Gregoire’s Lame-Duck Tax Increase Proposal

Taxes took center stage today in Olympia. Out-going Governor Gregoire released her last budget proposal along with her suggested tax increases. With Governor-elect Inslee’s promise to veto tax increases and the new Senate “Coalition Caucus” saying it plans to help implement Inslee’s no-new-taxes agenda, the life span of Gregoire’s tax plan may be shorter than previous lame duck proposals.

Gregoire’s tax increase proposal would:

• Repeal a fuel use tax exemption: $63 million
• Repeal Sales Tax Exemption on Candy/Gum, with B&O Credit to Candy Manufacturers: $69 million
• Impose Carbonated Beverage Tax of .19 Cents/Ounce with $10 Million Exemption: $57 million
• Extend 0.3 Surcharge on Service Businesses Through Dec. 31, 2016: $534 million
• Extend the Beer Tax Increase of 50 cents/gallon Through Dec. 31, 2016: $101 million
• Impose an Excise Tax on Fuel Based on Wholesale Selling Price: $368 million

Along with fund transfers and other budget changes, Gregoire’s proposal would generate an additional $1 billion in revenue on top of the $1.5 billion increase already forecasted for 2013-15.

Based on Governor-elect Inslee’s tax veto pledge, the positioning of the Senate “Coalition Caucus” and the voters’ approval for the fifth time of the supermajority for taxes requirement, Gregoire’s proposal is likely D.O.A. in Olympia.

That said, remember this proposal the next time someone mentions a “temporary” tax surcharge.

Speaking of taxes, a proposed constitutional amendment to cement the voters’ 20 year support for requiring a supermajority or voter approval for tax increases was pre-filed yesterday. The proposal (HJR 4201) would exempt gas-tax increases from the supermajority requirement and would also allow an exemption for emergencies.

On the local level, it looks like Spokane is on the verge of following Pierce County’s lead (Charter Amendment 40 – 67% yes vote) by providing the voters an opportunity to implement a supermajority tax restriction at the local level. According to the Spokesman Review:

Voters will be asked to amend the City Charter by requiring that all tax increases that the council has the power to raise or create receive support from five of the seven members, instead of just four.

Councilwoman Nancy McLaughlin said she proposed the more-stringent requirement for tax increases because she suspects that the state will strip more state funding from cities and give cities the ability to create their own taxes.

‘I just want to make sure that we’re being reasonable,’ McLaughlin said.

Council President Ben Stuckart and Councilwoman Amber Waldref, who oppose the concept, voted in favor of placing it on the ballot.

Chris Cargill, Eastern Washington director of the conservative Washington Policy Center, noted that state voters have five times approved supermajority stipulations on the state Legislature to raise taxes. He said the council should turn the issue over to voters.

‘There is nothing more democratic than that,’ Cargill said.

Stay tuned for reaction from Governor-elect Inslee and the Senate “Coalition Caucus” on Gregoire’s tax Hail Mary.