Tax Justice Digest stories about Washington
Advocates in Kentucky have long been pushing for the implementation of a state Earned Income Tax Credit (EITC). The EITC is a popular, targeted tax credit that offers assistance to working families. Similar credits have been enacted in 22 states and the District of Columbia. The House Budget Committee passed a bill that would introduce a credit equal to 7.5 percent of the federal EITC, coupled with a broader state estate tax. The bill will now go before the full House.
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In more low income tax relief news, the Idaho House Revenue and Taxation Committee voted this week to increase the state rebates offered to offset the state's sales tax on groceries. Currently Idaho residents receive a $20 credit as an offset to the sales tax on groceries (more for seniors). The proposal being debated in the House would provide increased and targeted tax relief. For example, the new expanded credit would offer $50 per family member if the family's income is less than $25,000. The value of the rebates would increase each year until the maximum credit of $100 is reached. By 2015 the proposal is expected to cost about $122 million. Read more about options states have to provide targeted tax relief in ITEP's policy brief.
During the session, the Legislature also approved a change in law that will allow homeowners with incomes under $57,000 to defer payment of as much as half of their property taxes until they sell their homes. The Washington State Budget and
Last Tuesday voters made their voices heard on a variety of tax related issues. In Washington State it appears that anti-tax radical Tim Eyman won another initiative battle. The passage of Initiative 960 makes it more difficult for the state to raise needed revenue, but does little to increase government transparency or encourage economic development. Opponents of the measure rightly say that I-960 will increase dreaded red tape and bureaucracy. Read an FAQ about the initiative from the Washington Tax Fairness Coalition here.
But in a victory for tax justice, an earlier Eyman initiative has been ruled unconstitutional. This 2001 initiative, I-747, capped state and local property tax collections at 1 percent each year, unless a higher increase was approved by voters. Be on the lookout for more on how Washington responds to the passage of I-960 as courts may get involved again.
Elsewhere in the Pacific Northwest, a ballot initiative to raise cigarette taxes and to use the funds to provide universal health care for children was defeated in Oregon, due in large part to the $12 million spent by RJ Reynolds and other tobacco companies to oppose it. Governor Ted Kulongoski, one of the initiative's key backers, has vowed to continue the fight for expanding health care.
To read about the outcomes of ballot measures across the country check out this report from the Ballot Initiative Strategy Center.
In order to help educate taxpayers, the Washington State Budget and Policy Center recently issued a policy brief called "Washington State Taxes Remain Low Compared to Other States" which describes how Washington's tax structure stacks up. It points out that there are several reasons why Washingtonians should not be celebrating their low tax bills, including many pressing fiscal needs like a "shrinking revenue stream" and a growing structural deficit. The brief also notes that the average Washingtonian has low taxes, but the poor are carrying a higher proportion of the tax load in Washington than in any other state. Washington has the honor of being ranked by ITEP as having the most regressive tax structure in the country. It's clear that legislators have a lot to fix.
Florida and Maine are weighing changes to their property taxes as well — changes that would make their tax systems less fair. Last week, the Republican leadership of the Florida House of Representatives proposed abolishing the statewide property tax for Florida residents, limiting local property taxes, and raising the state sales tax rate 2.5 percentage points to 8.5 percent. These changes would not only exacerbate the inequity of Florida's tax system, but would also take a $5.8 billion bite out of state and local revenues, since the higher sales tax rate would only make up a little more than half of the revenue lost due to property tax cuts. "Reckless" and "irresponsible" are among some of the nicer things that the St. Petersburg Times has to say about the proposal.
Ironically, Maine's Governor, John Baldacci, in his FY 2008-2009 budget, advocated the same sort of limits on property tax assessments for year-round residents that have contributed to Florida's fiscal problems. This ITEP Policy Brief details the shortcomings of these kinds of assessment caps.
While the Democratic takeover of the House of Representatives (and apparently also the Senate) on Tuesday has has given new hope to advocates of progressive tax policies at the federal level, the results of ballot initiatives across the country indicate that state tax policy is also headed in a progressive direction.
In the three states where they were on the ballot, voters rejected TABOR proposals, which involve artificial tax and spending caps that would cut services drastically over several years. Washington State defeated repeal of its estate tax. Several states also rejected initiatives to increase school funding which, while based on the best intentions, were not responsible fiscal policy. Two of four ballot proposals to hike cigarette taxes were approved and the night also brought a mixed bag of results for property tax caps.
Taxpayer Bill of Rights (TABOR):
Maine - Question 1 - FAILED
Nebraska - Initiative 423 - FAILED
Oregon - Measure 48 - FAILED
Voters in three states soundly rejected tax- and spending-cap proposals modeled after Colorado's so-called "Taxpayers Bill of Rights" (TABOR). Apparently people in these three states had too many concerns over the damage caused by TABOR in Colorado.
Property Tax Caps:
Arizona - Proposition 101 - PASSED - tightening existing caps on growth in local property tax levies.
