Definition of ‘Tax Increase’ Debated in Washington State

Definition of ‘Tax Increase’ Debated in Washington State
April 19, 2013

Jason Mercier

Jason Mercier is director of the Center for Government Reform for the Washington Policy Center. (read full bio)

When the 2013 Legislative Session began this past January, tax increases in Washington State were a long shot.

First there was the voters’ most recent confirmation (for the fifth time) of the state’s two-decade-old law requiring a supermajority vote in the legislature to raise taxes. That proposal, Initiative 1185, received 64 percent of the vote and passed in every county of the state, including liberal King County.

Then there was the campaign promise of newly sworn-in Governor Jay Inslee (D), who promised, “I would veto anything that heads the wrong direction, and the wrong direction is new taxes in the state of Washington.”

Finally there was the newly formed Senate Majority Coalition (23 Republicans and 2 Democrats) that said it would not support a tax increase to balance the budget. Speaking on behalf of the Coalition, Senate Republican Leader Mark Schoesler (R-Ritzville) said, “Our first priority has been to help the governor keep that pledge [not to raise taxes].”

Two Safeguards Gone

Fast-forward to budget crunch time and two of those three taxpayer safeguards are no more.

On February 28, the State Supreme Court, in a 6-3 ruling, declared the 20 year-old law requiring a supermajority vote to raise taxes unconstitutional.

According to the majority opinion, “Our holding is not a judgment on the wisdom of requiring a supermajority for passage of tax legislation. Such judgment is left to the legislative branch of our government. Should the people and the legislature still wish to require a supermajority vote, they should do so through a constitutional amendment.”

Although a proposed constitutional amendment to remedy the Court ruling cleared a Senate committee, it was not brought up for a floor vote.

Then, on March 28, Inslee released the first budget proposal of his administration, and it included a plan to increase taxes by more than $1 billion despite his campaign promise that he would veto tax increases, and his campaign claim any new revenue would come from job creation and a growing economy. Inslee said his proposed $1 billion in tax increases are not tax increases.

In fact, when asked if he was breaking trust with voters by proposing tax increases, Inslee said, “I am doing today exactly—exactly—what I said I was going to do if I was given this great responsibility of being governor.”

Extending Expiring Taxes

Though Inslee did say on the campaign trail he was open to closing tax preferences—without specifying which ones or for how much—more than half of his $1 billion tax increase proposal depends on the definition of a tax increase. According to Inslee, extending “temporary” taxes that are scheduled to expire is not a tax increase.

Approximately $662 million of Inslee’s tax proposal comes from extending taxes imposed in 2010 on some businesses based on the promise the higher levies would expire this year.

However, under state law (RCW 43.135.034 (b)) the definition of a tax increase is  “. . . any action or combination of actions by the state legislature that increases state tax revenue deposited in any fund, budget, or account.”

This means that under the law as well as common understanding, extending a temporary tax scheduled to expire is in fact a tax increase.

Senate Coalition Objecting

For now at least, the Senate Majority Coalition is standing firm in its objection to tax increases and plans to rely on the $2 billion in revenue growth forecasted for the next budget. 

“It is disappointing to see Gov. Inslee break his strong campaign promise not to raise taxes,” said Paul Guppy, vice president of research for the Washington Policy Center. “We agree with the statement made by then-candidate Inslee’s campaign when his spokesperson said, ‘Taxes are not the way forward.’ Instead of trying to raise taxes, budget writers should take advantage of the $2 billion in additional revenue the hardworking taxpayers of our state are already providing.”

Jason Mercier (jmercier@washingtonpolicy.org) is director of the Center for Government Reform for the Washington Policy Center.

Jason Mercier

Jason Mercier is director of the Center for Government Reform for the Washington Policy Center. (read full bio)