Groups urge state to triple tax on polluters to plug budget hole

OLYMPIA — As state lawmakers search for ways to fill a $2.6 billion budget hole, environmentalists are dangling what they hope will be a tempting new tax idea.

They're pushing to as much as triple the state's "hazardous-substance tax" on petroleum, pesticides and other chemicals — an increase that could bring in an extra $250 million a year.

In the long run, the money would be dedicated to cleaning up polluted stormwater runoff contaminating Puget Sound and other waterways.

But to sweeten their prospects, environmental lobbyists are pitching the notion that the Legislature could use up to $150 million a year over the first few years to plug the state budget shortfall. Stormwater cleanup would get a larger share in future years.

Supporters say the hazardous-substance tax, created by a voter initiative in 1988, is a logical way to pay for stormwater cleanup.

"It's the only fund source on the table to address the biggest water-pollution problem in the state," said Cliff Traisman, state lobbyist for the Washington Environmental Council and Washington Conservation Voters. "This is a tax on polluters who scientifically are the number one contributor to the dying Sound."

Details are still being shaped into a bill, and advocates are maneuvering to line up support of key lawmakers.

Representatives of the petroleum industry and other businesses groups argue that the new tax would kill jobs and raise fuel prices.

"There is definite economic impact," said Dave Fisher, spokesman for the Stop Washington Hidden Gas Taxes Coalition. "You can't impose more than a billion in new costs on an industry and not have it show up in higher prices at the pump or loss of jobs or both."

Last year, a similar proposal — a new "barrel fee" on oil at refineries — passed the state House but died in the Senate. That fee ran into objections from industry, as well as legislative transportation leaders who said it amounted to a gas tax that would have to be dedicated to road-building under the state constitution.

Environmentalists hope their proposal this year to simply raise the existing hazardous-substances tax will prove more palatable.

The tax rate, 0.7 percent of the wholesale value of the products, has never increased. The tax raised $127 million last year, with most of it paid by the state's five oil refineries.

Oil, grease and chemical residue washing off roads is the leading source of toxics in Puget Sound, according to the state Department of Ecology. The pollution harms fish and other wildlife and threatens the health of people who eat fish or shellfish with high levels of contaminants.

The money from the hazardous-substances tax would pay for such projects as detention ponds or swales that allow polluted water to filter into the ground instead of washing into waterways.

Rep. Dave Upthegrove, D-Des Moines, said the new tax could create construction jobs and help cities that would otherwise have to foot the bill for stormwater cleanup through higher utility rates or property taxes.

"It's not a question of if the people pay for this. It's who pays," Upthegrove said.

The Association of Washington Cities also supports the tax so that local property owners don't have to bear the entire burden of stormwater cleanup, said Dave Williams, a lobbyist for the group.

But critics question the Legislature's sincerity when it comes to devoting the tax to environmental programs.

The current tax is supposed to be dedicated to cleaning up hazardous- waste sites.

But over the last few years, legislators have raided the money to balance the state's general-fund budget. They diverted $180 million last year and Gov. Chris Gregoire has proposed taking an additional $80 million in the 2010 budget.

"It's kind of an empty promise from an environmental standpoint," Fisher said.

It's not clear whether the tax idea will get enough support to pass in the short 60-day legislative session. Legislative leaders so far have been vaguely supportive of the idea but aren't making any promises.

Senate Majority Leader Lisa Brown, D-Spokane, said "there is some support" for increasing the tax "and utilizing it for these clean-water needs around the state." But, she added, "I don't know for sure we'll get there this session."

House Majority Leader Lynn Kessler, D-Hoquiam, said the hazardous-substances tax "resonates better" than the oil-barrel fee that passed the state House last year.

But Kessler said lawmakers are waiting to commit to specific taxes until February's revenue forecast and news on federal aid.