January 25, 2002 11:00 pm

By Ray Linker

Observer Staff Writer

Raising the tax on beer and wine by 5 cents a drink wont raise the $44 million Gov. John Kitzhaber said it would, House Speaker Mark Simmons said Friday.

You would have to more than double that tax to raise anywhere near that, Simmons, R-Elgin, said by phone from Salem.

That is just one of the points of contention between the Democratic governor and the Republican-dominated Legislature, which will begin meeting Feb. 8 in an effort to devise a new budget for the 2001-2003 biennial. Since the end of the last legislative session, the state is facing a deficit of between $700 million and $815 million.

A bipartisan committee of legislators has been meeting to come up with a solution, but the governor has gone off on his own with his latest proposal. This includes proposed tax increases and a repeal of a voter-approved income tax cut.

The governors proposals this week were never part of the agreement (among the legislative committee). Our bipartisan committee is continuing to work (on balancing the budget), but the governor is out there doing his own thing. He is destabilizing the process. Even Democrats are opposed to his proposals on new taxes, Simmons said.

We should look at tax increases as a last resort. I believe the voters expect us not to raise taxes. The sin taxes wouldnt raise much money. The cigarette tax would raise more, but the beer and wine increase of five cents a drink wouldnt raise much.

Kitzhaber has proposed raising the tax per pack of cigarettes from 68 cents to 98 cents.

Simmons, who said he still has not made up his mind whether to run for a fourth term, and other Republicans are opposed to Kitzhabers proposed tax on real estate transfers (exempting the first $100,000 of the sale) and on eliminating the benefit provided by the voter-approved Ballot Measure 88. That amounted to a tax cut since it allowed taxpayers to deduct from their state return the amount they paid in federal income taxes.

Simmons said that if the Legislature essentially eliminated the terms of Measure 88, it would be referred to the voters and be soundly defeated, as would a real estate tax increase.

Kitzhaber said the cigarette tax increase could produce $67 million over two years and the Measure 88 repeal would bring in $133 million to the state. The governor has proposed $414 million in cuts in various programs.

The bipartisan committees solution, Simmons said, would be to make up half of the deficit with cuts in programs and the other half from other funding sources. Republicans feel that because of the steep recession and the effects of the Sept. 11 terrorist attacks, Oregonians are willing to face spending cuts.

It takes a three-fifths margin in each house of the Legislature to pass a tax increase.

Whatever happens, Simmons hopes the governor will be willing to sit down and work things out.

I hope (the special session) is not confrontational. I dont want to call a special session unless we have an agreement. Even the Democrats are not supporting the governors proposal. We need his signature, but his proposal is a moot point, I think.

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