Efforts are underway in a variety of states to give voters the opportunity to change their state's tax structure for the better. Advocates are laying the ground work for tax reform in Colorado. Tax justice advocates in Arizona can celebrate that a Proposition 13-like initiative didn't garner enough signatures to be placed on the ballot. California voters will get the chance to repeal various corporate tax loopholes while Washington is closer than ever before to introducing a personal income tax.
In Colorado, folks are thinking about the 2012 ballot already. Representatives of the Colorado Fiscal Policy Institute (CFPI) have filed two initiatives that are currently being reviewed to determine if they abide by the state's "single subject" per initiative rule. According to The Denver Post, "the measures also call for reducing the state sales tax but taxing services as well as goods, changing the income-tax system to a graduated system and making a tax credit for low-income workers permanent." Specifically the proposal would change Colorado's flat rate income tax into a graduated system with a least five brackets. Carol Hedges with CFPI recently said of the initiatives that "the overriding objective is to have our tax system more appropriately matched with economic realities."
Arizonans swerved and missed the tax policy equivalent of a Mack truck slamming into them when it was announced that "Prop. 13 Arizona" failed to garner enough signatures to qualify for the 2010 ballot. The proposal was modeled after California's Proposition 13. The measure would have rolled back the assessed value of property sold before 2004 to 2003 levels, limited property value increases, and taken away voters' rights to override levy limits. This is the second time that the proposal failed to garner enough signatures. For more on capping assessed value, see ITEP's primer on the subject.
In November, California voters will get to vote on the Repeal Corporate Tax Loopholes Act. The measure, if passed, would eliminate several business tax breaks enacted in 2008 and 2009. They include elective single sales factor, tax credit sharing, and net operating loss carrybacks. For more details on these tax breaks, see California Budget Project's Budget Brief on this issue. Perhaps more upsetting than these tax breaks actually passing is the way they were passed. Initially, according to the California Budget Bites Blog, these tax deals were of the "dark-of-night" variety. Now Californians themselves will decide if these costly corporate tax breaks should remain the law of the land.
Washingtonians are closer than they have ever been to establishing a personal income tax. Washington has repeatedly been named by ITEP as the state with the most regressive tax structure largely because of their high reliance on sales taxes and absence of a personal income tax. Initiative 1098 introduces an income tax that has two brackets targeted at high income Washingtonians, reduces the state property tax, and reforms the business and occupation tax. Supporters of the initiative this week turned in well over the 241,000 signatures required to get on the ballot. It appears that Washingtonians will have an exciting and historic opportunity to reform their state's tax structure this fall.
Recent News about Washington
Voters this November in a variety of states may have the opportunity to vote against anti-tax initiatives, as well. Right-wing activists were successful recently in gathering signatures for a handful of misguided anti-tax initiatives in Colorado, Massachusetts and Washington.
Colorado voters are going to have a congested ballot come November. Proposition 101 and Amendments 60 and 61 have all qualified for the ballot and would have an enormous impact on Coloradans' way of life. About these three proposals the Denver Post opines, "The operating language within each one is a virus that would cripple the ability of our local and state governments to provide the most basic of services — from building schools for our children to supplying clean water to our homes. Both Democratic and Republican politicians have joined leaders in business and community organizations to oppose the initiatives."
According to the Ballot Initiative Strategy Center: "Amendment 60 would overturn voters' decision to opt out of Colorado's TABOR limitations. The initiative also cuts property tax rates in half over a ten-year period. The statutory Proposition 101 would slash state and local revenues to the tune of $1.7 billion by reducing the state income tax, motor vehicle fees, and telecommunications fees." Amendment 61 would prohibit all levels and divisions of government from bonding, even if they previously had the authority to do so. These measures would have a disastrous impact on Coloradans' way of life.
The Boston Herald is reporting that an initiative proposing to reduce the Massachusetts sales tax from 6.25 to 3 percent is likely headed to the November ballot. The proposal would cost the state a jaw-dropping $2.4 billion annually. Proponents of the legislation delivered more than the required 11,099 signatures to the Secretary of State's office Wednesday. In somewhat brighter news, none of the four candidates for governor appear to support the initiative and have said that if it passes, deep cuts in state and local services would be all but guaranteed. Despite the regressive nature of the sales tax, it's important because slashing it would cripple Massachusetts' ability to provide for its residents.
