Key senator working on state income-tax proposal

Senate Majority Leader Lisa Brown is working on a possible proposal to create an income tax on the wealthy.

Brown said no decision has been made, but if the Senate did act on a proposal it would be sent to voters.

"Were we to go that direction, we would make any income tax in Washington state very analogous to the federal system," she said today. "It would take into account all federal exemptions and deductions and make it as simple as possible."

Discussion of an income tax has emerged as the Legislature looks for ways to cut nearly $4 billion in spending to balance the state's next two-year budget. Both the state House and Senate have proposed deep cuts in the budget, but Democrats also have talked about the possibility of putting some kind of tax increase on the ballot.

Brown said any income tax proposal "would be targeted at the high earners. I'm not sure how high. But certainly not wanting to put an additional tax burden on middle class people or low-income people who are going to bear the brunt of the (budget) cuts."

Brown's spokesman Jeff Reading said the senator is "still working out the details, such as income threshold, percentage, offsets of other taxes, programs the revenue would fund" and language that would pass constitutional muster.

It's not clear yet how House Democrats feel about the idea. House Majority Leader Lynn Kessler said it would probably get a mixed reaction in her caucus.

"There would be some who would just be jumping for joy. There would be others who would be sort of horrified that we'd be putting out a big tax increase," she said.

There had been speculation that Brown, D-Spokane, was behind a bill by Sen. Jeanne Kohl-Welles, D-Seattle, that would create an income tax on the rich.

However, Brown said this morning the Kohl-Welles bill, which would raise around $100 million per biennium, according to a 2007 fiscal analysis, is not "the answer to the structural problem" in the state's budget.

Kohl-Welles has proposed a similar income-tax bill before, but it has never gained any traction. Her bill would place a 1 percent income tax on people making more than $500,000 a year or $1 million on married couples.

Gov. Chris Gregoire issued a statement today saying she doesn't support a state income tax.

Speaking specifically about the Kohl-Welles bill, Gregoire said, "The new proposal will undoubtedly raise constitutional and legal challenges and probably wouldn't bring in new revenue in time to address the economic crisis we face."

If the Legislature decided to send an income tax measure to voters, it would bypass the governor and go to directly to the ballot.

Brown views an income tax as more of a long-term structural fix to the state's budget problems.

Sen. Ed Murray, D-Seattle, chairman of the Senate Democratic Caucus, said support appears to be fading for a ballot measure that ask voters to increase existing taxes such as a sales tax.

"I think the idea of a sales tax is in trouble in the caucus," he said. "Sending out a sales tax package right now I think is losing steam."

Murray said there's growing concern among Senate Democrats about the state's reliance on the sales tax. "Probably we've reached the ceiling in terms of what we can do on the sales tax," he said.

Brown has said in the past she's concerned about what she considers to be an over-reliance on the state sales tax, which she called "an extremely volatile revenue stream."

In a blog post on Tuesday, Brown wrote that the New York Legislature is considering a "fair and stable way to address their revenue challenges": a temporary increase in the income tax for New York's highest earners.

"Should we do something similar in Washington?" she wrote.

Conventional wisdom has been that an income tax targeting the wealthy would require a state constitutional amendment. And that would require a two-thirds vote in the House and Senate to put on the ballot. Once before voters, it would only need a simple majority vote to pass.

However, Brown and others say it may be possible to avoid a constitutional amendment and send an income tax proposal to voters that would create a new state law.

Doing so would almost certainly invite a legal challenge that would end up in the state Supreme Court, but Brown said she feels there's a good chance the court would side with the Legislature.

Andrew Garber: 360-236-8268 or agarber@seattletimes.com