Wash. gov seeks $605M in higher taxes for deficit - Business Week

Wash. gov seeks $605M in higher taxes for deficit - Business Week

Washington Gov. Chris Gregoire wants a total of $605 million in higher taxes to help fill the state's budget deficit, including larger levies on oil products, bottled water, pop, candy and cigarettes.

Gregoire's tax plan, released Wednesday afternoon, is an opening bid in the public debate over hiking taxes amid a fragile economic recovery. The Legislature's majority Democrats are planning to raise taxes and cut spending to solve the $2.8 billion budget gap, but haven't yet revealed detailed plans.

"The task ahead may appear daunting, but I believe we can work together to get the job done," Gregoire said in a letter to top legislators.

Gregoire's plan is centered around some $493 million in tax increases, including a near-tripling of the tax rate on oil products and other pollutants.

Raising that existing pollution tax from 0.7 to 2 percent would generate about $148 million for state programs, according to Gregoire's projections.

Environmentalists and organized labor have been pushing that tax increase as a key budget solution, but the idea is opposed by oil refiners, business groups and some key transportation leaders.

Gregoire also would raise about $135 million from a penny-per-ounce tax on bottled water; a nickel-per-can tax on pop, worth about $96 million; a $1-per-pack cigarette tax, raising about $89 million; and extension of the sales tax to candy and gum, for about $28 million.

The money would be used to help preserve state programs that otherwise would be cut, including the Basic Health Plan, the General Assistance welfare program for the disabled, and subsidies for rural school districts.

In her letter to lawmakers, the second-term Democrat said her first priority was to seek tax sources that wouldn't handcuff the economic recovery.

The state's chief economist recently reported encouraging signs of economic improvement, but also warned of lingering risks among regional banks, construction employment and consumer spending. Washington's December unemployment rate was 9.5 percent, the highest in 25 years.

Gregoire's tax plan also includes the closing of some tax exemptions and legal changes spurred by the state's loss in recent court cases that challenged tax collections.

She had previously suggested some of those proposals, including an estimated $73 million plan to raise taxes on out-of-state businesses by rewriting a part of the business tax code.

As a practical matter no taxes can be raised until lawmakers suspend Initiative 960, a 2007 law that imposed a difficult-to-reach requirement that tax increases get support from two-thirds of the state Legislature. Democrats are in the middle of revising I-960, but their effort has been bottled up by missteps and rowdy delays from an energized Republican minority.