Another initiative that reportedly has enough signatures to appear on the November ballot, backed by beer and wine wholesalers, would eliminate the new sales tax on alcohol. Last year, state lawmakers removed the sales tax exemption on beer, wine and liquor and added them to the state’s sales tax base in order to raise $80 million for substance abuse programs.
Tim Eyman, Washington state's notorious anti-tax crusader, is up to his old, tired tricks again. Initiative 1053 would permanently re-establish the requirement for a two-thirds supermajority vote in the Legislature or a statewide popular vote in order to pass tax increases. A similar measure won at the ballot in 2007, but that measure allowed the legislature to repeal the rules by a simple majority vote after two years. Facing a $2.8 billion budget gap this year, Washington legislators suspended the requirement in February for 16 months to pass tax increases to mitigate cuts to vital state services. If passed this initiative impairs the ability of Legislators to do what they were elected to do — legislate.
Eyman is also supportive of Initiative 1107, which would roll back the new state taxes on a variety of goods including soda, bottled water, and candy. (Advocates of both initiatives turned in over 700,000 signatures to see that these issues will be placed before the voters in November.) Of course sales taxes are regressive, but the cost of removing the sales tax from these items is pretty stark. According to the Children's Action Alliance, "The choice for us is clear, a few extra pennies or the loss of essential services for kids."
Not surprisingly, the main financial backer of Initiative 1107 is the American Beverage Association, which has reportedly spent more than $1 million on the ballot effort thus far.
Washington recently joined with 30 other states to tax candy. If you want to see how your state taxes candy, see Washington State Budget and Policy Center's handy map on the subject.
Washington State has the most regressive tax structure in the country according to ITEP's recent Who Pays? report, which analyzed the tax structures of all fifty states. Not only does the state's tax structure hit low- and middle-income families the hardest, but it's also unsustainable because it doesn't generate enough revenue to fund public services.
The introduction of an income tax targeted at wealthy taxpayers would go a long way to solving both of these problems. Such a proposal is being touted by Bill Gates Sr. and a large coalition of groups promoting an initiative that, if put on November's ballot, would raise taxes on couples earning more than $400,000 ($200,000 for singles).
According to a recent poll from the University of Washington, the state's voters favor this tax reform by a 58 to 30 percent margin. If the initiative passes, Washington would join the vast majority of other states that have income taxes.
Late last month, Washingtonians for Education, Health, and Tax Relief filed a ballot initiative to reduce the state's structural deficit and reduce the unfairness of the state's tax structure. One of the lead organizers of the effort to get Initiative 1077 on the ballot and approved by voters is Bill Gates, Sr.
Gates wrote in a recent Seattle Times op-ed, "I hope you will join me in supporting real tax reform to benefit the middle class and small business in Washington state, while making a much-needed investment in our schools and health systems. It's an idea whose time has finally come."
According to a fact sheet from the Economic Opportunity Institute, the initiative would:
- Introduce an income tax on couples with incomes above $400,000 and singles over $200,000;
- Reduce the state portion of the property tax by 20%;
- Eliminate or reduce the Business and Occupation tax for many businesses by raising the small business credit from $420 to $4,800 per year;
- Dedicate net new revenues to education and health;
- Require regular reporting on how revenues are spent and require that future changes in the income tax be approved by a vote of the people.
ITEP's recent report, Who Pays?, which analyzed the impact of tax structures in all fifty states, found that yet again Washington has the most regressive tax structure in the country. Serious efforts in Washington to increase tax fairness should be welcome news to tax justice advocates everywhere.
