million in environmental programs).
The House rounds out its budget with $641 million in federal money and $465 million in transfers from other funds, like the state rainy-day fund.
I have a call into the House Republican Caucus to get their take on the Democrats' budget, which, by avoiding a sales tax increase, doesn't seem to play into the GOP's hands. (The Senate has proposed raising the sales tax by .3 percent). Instead, the Democrats have gone after corporate tax loopholes and increased taxes on luxury items and "sin taxes."
Here's the GOP response from the ranking Republican on Rep. Hunter's Finance Committee, Rep. Ed Orcutt (R-18, Kalama), which doesn't address the bulk of Hunter's war on exemptions and loopholes, but rather, singles out two items: The $1 increase in the cigarette tax and getting rid of the sales tax exemption for janitorial services. And Rep. Orcutt ultimately circles back to GOP red meat, criticizing the Senate Democrats for pitching a sales tax increase
“This is $850 million that our economy cannot afford. This doesn’t make the task of economic recovery for our families and employers any easier. These tax increases will lead to more layoffs and further delay employers from hiring back workers. Also, it will further erode the ever-decreasing buying power of low- and middle-income families.
“I personally know an employer in my district that works in janitorial services. This tax is the difference between her keeping her workers employed or being forced to go down the road of layoffs.
“And, adding another dollar to the price of cigarettes is only going to create an underground economy, or force people to go the tribal reservations or, in border areas like Southwest Washington, encourage folks to go across state lines to make their purchases. The secondary affects of people leaving this state also needs to be considered. The mom and pop convenience stores in our state are going to suffer because of these tax increases.
“The Senate Democrats want to increase the sales tax. The governor wants to tax an assortment of items, similar to the House proposal. While we don’t know exactly what the final tax package will look like, I can almost guarantee you it will only go in one direction – UP! At the end of the day, it’s going to look ugly for taxpayers.”
In his own statement, Hunter said:
“We’ve spent weeks analyzing all kinds of options, gathering feedback and making substantive changes in response to the concerns we’ve heard,” said Hunter. “Ultimately, in looking at the options, we had to ask what was more important—preserving a tax exemption for out of state food distributors that our in-state companies don’t get or preserving that funding to help thousands of Washington kids go to college?
“Our focus was on removing exemptions and closing loopholes. This approach makes sure everyone is doing their fair share in helping our state get back on its feet.”