Posts by: Steve Zemke

The main reason voters gave for their voting as they did in the Nov 2014 election was the economy as it affected them. Despite job growth going up and unemployment going down and the stock market going up and GDP increasing, most Americans were not sharing in the economy doing better.

As Steve Rattner points out in a New York Times article entitled “Inequality Unbelievably, Gets Worse” :

 “Inflation-adjusted earnings of the bottom 90 percent of Americans fell between 2010 and 2013, with those near the bottom dropping the most. Meanwhile, incomes in the top decile rose.”

Democrats got blamed for the impacts of this growing income inequality in the US. Ironically conservative Republican policies rather than progressive Democratic  policies have exacerbated this inequality. Republicans did a better job of blaming people’s economic woes on Obama and deflected their own culpability and contribution in opposing things like repealing tax loopholes on big oil and other profitable corporations  and pushing for lowering taxes on the rich.

In charts presented in Rattner’s piece, he notes that because of the US’s relative low tax rate compared to that of other developed countries, less funds are available to help people in need of government assistance. The result is that the US ranks at the top as having the most inequality. Rattner says:

“That’s because our taxes, while progressive, are low by international standards and our social welfare programs — ranging from unemployment benefits to disability insurance to retirement payments — are consequently less generous.

Conservatives may bemoan the size of our government; in reality, according to the Organization for Economic Cooperation and Development, total tax revenues in the United States this year will be smaller on a relative basis than those of any other member country.”

Democrats unfortunately did not talk about what they and Obama had been doing to help working families despite Republican opposition.  Again Rattner noted:

To his credit, President Obama has succeeded in keeping income disparities from growing even wider, by such measures as by forcing tax rates on the wealthiest Americans up toward fair levels.

Democrat Jason Ritchie is running in Washington’s 8th Congressional District against incumbent Republican Dave Reichert. Washington state’s 10 congressional districts are currently held by 6 Democrats and 4 Republicans. Picking up an additional Democratic Congressional seat would help in the Democrat’s national effort to take back the US House of Representatives from the Republicans. Considering that President Obama won the 8th Congressional District when he ran for re-election in 2012 makes a Democratic pickup possible. The 8th CD is one of only 17 CD’s nationally where Obama won and a Republican Representative won.

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Democratic Representative Cyrus Habib announced today that he was going to run for the State Senate seat in the 48th LD in east King County. Candidate Joan McBride, former Mayor of Kirkland, announced that she was dropping her bid for Senate and would run for Habib’s House seat.

Joan McBride was the lone Democrat to challenge Senator Rodney Tom in the 48th LD. Rodney Tom, while professing to be a Democrat, bolted the Democratic Party two years ago when he aligned himself with the Republicans in the State Senate. This Legislative session he was the so-called Majority Leader as a result of joining with another Democrat professing to also be a Democrat  – Tim Sheldon of the 35th LD, and aligning themselves with the minority 24  Republicans to be part of a “Majority Coalition”.

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Non-presidential election years like 2014 can be tough for Democrats who have tended to do better in years when more voters turn out.  Will 2014 be better? A lot is at stake for Democrats on the national level with the Republicans pushing to take over the US Senate and keep control of the House. The New York Times published  a 2014 Senate Landscape Analysis on 3/2/2014 breaking down the upcoming Senate races.

Senators serve for six years.  The current makeup of the US Senate is 53 Democrats and 2 Independents who vote with them, and 45 Republicans.  Republicans need 6 more Senators to get the majority and flip the Senate. The New York Times analysis shows 34 continuing Democrats and 30 continuing Republicans.  Of the seats up for election in 2014 they count 6 solid Democratic seats and 5 leaning Democratic. They count 12 solid Republican seats and 1 leaning Republican.  And in the middle there are 12 states that could “flip” and go either way.