Since the passage of the 1986 Tax Reform Act, federal tax law has given state lawmakers a clear incentive to rely on income taxes, instead of sales taxes, to fund public investments. This is because state income taxes can be written off by federal taxpayers who itemize their deductions, and sales taxes generally cannot. Even with temporary legislation in place that does allow a sales tax deduction, states that rely heavily on sales taxes — and not at all on income taxes — are essentially choosing to ignore what amounts to a federal "matching grant" for states that rely heavily on progressive income taxes.
A new joint report from ITEP and United for a Fair Economy's Tax Fairness Organizing Collaborative quantifies the cost of this choice in seven states that currently have no broad-based income tax — and that make up the gap by leaning heavily on the sales tax. The report shows that collectively, these seven states could reduce the federal taxes paid by their residents by $1.7 billion a year if they enacted a revenue-neutral reform that replaces sales tax revenue with a flat-rate income tax, and that the same states could save their residents $5.5 billion a year in federal taxes by enacting a similarly revenue-neutral shift to a graduated-rate progressive income tax.
Washington Governor Chris Gregoire signed a bill this Wednesday that temporarily suspends the state’s supermajority requirement for raising taxes. By preventing the minority Republicans in either chamber from blocking budget proposals that rely on both revenue increases and spending cuts, this move almost certainly paves the way for what will be a more balanced approach to filling the state’s budget gap.
The House, Senate, and Governor have all released budget proposals in recent days that would do precisely that, though each could go much farther in the degree to which it relies on additional revenues. The Senate proposal, for example, relies on new revenues to fill just 10% of the state’s budget gap, while the Governor’s proposal would use revenues to fill barely 7%.
The Senate proposal, released on Tuesday, would eliminate or curtail a number of special tax breaks, raise the cigarette tax, and temporarily hike the sales tax by 0.3 percentage points. In order to offset the inevitably regressive effects of the sales and cigarette tax hikes, the proposal would finally provide the funding needed to activate the state’s EITC (called the “Working Families Tax Rebate”), which was originally enacted in 2008.
Like the Senate proposal, the Governor’s proposal also identifies an array of tax breaks for elimination or reduction, though it targets fewer breaks than the Senate version. The Governor would also increase the cigarette tax, raise the hazardous substance tax, and generate additional revenue from taxing bottled water, carbonated beverages, candy, and gum.
The House is expected to release the details of its budget proposal today. That proposal was not yet available at the time of this writing, but it is expected to include both spending cuts and tax increases. For more details on the House proposal once it’s released, be sure to check the Washington State Budget and Policy Center’s blog, “Schmudget.”
As noted above, the likelihood of enacting the revenue increases contained in these plans has been greatly improved as a result of Washington lawmakers’ decision to temporarily suspend the portion of Initiative 960 that requires a supermajority vote in both houses in order to raise taxes. I-960 was passed by voters in 2007, long before they could possibly have realized how dire the budgetary situation would be just a few years later as a result of the national recession. Notably, the suspension of I-960 has opened up a great opportunity not only for Washington to tackle its budget shortfall in a more balanced fashion, but also to close a number of tax loopholes and special interest tax breaks that have been unduly protected by the supermajority requirement against “tax increases” over the past few years.
For more on the Washington State debates as they develop, you can follow the work being done at the Washington State Budget and Policy Center, and the Economic Opportunity Institute. Notably, both organizations have released additional options for raising revenue (here and here) that could be used to further mitigate some of the deep cuts still being contemplated by lawmakers.
On Monday, Kansas Governor Mark Parkinson gave his State of the State speech, which included a proposal to temporarily increase the state sales tax by 1 percent to help fill a nearly $400 million budget shortfall. Governor Parkinson said, "I can't find $400 million that we can responsibly cut. If you can find responsible cuts, I'm open to looking at them. Let me repeat, as a person who is fiscally responsible, a person that has cut more money out of the Kansan budget than any Kansan in history, there isn't $400 million that we can responsibly cut."
Of course, lawmakers shouldn't forget the very good ideas floated by Secretary of Revenue Joan Wagnon. She has suggested a three-year moratorium on creating new sales tax exemptions and an examination of the effects of current sales tax exemptions. If enacted, her proposals would go a long way to both modernizing the state's tax structure and making it more stable.
