Tim Eyman's latest initiative, aimed at controlling government spending and reducing taxes, appeared to be losing in early returns Tuesday.

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Voters on Tuesday firmly rejected Tim Eyman’s latest effort to control government spending and reduce property taxes.

Initiative 1033 was losing heavily in King County and trailing in 10 Eastern Washington counties where Eyman needed big wins.

Matt Barreto, a University of Washington political-science professor, said it was clear from the early returns the measure was toast. “Everyone knew it was going to lose in King. But the Eastern Washington counties really sealed its fate,” Barreto said.

Eyman blamed the loss in part on the fact opponents outspent him by millions of dollars. “Voters definitely heard from the no campaign, but I don’t think they heard from our side,” he said, adding he plans to come back next year with another measure.

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Initiative 1033 would have limited revenue increases for state, city and county governments to the rate of inflation and population growth. Additional money collected above the limit would have been used to reduce property taxes.

The state projected the measure would have diverted more than $8 billion from state, city and county general funds into property-tax relief from 2011 to 2015.

Gov. Chris Gregoire said in a statement “voters understood that this misguided proposal would have precluded our ability to recover from these extraordinarily difficult economic circumstances… “

I-1033 also would have largely removed any incentive for the Legislature to boost taxes without voter approval because it essentially required the state to use the same money to lower property taxes.

Eyman argued his initiative was the only thing standing in the way of the state Legislature increasing taxes.

And there has been more talk in Olympia lately about a tax increase.

Both Gregoire and Senate Majority Leader Lisa Brown have said they’re willing to consider the idea because the state is facing a $1.7 billion budget gap in the current two-year budget. The Legislature will have to close the shortfall during the next session, which starts in January.

On the other hand, 2010 is an election year and Democrats generally don’t like to hand Republicans something as unpopular as a tax increase to bludgeon candidates with during the campaign season.

Taxes aside, the defeat of I-1033 makes it a little easier for lawmakers to close an even larger budget gap — expected to exceed $5 billion — projected for 2011.

The state estimates it will get an additional $3.3 billion in tax revenue during the next two-year budget cycle that could be used to offset that shortfall. The loss of I-1033 allows the state to use all the money to help offset the shortfall.

A broad coalition including education, labor and health-care groups, along with top political leaders, opposed the measure. The No on 1033 campaign raised and spent more than $3 million and blanketed the region with television ads. Eyman, by comparison, raised and spent less than a quarter of the money raised by the opposition. He relied on free coverage by local media.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com

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