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The Tax Exemption Transparency and Accountability Act has been filed as bills in both the House and Senate in the Washington State Legislature. The prime sponsor of the House bill, HB 2721 is Representative Gerry Pollet. A total of 17 Legislators have signed onto the bill when it was dropped.  The prime sponsor of the Senate bill SB 6477 is Senator Maralyn Chase. Eight Senators had signed onto the bill when it was dropped.

The following fact sheet on the bill and why it was filed is from the Tax Sanity website at www.taxsanity.org  

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`Tim Eyman is trying to convince voters that Washington State needs a constitutional amendment to allow 1/3 of the Legislators to decide issues regarding raising revenues in Washington state. He has  filed Initiative 1325 to try to force the legislature to place a constitutional amendment on the ballot by a coercive tactic of proposing to cut the state component of the state sales tax by 15% if they don’t. Eyman calls it a 2/3 vote measure but the reality is that it allows 1/3 of the Legislators to make budget decisions on raising revenue rather than a majority.

Eyman’s attempt to enact his  1/3 constitutional amendment is a repeat of the recent Republican extortionist  proposal regarding raising the debt limit  in Congress by shutting down government.   The 15% cut under Eyman’s measure if the Legislature doesn’t play by his rules would occur by reducing the current 6.5% state sales tax to 5.5%.  This would equal over a billion dollars a year. Of course to Eyman the one billion dollars has no significance, it is merely a tool to try to use as extortion to promote  his libertarian view that taxes and government can do no good and the more we cut them the better.

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Nation of Change in a post entitled Democrats Swipe Right Wing ‘Soundbite Magic’ offers the following as what Democrats will talk about in 2014:

“Democrats will bang the drum this year: 1) to keep government open, 2) raise the minimum wage (with midterm ballot propositions), 3) keep unemployment insurance going, however marginal, 4) defend to the death the sanctity of Medicare and Social Security, 5) urge immigration reform overdo for decades, and 6) take pot shots at the open Citizens United spigot. Most will gingerly endorse climate change and gay rights. This campaign only has to be bold enough to dramatize the rightwing contradiction of spending billions to get elected to government, then methodically gumming up the works to prove that government is the enemy.”

Left out is the relationship between the economy and jobs and income inequality. Andy Stern, speaking at Town Hall in Seattle on January 7, 2014 in a talk entitles “Innovation and the Future of Labor” presented a much more complex dialogue that is emerging and that progressives are talking about. What’s happening is that the “economy” is growing but growth in jobs and wages are not. The issue is not just raising the minimum wage, which is important, but in ensuring that all Americans share in the economic growth, not just the top 1% or 2%.

Stern noted that 11 million jobs were lost since 2008 and only 8 to 9 million have come back. And while GDP has gone up by 50% and profits have gone up 70%, wages have gone up only 4%. The profits have gone to the very wealthy at the top, not to the average wage earner. Since the recession started low wage jobs increased from 24% to a majority now.

Many factors have contributed to this but one Stern spent time discussing was the continued increase in the use of robots. The real emerging issue here is as there is less and less need for human labor how do you provide economic support to the masses of people who really can’t find work through no fault of their own. It is not because they are lazy and want to leech off the employed. Our nation is undergoing a real transition in the nature and composition of its workforce and citizens economic livelihood as a result.

Republicans are not addressing these issues at all, falling back on outdated moral righteousness outrage and blaming government overspending and placing blame for issues like unemployment on the victims. Democrats, while increasingly concerned about the profound changes occurring, need to also update their basic understanding of what is happening and work for solutions to address the new economic reality facing our society.

It is a challenge for all of us but we need to start finding solutions soon. Our economic reality of increased joblessness, decreased wages for most Americans despite economic growth, drastically growing income inequality, increased pressures on many citizens ability to meet basic human needs, and the loss of real opportunity and equality for most citizens to better their economic security is increasingly affecting the future of our nation and its citizens.