In Washington State there are fewer buttons to press when it comes to revenue raisers (because the state lacks a broad-based income tax), but one option that is available to lawmakers is to increase and modernize the state's sales tax.
This week the Washington Budget and Policy Center released a report on this very topic. It includes a proposal to temporarily increase the sales tax rate, enlarge the base to include consumer services, and include candy, gum, and bakery products in the sales tax base.
Governor Christine Gregoire's budget proposals are frankly disappointing compared to the proposal put forward by the Budget and Policy Center. The Governor's proposal includes offering tax incentives to businesses, closing tax loopholes, service cuts and using federal dollars to help balance the state's budget.
This week, the Institute on Taxation and Economic Policy (ITEP), in partnership with state groups in forty-one states, released the 3rd edition of “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.” The report found that, by an overwhelming margin, most states tax their middle- and low-income families far more heavily than the wealthy. The response has been overwhelming.
In Michigan, The Detroit Free Press hit the nail on the head: “There’s nothing even remotely fair about the state’s heaviest tax burden falling on its least wealthy earners. It’s also horrible public policy, given the hard hit that middle and lower incomes are taking in the state’s brutal economic shift. And it helps explain why the state is having trouble keeping up with funding needs for its most vital services. The study provides important context for the debate about how to fix Michigan’s finances and shows how far the state really has to go before any cries of ‘unfairness’ to wealthy earners can be taken seriously.”
In addition, the Governor’s office in Michigan responded by reiterating Gov. Granholm’s support for a graduated income tax. Currently, Michigan is among a minority of states levying a flat rate income tax.
Media in Virginia also explained the study’s importance. The Augusta Free Press noted: “If you believe the partisan rhetoric, it’s the wealthy who bear the tax burden, and who are deserving of tax breaks to get the economy moving. A new report by the Institute on Taxation and Economic Policy and the Virginia Organizing Project puts the rhetoric in a new light.”
In reference to Tennessee’s rank among the “Terrible Ten” most regressive state tax systems in the nation, The Commercial Appeal ran the headline: “A Terrible Decision.” The “terrible decision” to which the Appeal is referring is the choice by Tennessee policymakers to forgo enacting a broad-based income tax by instead “[paying] the state’s bills by imposing the country’s largest combination of state and local sales taxes and maintaining the sales tax on food.”
In Texas, The Dallas Morning News ran with the story as well, explaining that “Texas’ low-income residents bear heavier tax burdens than their counterparts in all but four other states.” The Morning News article goes on to explain the study’s finding that “the media and elected officials often refer to states such as Texas as “low-tax” states without considering who benefits the most within those states.” Quoting the ITEP study, the Morning News then points out that “No-income-tax states like Washington, Texas and Florida do, in fact, have average to low taxes overall. Can they also be considered low-tax states for poor families? Far from it.”
Talk of the study has quickly spread everywhere from Florida to Nevada, and from Maryland to Montana. Over the coming months, policymakers will need to keep the findings of Who Pays? in mind if they are to fill their states’ budget gaps with responsible and fair revenue solutions.
Read ITEP's New Report: Who Pays? A Distributional Analysis of Tax Systems in All 50 States
By an overwhelming margin, most states tax their middle- and low-income families far more heavily than the wealthy, according to a new study by the Institute on Taxation & Economic Policy (ITEP).
“In the coming months, lawmakers across the nation will be forced to make difficult decisions about budget-balancing tax changes—which makes it vital to understand who is hit hardest by state and local taxes right now,” said Matthew Gardner, lead author of the study, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States. “The harsh reality is that most states require their poor and middle-income taxpayers to pay the most taxes as a share of income.”
Nationwide, the study found that middle- and low-income non-elderly families pay much higher shares of their income in state and local taxes than do the very well-off:
-- The average state and local tax rate on the best-off one percent of families is 6.4 percent before accounting for the tax savings from federal itemized deductions. After the federal offset, the effective tax rate on the best off one percent is a mere 5.2 percent.
-- The average tax rate on families in the middle 20 percent of the income spectrum is 9.7 percent before the federal offset and 9.4 percent after—almost twice the effective rate that the richest people pay.
