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Dear Friends and Neighbors,
The 2012 legislative session began on Monday and will run 60 days. The governor gave her annual State of the State speech on Tuesday, which you can find here (33:29 mark). You can also read the statement I put out here. You may also watch my video update from this week by clicking here. Below are my thoughts on the governor's proposals.
$1.50 fee on every barrel of oil produced in our state
The theme of the governor's speech was, “winning in the turn” – a metaphor gleaned from a book called “That Used to Be Us” by Thomas Friedman and Michael Mandelbaum. As one of the few small business owners in the Legislature, and a business professor at Whitworth University, I appreciate Mr. Friedman's belief that challenging times offer opportunities to gain ground on the competition.
The governor interprets “winning in the turn” as one new fee and two new tax increases. She believes a $1.50 “fee” on every barrel of oil produced in our state, which is a convenient word for “tax,” will translate into job growth. As a small business owner, I believe this argument is fundamentally wrong. One barrel of oil has approximately 50 gallons of crude oil in it. State lawmakers continually struggle with the understanding that when large companies are taxed, those taxes are passed on to consumers. In doing the math, many people believe this $1.50 per oil barrel fee translates to approximately a 9 to 11 cent per gallon gas tax increase. In other words, we would all pay more at the pump. It would also impact manufacturing jobs in regions of our state.
Consumer confidence is a critical element of our economy. We gauge our confidence primarily on electricity rates and gas prices. The consumer confidence index is continually experiencing large swings from negative, to positive, and back. The governor's new fee increase would only further weaken consumer confidence. Jobs must be created in the private sector, and this approach would only serve to undermine the economy.
Increasing the state sales tax to buy back cuts to education
The governor is also proposing to raise the state sales tax, which would generate nearly $500 million in revenue, to offset her proposed cuts to education and other areas of state government. This tax increase proposal has two fundamental problems. First, if education is our top priority, as I believe and what our state Supreme Court recently confirmed, then additional taxes are not required because it must be funded first in our budgeting process. Secondly, I don't believe the governor's math lines up because this new tax increase would be neither effective nor temporary, as proposed. The current six-year budget projection (please see chart below) is scary, as a $2.5 billion shortfall is expected, predicated on 4.5 percent revenue growth. The governor's state sales tax increase would actually need to be permanent and tripled to meet the gap of what state government wants to spend versus what it needs to spend.
As state lawmakers, we are always challenged to not accept the obvious – to dig deeper. I believe the fundamental structure of the budget must be reformed, and education should not be held hostage by a tax increase vote. I also feel the Legislature should utilize a six-year budget forecast, as opposed to the two-year budget model it currently relies on.
Meeting our challenges with creative, new and bold solutions
I recently read “The Sun Also Rises” during Christmas break, a novel by Ernest Hemingway. From it, I realized there are big challenges that will call out the best in each of us. Our state deserves creative, new and bold solutions to meet our challenges. New or increased taxes are small ideas, an easy default, that have not worked in the last 20 years of majority-party control of Olympia. The Legislature should raise the bar, not taxes, and ask for new solutions. As a former president said, and as Hemingway concludes, the sun will rise again in our state when we do not accept easy, default answers, and when we govern with priorities and vision. The sun will rise when children and jobs are the Legislature's top priorities, not ones that require new tax increases to fund, and when employers are not burdened with regulations and are freed up to create jobs.
Thank you for the very special opportunity to serve you in Spokane. In closing, I just want to reiterate that I respect your time and privacy. If for any reason you would no longer like to receive these e-mail updates, you may take your name off my confidential distribution list by going to this link and selecting “Leave,” or contacting me directly. My hope is that you find them useful and want to continue to receive them.
421 John L. O'Brien Building | P.O. Box 40600 | Olympia, WA 98504-0600
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