Article by Erik Smith. Published on Monday, February 08, 2010 EST.
Big Tax on Oil Would Bail Out General Fund, Raise Price of Gas Statewide – And Eventually Use Money for Water Projects
By Erik Smith
Staff writer/ Washington State Wire
OLYMPIA, Feb. 8.—The green plan to balance the state budget has finally emerged in black and white, with a big tax on oil, a nod to Puget Sound cleanup, and a strong chance that every motorist in the state will pick up the tab.
Lawmakers in the House and Senate Monday introduced identical bills that would triple the state’s tax on oil refiners and other importers of hazardous substances. The proposal raises a question that will dominate the Legislature for the remaining four weeks of the 2010 legislative session:
Should lawmakers hike gas prices to avoid cuts in state spending?
The plan is being pushed hardest by the state’s environmental groups, but support also comes from city and county lobbying organizations. The eventual goal is to provide funding for stormwater drainage projects required by new federal water-pollution regulations. That construction effort is expected to cost billions of dollars in the years ahead.
The backers are sweetening the deal for the Legislature by offering them an enormous cut for the next few years. The plan would raise taxes by $228 million a year and give the state general fund $162 million the first year, $214 million in 2011-2013 and $160 million in 2013-2015.
Those are attractive numbers for a Legislature that faces a $2.6 billion budget shortfall this year, and another budget crisis next year of anywhere between $3 billion and $7 billion.
Ultimately a large part of the tax increase – if not most of it – would be paid by motorists who buy their gasoline and diesel at the pump. Depending on how much the refiners are able to pass along to customers, the increase could be as much as six cents a gallon.
At the same time, there is no guarantee that the money will go toward water-pollution projects in the future. Lawmakers already are diverting every dollar they get from the current Model Toxics Control Act cleanup taxes to fill holes in the state budget. Whatever deal they make this year to divvy the increased tax revenue could be revised by a future legislature.
Looks Good to Governor
At her weekly news conference Monday, Gov. Christine Gregoire said she finds the proposal attractive, and she disputed the idea that it would raise the price of gas. She said she believes the oil industry and other payers will have to absorb the increase.
“Let’s be honest. The MTCA [Model Toxics Control Act] tax has been in place since the 80s, and there has been no increase since the 80s, and these are oil companies that are making lots of profits, so for us to assume that we pay for it at the gas pump, I don’t think is fair. We have to have a long-term solution to water problems in the state of Washington. The federal government will require it. And if we want to get Puget Sound cleaned up we can’t sit and pray for something to happen someday. We’re going to have to take action to get something done. So I’m looking at it and I will tell you after I get my revenue forecast and after I get my caseload forecast this week exactly where I think we should go in terms of revenue.”
The governor said she doesn’t think the proposal represents a hidden gas-tax increase, as opponents have charged.
“It doesn’t have to be,” she said.
Gregoire said she will meet with her staff Wednesday to discuss details of the proposal.
Gas Tax by Another Name?
Opponents say the tax increase is a gas tax in disguise. That’s because the Model Toxics Control Act cleanup tax is paid mainly by the oil refiners that line the shores of Puget Sound – some 84 percent of it. Refiners will pass along as much of the tax as the market will allow, they say. And even if the industry absorbs some of it, that still spells trouble. “You are raising taxes on some of the last good manufacturing jobs in the state,” said Rep. Doug Ericksen, R-Ferndale. “The oil industry can move its business to other states and overseas. I think it sends a pretty clear message to our oil producing companies that we don’t value their jobs. We’re not going to get any money from them once we tax these companies out of existence.”
Ericksen also accused the governor of “pure ignorance” about the way the MTCA tax works. Maybe the tax rate hasn’t changed, but tax revenue has steadily increased. That’s because the tax is based on a percentage of the dollar value of hazardous substances imported into the state. When oil prices rose, so did tax revenue. “The governor displayed gross ignorance about how our own tax code works,” he said.
Republicans maintain that the water-pollution and “big oil” angles are really red herrings.
“They’re talking about raising taxes to balance the budget and trying to make it look like ‘big oil’ is paying for it, but it all comes back to the people,” said Rep. Ed Orcutt, R-Kalama. “The bottom line is that they’re raising taxes on the citizens of the state and they’re trying to disguise it.”
Bills Provide Details
The stormwater tax plan has been a hot topic of speculation around the state Capitol this year, but until now the specifics have been murky. The plan that is outlined by House Bill 3181 and Senate Bill 6851 differs in some ways from earlier reports.
The bills triple the state’s tax on hazardous substances, which currently generates $114 million a year. The Model Toxics Control Act was launched by an environmental initiative in 1988.
The proposal doesn’t touch the existing cleanup taxes – lawmakers still can spend that money any way they want. Lately none of the cleanup money has been going to cleanup – budget plans have raided $260 million in cleanup money to pay for state general fund programs.
The bills deal only with the increase in taxes. The spending plan would allot 71 percent the first year for the general fund and 29 percent to environmental programs. In the next budget, the state would get 46 percent of the money. In the budget after that, the state would get 35 percent. After 2015, the entire amount is supposed to go the environment.
The measure is supported by the Washington Environmental Council, People for Puget Sound, the Association of Washington Cities and the Washington Association of Counties. Support in the Legislature is strictly along party lines. The House measure is sponsored by Rep. Timm Ormsby, D-Spokane, and 31 other Democrats. The Senate bill is sponsored by Ed Murray, D-Seattle, and 23 other Democratic senators.
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