House Dems don't go for increase in sales tax

OLYMPIA — House Democrats on Monday proposed raising $758 million by ending certain exemptions and boosting taxes on items such as cigarettes, water, candy, gum and elective cosmetic surgery.

Noticeably absent — an increase in the state sales tax. House Democrats debated among themselves for weeks whether to include a temporary increase as part of their proposal to help close a multi-billion-dollar budget shortfall.

It's out. For now. But that doesn't mean the idea is dead.

Senate Democrats earlier proposed a three-tenths of a cent increase in the state sales tax as part of a tax package that would raise $918 million.

"I can't say if ... we'll have to go to some version of what they've done, or if we'll end up with some version of what we're doing," said Sen. Ed Murray, D-Seattle, the Senate's lead on taxes. "I can't predict which way it will go."

Gov. Chris Gregoire seemed to side with the House tax plan Monday, saying, "It's a much preferable revenue package for me than the Senate."

The governor's tax proposal, which would raise about as much money as the House, also leaves out a sales-tax increase.

All the budgets call for several hundred million in cuts and would use federal money and other one-time fixes to help balance the budget.

Republicans contend tax increases would hurt the economy, and say the state should cut more and find cheaper ways to provide services.

House Minority Leader Richard DeBolt, R-Chehalis, said Republicans are worried about the signal the tax increases send to business.

"Anything we do now that makes it more expensive to do business in Washington, I don't think is the right thing to do," he said.

The House plan would raise more than $160 million by extending the state sales tax to bottled water, elective cosmetic surgery (except for medically needed reconstructive surgery), candy, gum, janitorial services and custom software.

It also would raise $112 million by increasing some tobacco taxes, including a $1 increase for a pack of cigarettes, and increase the business-and-occupation tax rates by a half-cent for certain services including lawyers and accountants, raising around $22 million.

Lawmakers have to close a $2.7 billion gap in the two-year budget, running through June 2011.

The shortfall represents the amount of money it would take to maintain state services compared with the amount of tax revenue and other funds the state is expected to have to pay the bills.

The Governor's Office projects it would cost about $32.4 billion to maintain existing services through June 2011 and leave $512 million in reserve. However, the state expects to have only around $29.7 billion in tax revenue and other resources on hand.

Democratic leaders say that unless the state increases taxes, the Legislature would have to reduce programs such as subsidized health insurance for thousands of low-income workers and aid to people who can't work because of disabilities.

"Our job is to do something that fits with what the values of the state of Washington are. That's what we're trying to do, and I think we've come pretty close," said Rep. Ross Hunter, D-Medina, chairman of the House Finance Committee.

Hunter plans to take up the tax package in his committee Tuesday and expects a floor vote soon. "I believe we will be able to move this package, or one substantially like it, off the floor this week," he said.

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

Staff reporter Jim Brunner contributed to this report.