Property Tax Cap: Back from the Dead?

Since a Washington court found part of the state's property-tax limit scheme unconstitutional last year, there's been some hope that lawmakers seeking to provide property tax breaks for fixed-income families will settle on a solution that's actually geared towards low-income homeowners and renters. No such luck, according to the Seattle Post-Intelligencer:

Democratic lawmakers proposed a constitutional amendment Friday to limit state property tax assessments to annual growth of 1 percent.The proposal, by Rep. Dawn Morrell, D-Puyallup, and 13 co-sponsors, would apply to the state portion of the property tax, not locally imposed taxes. The state share typically amounts to about a quarter of a homeowner's tax bill.

For more on why assessed value caps are a bad approach to property tax reform, check out this ITEP policy brief.

Internet Sales Tax Proposal Moving Along

A terrific article in the Puget Sound Business Journal gives real-world examples of why it's so important that Washington's sales tax should apply to Internet-based transactions as well as bricks-and-mortar stores:

When customers visit Washington tire shops looking for custom wheels and tires, sales staff will often explain options, show the customers tire packages on display and help them make selections.
So it's frustrating when those customers then buy the products on the Internet, says Charlie Extine, who represents the Northwest Tire Dealers Association. Customers can save $88 to $350 on a custom wheel package because out-of-state vendors can sell products free of the state sales tax.
"The dilemma is, we spend quite a bit of time, only not to ring the cash register," Extine recently told lawmakers during a hearing at the state Legislature. "You can't blame the customer for it -- it's quite a bit of savings."

The good news: legislation is currently moving through both houses of the state legislature that would help fix this problem. The bills: House Bill 1072 and Senate Bill 5089 . Follow the progress of these bills on the legislature's website here and here.

Rainy Day Fund Proposal Boosts State's Credit Rating

The Standard and Poor's credit rating agency has given Washington State a boost-- and gives some of the credit to Governor Christine Gregoire's proposal to strengthen the state's "rainy day fund:"

S&P improved its outlook for the state's creditworthiness to "positive" from "stable," the service said in a press release...S&P attributed the upgrade to "the state's sustained economic expansion and robust revenue performance, which is translating into a much improved budget and financial position," the service said in a statement.The statement went on to say: "The outlook reflects the state's proposed move to formalize its rainy day fund reserve, which will provide for increased financial stability in times of future economic downturns."

Gregoire's proposal, which would create an annual automatic deposit into the state's rainy day fund, is a good first step toward fiscal accountability, as S&P notes. But it's not all sunshine and lollipops. As the Washington Budget and Policy Center notes, the governor's proposal will likely not be sufficient to ensure that the state's rainy day fund can weather the next recession. Read the WBPC report here. Read ITEP's policy brief on rainy day funds here.

Clear Thinking on Internet Sales Taxes

Should retail sales made over the Internet be taxed? In Washington, the legal answer historically has been "only if you feel like paying," and the result is a nearly $800 million annual revenue loss for the state. A terrific editorial from the Seattle Times explains why closing this loophole makes sense.

Washington's unwillingness to consider structural tax reform focusing on the income tax has long doomed it to having the most chronically unfair tax system in the nation. But if you're going to have a sales-tax-based system, the Times argues, you should at least do it right. Allowing Internet-based transactions to go untaxed actually compounds the unfairness in the Washington system.

Check out this ITEP policy brief for more information on this topic.

A Step Backwards for Washington Tax Reform?

Washington State's tax system has attracted its share of critics--and they sing the same tune with astonishing regularly. Whether it's the state legislature's Gates Commission from a few year back, or recent gubernatorial candidate Ron Sims, or (ahem) the Institute on Taxation and Economic Policy, everyone keeps coming back to the fact that Washington is one of only seven states that gets by without any kind of an income tax. Lacking an income tax, lawmakers are forced to rely extra heavily on the remaining taxes, with high (and unpopular) sales taxes, property taxes, and business taxes. It's a simple problem-- with a simple solution: enact an income tax, & maybe use some of the revenues to cut sales and property and business taxes.

In this context, you like to see a state lawmaker who's not afraid to suggest this simple solution. And Rep. Jim McIntire is just that guy-- all the more heartwarming given that he's been running the House Finance Committee. The political will may not be there to enact an income tax-- but at least someone in a position of power has the guts to beat this drum.

But not anymore. The Olympian reports that McIntire has lost his chairmanship of the committee for the upcoming legislative session.-- and that his support for an income tax is a big reason why:

"I think it was clear that the leadership wanted something different," McIntire said late Tuesday, acknowledging that his views on the income tax might have put his caucus in a tough spot politically.

McIntire comes across quite graciously in the article, especially when you consider that he appears to have lost his leadership job not because of any inadequacies in his job performance but because of his beliefs about tax fairness.

This isn't the end for progressive tax reform in Washington State. Far from it, says Rep. Brendam Williams:

"There are any number of us willing to talk about the fundamental need to talk about structural tax reform," Williams said. "I don't think the need for fundamental tax reform is off the table. We've just chosen a new leader."

But it's a shame that House Democrats appear to have chosen their new leader because the old one was too forceful in his belief that an income tax could help fix Washington's fiscal policy mess. A willingness to leave all options on the table shouldn't disqualify you from being a policymaker.