Phil Rockefeller dropped by our office this week to catch us up on a number of things.

He’s running hard for a third term, he said, and is buoyed by his 60-plus percent showing in the primary. Which prompted us to wonder aloud why anyone would want to go back to Olympia this fall to tackle what looks like a $2 billion budget deficit for the next biennium.

The situation is indeed grim, the Bainbridge Democrat said. But he found some reason for optimism in the fact that the financial picture is so bleak that neither party can wish it away.

“Last year, the Republicans criticized us for the budget, yet they never proposed an alternative of their own,” he said. “This year, even leading Republicans are saying that there may have to be both program cuts and tax increases.”

What Rockefeller would like (as would we) is for both parties to face up to the fact that the bromides of the past won’t be good enough. And maybe the best way to do that will be to take a hard look at the work of the State Tax Structure Study, chaired by Bill Gates, Sr., which is examing in a fundamental way our state’s tax structure.

A basic problem, according to the study group, is Washington’s reliance on the sales tax and the business-and-occupations tax applied to gross receipts of Washington businesses. Those revenue sources, the group says, are highly volatile, meaning they fluctuate even more than the variations of the state’s business cycle.

The result: excess revenue during boom times, insufficient revenue during slow times.

In theory, that would balance out. We’d save the excess when times were good, spend it when we needed it later. In reality, though, it doesn’t work. Instead of saving the excess, we cut taxes, either legislatively or through initiatives, or we add new expenses, like the voter-mandated increases in education spending, to be funded from the state surplus. So when the bad times hit, we don’t have the money we need.

Besides being inefficient, our tax system is not particularly fair, the group says. The B&O tax on gross receipts can be punishing to businesses that aren’t profitable. And sales and property taxes are criticized as regressive, meaning they hit lower-income folks proportionately harder than upper-income ones. (The group notes that over a taxpayer’s lifetime, property taxes become progressive, as people whose incomes grow move up to more expensive homes.)

The recommendations are not yet in – the final report is due Nov. 30. But early position papers available on the group’s web site (http://dor.wa.gov and click the icon) suggest that an income tax, both personal and corporate, are among the items receiving a look.

Although an income tax hasn’t been well received in the past – and because a constitutional amendment would be required, voters have the final say – it’s time for serious consideration. Businesses loathe the B&O tax, and might support an income tax if it meant doing away with the B&O. While wage-earners don’t love the income tax, most like the property tax even less because of its lump-sum application. They might find a significant reduction to be a worthwhile trade.

The financial news may be so bad that demagoguery will have to give way to serious thought, taking nothing off the table. And that would, in the long run, be good news.