Washington Gov. Gregoire will propose tax hikes to help fix budget, but details unclear

Washington gov to propose tax hike for budget fix

OLYMPIA, Wash. — Washington Gov. Chris Gregoire will definitely propose a tax package to avoid the deepest cuts in state spending needed to fill a $2.6 billion state budget deficit. The only remaining questions: Whom to tax, and how much to raise.

Gregoire, a Democrat, is scheduled to release a new budget plan next week. By law, her budget must propose a way to solve the deficit within existing state revenue streams.

But that won’t be the final word from Gregoire. She now plans to also request a revenue package from the state Legislature, which is scheduled to reconvene in early January.

After reducing state spending by billions of dollars earlier this year, officials say the only way to find significant savings is by dropping entire programs. In an interview with TVW, the state-funded public affairs station, Gregoire said relying on cuts alone would unravel the government’s safety net.

“We’re at a point now where there’s no doubt in my mind, I can’t live with that budget,” Gregoire said in the interview, which aired Thursday. “That’s not my values. I don’t believe it’s the values of the people of the state of Washington.”

The Legislature’s majority Democrats already have said they’re interested in raising taxes to fix the budget deficit. But the governor’s willingness to take the lead on tax increases will give lawmakers a measure of political cover on the issue going into an election year.

Minority Republicans, who predicted Democrats would take this step, said the majority still isn’t looking hard enough for creative ways to prioritize government spending and spare taxpayers trying to recover from a recession.

Sen. Joe Zarelli, R-Ridgefield, said the state should radically rethink how services are delivered. Among his sugggestions: Privatizing the state’s monopoly on liquor sales, giving universities broad tuition-setting authority with requirements for more financial aid, and instituting more time limits and copays for state-funded welfare and health care programs.

“I’m so tired of not hearing a fresh idea come out of somebody’s mouth in state government,” Zarelli said. “This is the time where we have to talk in a fresh new way.”

Republicans also said higher taxes could harm the emerging recovery, since most tax increases are eventually passed on to consumers, whose spending is key to sustained economic growth.

“All of those revenues are being generated by either taxpayers or employers,” said Rep. Gary Alexander, R-Olympia. “I just don’t see where there are any sources out there that are going to not have an adverse effect on the recovery.”

Gregoire previously said she was open to tax hikes to patch the budget, and there was little doubt she would propose such a package.

Details are being worked out. Gregoire’s budget chief, Victor Moore, said the plan likely would rely more heavily on cuts than on tax increases. Eliminating tax incentives and loopholes are prime candidates, but Gregoire isn’t interested in general hikes in the state sales, property and business and occupation taxes, Moore said.

Gregoire said any program whose price tag runs in the hundreds of millions of dollars is a likely candidate for major cuts, if not outright elimination, in her initial budget proposal.

Programs falling into that category include the state’s Basic Health Plan, a welfare program called General Assistance for the Unemployable, and state Need Grants to college students.