-- The average tax rate on the poorest 20 percent of families is the highest of all. At 10.9 percent, it is more than double the effective rate on the very wealthy.
“Fairness is in the eye of the beholder.” noted Gardner. “But virtually anyone would agree that this upside-down approach to state and local taxes is astonishingly inequitable.”
The “Terrible Ten” Most Regressive Tax Systems
Ten states—Washington, Florida, Tennessee, South Dakota, Texas, Illinois, Michigan, Pennsylvania, Nevada, and Alabama—are particularly regressive. These “Terrible Ten” states ask poor families—those in the bottom 20% of the income scale—to pay almost six times as much of their earnings in taxes as do the wealthy. Middle income families in these states pay up to three-and-a-half times as high a share of their income as the wealthiest families. “Virtually every state has a regressive tax system,” noted Gardner. “But these ten states stand out for the extraordinary degree to which they have shifted the cost of funding public investments to their very poorest residents.”
The report identifies several factors that make these states more regressive than others:
-- The most regressive states generally either do not levy an income tax, or levy the tax at a flat rate;
-- These states typically have an especially high reliance on regressive sales and excise taxes;
-- These states usually do not allow targeted low-income tax credits such as the Earned Income Tax Credit; these tax credits are especially effective in reducing state tax unfairness.
“For lawmakers seeking to make their tax systems less unfair, there is an obvious strategy available,” noted Gardner. “Shifting state and local revenues away from sales and excise taxes, and towards the progressive personal income tax, will make tax systems fairer for low- and middle income families. Conversely, states that choose to balance their budgets by further increasing the general sales tax or cigarette taxes will make their tax systems even more unbalanced and unfair.”
Implications for State Budget Battles in 2010
“In the coming months, many states’ lawmakers will convene to deal with fiscal shortfalls even worse than those they faced last year,” Gardner said. “Lawmakers may choose to close these budget gaps in the same way that they have done all too often in the past—through regressive tax hikes. Or they may decide instead to ask wealthier families to pay tax rates more commensurate with their incomes. In either case, the path that states choose in the upcoming year will have a major impact on the wellbeing of their citizens—and on the fairness of state and local taxes.”
A new report from Citizens for Tax Justice makes the case for a “performance review” system designed to evaluate the effectiveness of special tax breaks in achieving their stated goals. While CTJ's report primarily focuses on the importance of such a system at the federal level, most of its findings are equally applicable to the states.
The special breaks littered throughout state tax codes — or “tax expenditures,” as they are frequently called — are an enormous and often overlooked part of government’s operations. Although the primary purpose of a tax system is to raise the revenue needed to pay for public services, every state, as well as the federal government, also uses its tax system to accomplish a variety of other policy goals. Encouraging job creation, subsidizing private industry research, and promoting homeownership are just a few of the countless ends pursued via special subsidies contained in state tax codes. Rather than having anything to do with fair or efficient tax policy, these tax credits, exemptions, and other provisions are actually much more akin to government spending programs — hence the term, “tax expenditures.”
A performance review system takes the commonsense step of asking whether these provisions are doing what policymakers intended of them. Under such a system, tax credits designed to encourage research and experimentation, for example, would be regularly examined to determine the amount of new research undertaken as a result of the credits. Shockingly, the vast majority of states, and the federal government, do not currently attempt to answer fundamental questions of this sort with any type of rigorous evaluation.
Among CTJ’s findings are:
— “Procedural biases,” such as the omission of tax expenditures from the authorization and appropriations processes, allow tax expenditures to slip by with a fraction of the scrutiny given to direct spending programs. State legislative systems requiring supermajority consent to “raise taxes” (or eliminate tax expenditures) are particularly biased in this regard.
— “Political biases,” such as the erroneous belief that government can take a “hands off” approach, or reduce its overall size by offering special tax breaks, also contribute to the current lack of oversight.
