Tax Scramble Continues

While waiting for the Senate to bring its tax legislation to the floor, consider these news reports. The Olympia highlights an ad campaign by labor and health care groups seeking higher taxes. Attempting to capitalize on some public sentiment against the financial stimulus package, the ad targets the banking industry. The target is a tax exemption for some of the banks' interest earnings on first mortgages. Far from punishing banks, repealing the exemption will increase the cost of capital.

"Our opposition is primarily based upon the impact it would have on consumers," contract lobbyist Dave Fisher said on behalf of the bankers. "It's inevitably going to make mortgages harder to get and more expensive."

So far, it looks like a majority in the Senate understands that, but in the revenue scramble anything can happen, which is why these are dangerous hours in Olympia.

Another example reported in the Washington State Wire: a large tax hike to fund the billion dollar jobs package passed by the House. 

[the] plan would ask voters this fall to approve an $861 million bond issue. The money would be used to retrofit and repair schools and other public buildings, and in the process [prime sponsor Rep. Hans] Dunshee says the state would put 38,000 people to work.

It would have to go to a vote because the bond issue would take the state over the constitutional debt threshold. The billed stalled in the Senate during the regular session for good reason: It's a ton of new debt not backed by a dedicated revenue stream and the jobs and energy efficiency benefits are not proven. Having resurrected the bill in special session, supporters are contemplating a sizeable bump in utility taxes, increasing costs for consumers and businesses.

They don't need to do this. As The News Tribune editorial board writes, the 6,000 jobs a year claimed by the sponsor won't start being created until after 2012, when the economy will already be in recovery. And, with Washington already carrying twice the national average per capita debt burden, the increased debt load could sabatoge the state credit rating. Yet, the editorial points out.

But determined to pass something, they are looking for a new revenue source to pay off the bonds. A bump in the state utility tax is reportedly one of the options.

Another tax increase isn’t the way to convince voters that the Legislature did something for them this year. Nor is it likely to encourage growth in employment sectors that were responsible for the rest of the 190,000 jobs lost in Washington this recession.

Right.