Georgia - Referendum D - PASSED - exempting seniors at all income levels from the statewide property tax (a small part of overall Georgia property taxes. (The Georgia Budget and Policy Institute evaluates this idea here.)
South Carolina - Amendment Question 4 - PASSED - capping growth of properties' assessed value for tax purposes. The State newspaper explains why the cap would be counterproductive.
South Dakota - Amendment D - FAILED - capping the allowable growth in taxable value for homes, taking a page from California's Proposition 13 playbook. (The Aberdeen American News explains why this is bad policy here - and asks tough questions about whether lawmakers have shirked their duties by shunting this complicated decision off to voters.)
Tennessee - Amendment 2 - PASSED - allowing (but not requiring) local governments to enact senior-citizens property tax freezes.
Arizona's property tax limit will restrict property tax growth for all taxpayers in a given district. South Dakota's proposal was fortunately defeated. It would have offered help only to families whose property is rapidly becoming more valuable, and those families are rarely the neediest. Georgia's is not targeted at those who need help but would give tax cuts to seniors at all income levels. The Tennesse initiative, which passed, is a reasonable tool for localities to use, at their option, to target help towards those seniors who need it.
Cigarette Tax Increase:
Arizona - Proposition 203 - PASSED - increase in cigarette tax from $1.18 to $1.98 to fund early education and childrens' health screenings.
California - Proposition 86 - FAILED - increasing the cigarette tax by $2.60 a pack to pay for health care (from $.87 to $3.47)
Missouri - Amendment 3 - FAILED - increasing cigarette tax from 17 cents to 97 cents
South Dakota - Initiated Measure 2 - PASSED - increasing cigarette tax from 53 cents to $1.53.
While many progressive activists and organizations support raising cigarette taxes to fund worthy services and projects, the cigarette tax is essentially regressive and is an unreliable revenue source since it is shrinking.
State Estate Tax Repeal:
Washington - Initiative 920 - FAILED
Complementing the heated debate over the federal estate tax has been this lesser noticed debate over Washington Stats's own estate tax which funds smaller classroom size, assistance for low-income students and other education purposes. Washingtonians decided it was a tax worth keeping.
Revenue for Education:
Alabama - Amendment 2 - PASSED - requiring that every school district in the state provide at least 10 mills of property tax for local schools.
California - Proposition 88 - FAILED - would impose a regressive "parcel tax" of $50 on each parcel of property in the state to help fund education
Idaho - Proposition 1 - FAILED - requiring the legislature to spend an additional $220 million a year on education - and requiring the legislature to come up with an (unidentified) revenue stream to pay for it.
Michigan - Proposal 5 - FAILED - mandating annual increases in state education spending, tied to inflation - but without specifying a funding source. The Michigan League for Human Services explains why this is a bad idea.
Voters made wise choices on education spending. The initiative in California would have raised revenue in a regressive way, while the initiatives in Idaho and Michigan sought to increase education spending without providing any revenue source. Alabama's Amendment 2 takes an approach that is both responsible and progressive.
Income Taxes:
Oregon - Measure 41 - FAILED - creating an alternative method of calculating state income taxes.
Measure 41 was an ill-conceived proposal to allow wealthier Oregonians the option of claiming the same personal exemptions allowed under federal tax rules and would have bypassed a majority of Oregon seniors and would offer little to most low-income Oregonians of all ages.
Other Ballot Measures:
California - Proposition 87 - FAILED - would impose a tax on oil production and use all the revenue to reduce the state's reliance on fossil fuels and encourage the use of renewable energy
California - Proposition 89 - FAILED - using a corporate income tax hike to provide public funding for elections
South Dakota - Initiated Measure 7 - FAILED - repealing the state's video lottery - proceeds of which are used to cut local property taxes
South Dakota - Initiated Measure 8 - FAILED - repealing 4 percent tax on cell phone users.
For the first time in almost thirty years, Pennsylvania has passed major property-tax cuts. In an unusual display of election year bipartisanship, Democratic Governor Ed Rendell and the Republican-controlled legislature agreed on a series of measures designed to lower property taxes. There are two components to the legislation. First, the number of senior citizens eligible for property-tax rebate checks was nearly doubled. Second, most homeowners will have their property taxes reduced. Lawmakers are planning to pay for the tax cuts with revenue raised by casino gambling, which was recently legalized in Pennsylvania. Some state residents, however, might like to move in a more progressive direction and rely even less on property taxes and more on income taxes.
Things have not worked out so smoothly for property tax reform in Washington State. A Superior Court Judge has ruled Initiative 747 unconstitutional. The 2001 voter-approved initiative capped increases in state and local property taxes at 1 percent. Governor Christine Gregoire has said that if this ruling survives an appeal she will support some type of property tax reform. Early indications are that the Governor and legislators are specifically interested in reform that would benefit the elderly and low-income families.