— A number of states have made strides in recent years to counteract these biases through performance reviews and other, similar means. Washington State’s efforts represent the most complete attempt at tax expenditure performance review yet to be undertaken in the United States. California, Delaware, Nevada, Oregon, and Rhode Island have also made attempts — with varying degrees of success — to enhance the level of scrutiny applied to their tax expenditures.
— The bleak state budgetary outlook makes the implementation of tax expenditure review all the more urgent. States, like the federal government, can no longer afford to deplete their resources with ill-advised and ineffective tax expenditures. By implementing a tax expenditure performance review system, states can pave the way for a reduction in tax expenditures by identifying those expenditures that are ineffective.
— A formal review system could also help to reconceptualize these provisions in the minds of policymakers, the media, and the public as spending-substitutes, rather than simply as tax cuts. This would further help reduce the rampant biases in favor of tax expenditure policy.
— The precise design of a tax expenditure review system is very important. States should be sure to include all taxes, and all tax expenditures within the scope of the review. Additionally, states should exercise care in selecting the criteria to be used in the reviews — Washington State’s criteria represent a good starting point from which to build. Other key design issues include choosing the appropriate body to conduct the reviews, timing the reviews to coincide with the budgeting process, allowing similar tax expenditures to be reviewed simultaneously, and attaching some type of “action-forcing” mechanism to the reviews so that policymakers must explicitly consider the reviews’ results.
— Tax expenditure reviews are necessary, though they may not be sufficient to correct for the biases in favor of tax expenditure policy. A tax expenditure performance review system can play a vital informational role either on its own, or alongside other, more aggressive tax expenditure control techniques such as sunset provisions or caps on tax expenditures’ total value.
Though it seems like most legislative sessions just ended after laborious budget battles, many lawmakers are looking to the future and one word is coming to mind -- grim. In many states, revenue isn't keeping up with projections. As a result, this week alone, lawmakers in Illinois, Mississippi, and Washington State have said revenue-raisers must be on the table.
Spending cuts have their consequences and there is only so much cutting that is possible or reasonable. A recent Peoria Journal Star editorial calls on lawmakers to respond to a report from the Commission on Government Forecasting and Accountability. The report discusses various revenue-raisers, including a sales tax base expansion. The Journal Star says, "This structural deficit is not going away by itself. To declare discussion about alternative revenue options DOA would just be foolish."
Meanwhile, lawmakers in Mississippi are likely to review lists of fee increases put together by state agencies to show how some revenue could be increased.
In Washington, Governor Chris Gregoire earlier this week said that she would consider tax increases, saying that Washingtonians may have had their fill of cuts, "At some point, the people, I assume, don't want us to take any more spending cuts. I mean, I'm already hearing about, 'Why did you cut education?' Well, there weren't any options. We're without options.''
Next month, voters in two states will go to the ballot to decide whether to cap the growth in public budgets according to a formula based on the annual rate of population growth plus inflation. In Washington, the ballot initiative brought forward by anti-taxer Tim Eyman is called I-1033. Researchers at the Washington State Budget and Policy Center and the Colorado Fiscal Policy Institute refer to it as the "toxic twin" of Colorado's Taxpayer Bill of Rights (TABOR). In Maine, the initiative, dubbed TABOR II, is more akin to an annoying younger brother (well, if that brother had the ability to wreak complete havoc with sound fiscal policy). You can tell him to go away -- as Maine voters did in rejecting an earlier version of the initiative in 2006 -- but he unfortunately keeps coming back.
Colorado's experience makes it clear that arbitrary funding formulas are an ineffective way to run government, leading to devastating impacts on vital public services. In fact, Colorado voters chose to suspend TABOR in 2005, due to the effects it was having on education, transportation, and human services.
The limits that I-1033 in Washington and TABOR II in Maine would impose are especially dangerous in light of the current recession. Under these initiatives, funding caps would be the lesser of the previous year's cap or the previous year's actual funding levels. As a result, during economic downturns, when revenues are especially low, the cap is permanently “ratcheted” down to lower levels.
As to the consequences that these initiatives would have if enacted, Washington State Senator Rodney Tom was recently quoted in the New York Times as saying, "If I-1033 passes, I think we just all go home and bury our heads in the sand."
