Senate Ways and Means Committee Considers Income Tax

Yesterday's surprise public hearing on an income tax in the Senate Ways and Means Committee increased the uncertainties surrounding the budget endgame in Olympia. Is this Phoenix rising from the ashes? Most observers believe this bird won't fly.

This morning in the WashACE telephone briefing, one speaker speculated that the hearing was a courtesy to the bill's sponsor, Sen. Rosa Franklin, D-South Tacoma. Franklin voted no on the budget passed by the Senate 25-19. It's also a response to Oregon's successful Oregon ballot measures boosting taxes on high earners, dubbed Oregon's "business assisted suicide plan" by Nike founder Phil Knight.

The Everett Herald properly lambastes lawmakers.

See where this registers on your outrage meter:

The Senate Ways and Means Committee scheduled an afternoon public hearing on a substitute bill to create a state income tax. But the amendment on which the public was supposed to comment wasn’t even available until the hearing began.

This legislative chicanery is right in line with the recent introduction of “title-only” bills, proposals that go through a public hearing and are passed by a committee, even though they include no details. Those are added later, when there’s no opportunity for public comment. It’s a blatantly underhanded way to avoid scrutiny of a controversial idea.

Senate Majority Leader Lisa Brown, an income tax champion, writes on her blog that she wants to let the citizens decide. And she hopes Oregon's tax-the-rich schemes travel well.

[Oregon's tax hikes]  affected only the wealthiest 2.5 percent of the state, and both passed with solid majorities.

...Here’s an idea for how to let the people to decide the outcome of our budget process. The question is: Would the populist sentiment recently expressed on the other side of the Columbia River be as strong a motivator in Washington as it is in Oregon?

I'm guessing, no. Oregon already had a highly progressive income tax; Washingtonians have repeatedly rejected it.

At SeattlePI.com Chris Grygiel writes that voters probably won't see an income tax on the ballot this fall.

Even if Franklin's bill makes it out of the Senate it would face a tough time in the state House, where leaders have been cool to an income tax idea. Gov. Chris Gregoire is also no fan.

The Olympian's Brad Shannon provides a brief outline of the proposal and further evidence of the haste with which it reached the committee.

In a nutshell, PSSB 6250 imposes a 4.5 percent tax on income — affecting only the share of an individual’s income above $200,000, above $300,000 for a head of household, and above $400,000 for a married couple.

The income tax would not take effect until 2011 and, important to some, it would cut the state share of the sales tax from 6.5 cents per taxable dollar to 5.5 cents. It also would give tax credits to businesses that pay a business-occupations tax based on gross receipts.

It appears the measure would raise some revenue, but no definitive fiscal impact was available Thursday for the Legislature. Despite that, a legislative staffer told the Ways and Means Committee it is estimated to raise about $1.46 billion in its first year, while reducing sales tax revenues by about $1.143 billion. The value of the tax credits was not available.

Good coverage also from Andrew Garber at the Seattle Times.

More later.