Democratic Senator Adam Kline of the 37th LD has announced that he will not re-run this year for the Washington State legislative seat  he has held for many years.  He has been a staunch advocate on many progressive issues and will be missed.  In particular, unlike many other Legislators, he was willing to publicly oppose Tim Eyman’s many attempts to be Grover Norquist’s surrogate in Washington State. Eyman  would repeatedly say government was wasting money  and pushed initiatives to gut  government funding by opposing taxes of any kind.  Kline demanded Eyman publicly say what programs he thought should be cut and Eyman never responded, choosing instead to hide behind empty libertarian anti-tax rhetoric.

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Tax Sanity has been busy drafting legislation to create a tax expenditure budget bill to increase transparency and accountability over Washington State’s ever growing tax exemptions.  The most recent special legislative session saw the Governor and the State Legislature push for additional tax breaks for Boeing, creating the largest state corporate tax break in the nation. As Reuters reported, “The Washington state legislature … passed a measure to extend nearly $9 billion in tax breaks for Boeing through 2040 in an embattled effort to entice the company to locate production of its newest jet, the 777X, in the Seattle area.”  And even it may not be enough to keep Boeing here as now a race to the bottom is occurring as other states compete to try to lure Boeing to their state.

Tax Sanity believes the continued push to create more and more tax exemptions is out of control.  There needs to be more accountability for results and more transparency in who is benefiting and who is losing. They propose doing this by requiring the legislature to create a tax expenditure budget detailing all the exemptions, their cost and who they benefit that the legislature has to adopt every two years as part of the general appropriations budget or exemption will expire.

Their latest draft which they are urging legislators to adopt has also been filed as an initiative to the legislature.  Initiative 626 has just received the following ballot title and summary:

Ballot Title
Initiative Measure No. 626 concerns taxes.

This measure would require new and existing discretionary tax preferences to be authorized every two years in a tax expenditure budget and repeal requirements for advisory votes of the people on tax increases.

Should this measure be enacted into law? Yes [ ] No [ ]

Ballot Measure Summary
This measure would require the legislature to approve new and existing discretionary tax preferences every two years, in a tax expenditure budget detailing the fiscal impact and purpose of each tax preference. The tax expenditure budget would be included in the biennial omnibus operating appropriations act. Tax preferences not included in the tax exemption budget would expire at the end of the fiscal year. The measure would repeal requirements for advisory votes on tax increases.

View Complete Text PDF

Washington State currently has over 650 tax exemptions.  While some are required by our State Constitution or the US Constitution or by Federal law, the discretionary ones still number over 400. They are usually described as either an exemption, exclusion or deduction from the base of a tax; a credit against a tax; a deferral of a tax or a preferential tax rate. They are all  off budget spending that once granted almost never is rescinded. Only 10% of them have sunset dates. They represent expenditures of tax dollars which if not exempted from collection would be available as state revenue to fund critical state needs like education or health care.

The magnitude of the situation is not clear to the general public. Yet last year the Washington State Department of Revenue in its once every four year report on tax exemptions listing the discretionary tax exemptions points out why they are more appropriately called tax expenditures.  This is what most other states call them.  They are revenue that is not collected from some taxpayers but is collected from others. They noted that while we collected some $6.5 billion in B&O tax revenue in the last biennium, we did not collect but “exempted” some $7.5 billion.  We collected less than half the B&O tax revenue  available if every business paid the same.

When the sales and use tax collection was added to the B&O tax collection, essentially the same net result occurred.  The state collected some $21 billion in revenue but excluded $20 billion from collection.  Tax exemptions continue to grow with the Legislature adding another 15 in the 2012 session.

