Washington State Lawmakers Prepare to Increase Taxes to Help Fill Budget Gap

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Washington Governor Chris Gregoire signed a bill this Wednesday that temporarily suspends the state’s supermajority requirement for raising taxes.  By preventing the minority Republicans in either chamber from blocking budget proposals that rely on both revenue increases and spending cuts, this move almost certainly paves the way for what will be a more balanced approach to filling the state’s budget gap. 

The House, Senate, and Governor have all released budget proposals in recent days that would do precisely that, though each could go much farther in the degree to which it relies on additional revenues.  The Senate proposal, for example, relies on new revenues to fill just 10% of the state’s budget gap, while the Governor’s proposal would use revenues to fill barely 7%.

The Senate proposal, released on Tuesday, would eliminate or curtail a number of special tax breaks, raise the cigarette tax, and temporarily hike the sales tax by 0.3 percentage points.  In order to offset the inevitably regressive effects of the sales and cigarette tax hikes, the proposal would finally provide the funding needed to activate the state’s EITC (called the “Working Families Tax Rebate”), which was originally enacted in 2008.

Like the Senate proposal, the Governor’s proposal also identifies an array of tax breaks for elimination or reduction, though it targets fewer breaks than the Senate version.  The Governor would also increase the cigarette tax, raise the hazardous substance tax, and generate additional revenue from taxing bottled water, carbonated beverages, candy, and gum.

The House is expected to release the details of its budget proposal today.  That proposal was not yet available at the time of this writing, but it is expected to include both spending cuts and tax increases.  For more details on the House proposal once it’s released, be sure to check the Washington State Budget and Policy Center’s blog, “Schmudget.

As noted above, the likelihood of enacting the revenue increases contained in these plans has been greatly improved as a result of Washington lawmakers’ decision to temporarily suspend the portion of Initiative 960 that requires a supermajority vote in both houses in order to raise taxes.  I-960 was passed by voters in 2007, long before they could possibly have realized how dire the budgetary situation would be just a few years later as a result of the national recession.  Notably, the suspension of I-960 has opened up a great opportunity not only for Washington to tackle its budget shortfall in a more balanced fashion, but also to close a number of tax loopholes and special interest tax breaks that have been unduly protected by the supermajority requirement against “tax increases” over the past few years.

For more on the Washington State debates as they develop, you can follow the work being done at the Washington State Budget and Policy Center, and the Economic Opportunity Institute.  Notably, both organizations have released additional options for raising revenue (here and here) that could be used to further mitigate some of the deep cuts still being contemplated by lawmakers.

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