As discouraging as that image may be, there are reasons to be hopeful. The Maine Chamber of Commerce, which had initially backed TABOR II earlier this year (despite opposing its predecessor in 2006), recently withdrew its support, a clear sign that the measure goes too far even for business leaders.
For more on the impact of I-1033, see the Washington Budget and Policy Center's report “I-1033 Undermines Public Priorities.” For more on Maine’s TABOR II, check out these resources from the Maine Center for Economic Policy or read the Center on Budget and Policy Priorities recent analysis.
Two states, Washington and Maine, will consider ballot proposals this fall that are similar in concept to the disastrous "Taxpayer Bill of Rights," or TABOR, that Colorado enacted in 1992 to limit tax increases and cap spending by the state government.
This week, Washington State officials released their estimate of the fiscal impact from Initiative 1033, which will be on the November ballot. The Washington State Budget and Policy Center says I-1033 "would impose strict spending limits on state and local governments resulting in sharp reductions in public investments in education, community development, health care, and economic security. By restricting resources, I-1033 would dramatically weaken the state’s ability to fund important public priorities and would diminish the quality of life for all Washingtonians."
The state's Office of Financial Management agrees and says, "The initiative reduces state general fund revenues that support education; social, health and environmental services; and general government activities by an estimated $5.9 billion by 2015." (This doesn't include the estimated loss of nearly $700 million for counties and $2.1 billion for cities by 2015 that would result if I-1033 is approved.) Voters in Washington would be wise get all the facts before voting in favor of this heavy-handed and unnecessary proposal.
A similarly draconian initiative will be put before the voters in Maine this fall. Last week, Secretary of State Matt Dunlap approved the so-called TABOR II for inclusion on the November ballot. The initiative largely reprises an earlier effort – rejected by voters in 2006 – to impose severe limits on state spending and taxes, limits that could become more constraining with each successive economic downturn. A new and excellent report from the Maine Center for Economic Policy reviews the dangers of the current initiative and concludes that what was bad in 2006 has only gotten worse with time. Legislators and other public leaders agree.
To learn about how you can help stop TABOR II in Maine, visit Maine Can Do Better.
Washington State's infamous anti-taxer, Tim Eyman, is up to his usual shenanigans. Initiative 1033 was approved by the Secretary of State's office last week and will appear on the ballot this fall. If approved, this sweeping "measure would limit the growth rate of state, county, and city general fund revenue, not including new voter-approved revenue, to inflation and population growth. Excess revenue collected above these limits would be used to reduce property taxes." The Washington State Budget and Policy Center points out that the real impact of I-1033 would be to constrict government's ability to provide for the needs of residents, increase the current deficit, and exacerbate the impact of economic downturns. Watch the Budget and Policy Center's slide show on the substantial flaws of the ballot initiative.
Earlier this week, Washington Governor Christine Gregoire signed into a law a measure providing a 40 percent reduction in the state's business & occupation (B&O) tax for newspapers. Thousands of barrels of ink, millions of column inches, and billions of bytes have been expended in recent months lamenting the state of the newspaper industry, as newspapers such as the Boston Globe (and its parent, the New York Times) struggle to cope with -- or, in the case of the Seattle Post-Intelligencer and the Rocky Mountain News, are completely overwhelmed by -- advertising revenue losses and consumers' preferences for information that they can access any time and any place.
Given this long-term transition from one media platform to another, it's hard to see what this measure will accomplish, other than the waste of tax revenue. After all, if Governor Gregoire and other officials in Washington are concerned about the possibility of an ill-informed populace, why not use the funds lost to the tax cut to forestall cuts to schools or to improve government transparency still further?
In the end, the inefficiency of this tax subsidy will probably only be matched by the irony it has achieved. As at least one observer has already noted, the Seattle Times, one of the subsidy's principal beneficiaries, offered the following editorial solution to the state's budget woes earlier this year: "Efficiency will be the watchword. Lawmakers will have to find numerous savings and new, less expensive ways to do business." Apparently, that advice extends only so far.