The process is out of control. This is why Tax Sanity is urging the state legislature to let the public know the extent to which they are supporting tax expenditures, who is benefiting and how much they are receiving. No future legislature is bound by the actions of past legislatures. Legislators have a responsibility to use tax dollars wisely, including being judicious and wise in giving out tax breaks. The Legislature needs to be held accountable for the current out of control use of tax exemptions to benefit special interests and business while cutting public services like education and health care. Requiring them to adopt a tax expenditure budget every 2 years as part of the regular operating appropriations budget and end the shifting of state revenue to off budget spending that lacks accountability and transparency.

Washington state’s tax system is broken. We have pressing state needs but do not fairly collect  revenue to adequately fund needed state public services like education and health care. We rank in the bottom third of states in raising revenue.  The Department of Revenue in January 2013 stated:

Washington ranked 36th from the top in state and local taxes paid per $1,000 of personal income in 2010, according to Census Bureau data published by the Washington State Department of Revenue.

At the same time we are ranked by the Institute on Taxation & Economic Policy as having the most regressive tax system in the country.

Washington State, which does not have an income tax, is the highest-tax state in the country for poor people. In fact, when all state and local sales, excise and property taxes are tallied up, Washington’s poor families pay 16.9 percent of their total income in state and local taxes.

Meanwhile the top 1% pay only 2.8% of their income in state and local taxes. This is a terribly unfair tax system that has shifted taxes onto those least able to pay.

Don Smith and I co-authored a MoveOn.org petition calling for the Washington State Legislature and Governor Inslee to pass legislation and funding to create a new Tax Reform Commission to study and recommend ways to fix our broken tax system.

We ask that you show your support for a new Tax Study Commission and the need for reforming our tax system by signing our petition. Add your name to the 3800 people  have already signed. Thanks.

Click on the headline directly below to sign the petition.

Let’s fix our unfair tax system in Washington State

Washington State has one of the most regressive tax systems in the country. In order to fix our broken, upside-down tax system, we first need to educate the public about the facts. But neither Governor Inslee nor the state legislators are making significant effort towards educating the public about why we need progressive taxation. We ask Governor Inslee to appoint a high level commission to evaluate our regressive tax system and propose changes that would allow the state to adequately fund education, social services and other essential needs. The commission should hold hearings throughout the state, solicit input from the public, and publicize its findings widely. We also call on Governor Inslee and the Democratic leadership to make speeches, publish essays, and hold public forums for discussion of this central issue.

Petition Background

In Washington State, the middle class and poor pay a higher percentage of their income in state taxes than do the rich, due to a reliance on the regressive sales tax to fund state government.

Even the Business and Occupation tax is regressive: it taxes revenue, not profit, and so it favors profitable corporations over struggling small businesses.

Another cause of unfairness is the existence of tax loopholes for certain wealthy corporations.

In fact, according to the Institute on Taxation and Economic Policy, Washington State has the most regressive tax system in the nation. The poorest 20% of non-elderly Washingtonians pay 17% of their income in state taxes; the richest 1% pay under 3% of their income in state taxes. (Source: http://www.itep.org/pdf/wa.pdf .)

The state desperately needs a reliable source of funds to pay for education pursuant to the State Supreme Court decision in the McCleary case, which declares that the legislature is underfunding K-12 education.

Additionally, in recent years the state has had to slash funding for social services and for higher education, causing real suffering among vulnerable people, threatening our prosperity and safety, and drastically raising the cost of a college education.

Voters in 2010 rejected I-1098, the initiative to establish a high earners’ income tax in Washington State. Most voters were voting against their own self-interest, because only the richest 2% of citizens would have seen their taxes rise.

But up until now, only a few advocacy groups have spoken up about this issue. Our political leaders should make the effort to educate the public about all the ways we need government and about progressive taxation. In other words, our political leaders should actually lead and not just follow.

The proposed high level commission, hearings, speeches and essays will help move the state towards a sustainable and equitable funding model.

For discussion of this effort, please visit:

http://fairtaxesnow.us/

https://groups.google.com/d/forum/wafairtaxes

To see the list of signers and their comments, please visit: http://waliberals.org/WATaxFixers.html

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