Tag Archives: Sales Tax

Need to raise $1.7 billion in revenues

Advocates should be loud and assertive about the need to raise revenues. Governor Gregoire has said she would raise only $700 million of the deficit, about one-third in revenues, and balance the rest with cuts to essential services.

The King County Democrats take the position that we should raise two-thirds in revenues and cut one-third in services. The amount of the revenue goal will determine what kind of revenues are considered. It will be less painful to vote for a few large taxes than many small ones.The Governor has said she wants to address tax breaks. I suggest the legislature start with the largest non-performing tax break. That would be Boeing’s 2003 $3.2 billion (over 20 years) for promising 1,200 additional jobs. Instead, last year alone they laid off over 10,000.

The Seattle Times on Sunday Jan. 4th ran an article about other states rescinding their nonperforming tax breaks and demanding refunds, or “clawbacks.” We want to see that here, too. We don’t appreciate being played for fools.

Extending the sales tax to all services, not just professional services, would do the most to fill the deficit gap. It would also be, in effect, progressive tax, since low-income people tend to hire few lawyers, accountants and financial advisers. I’ll bet most moderate-income people would prefer to pay sales tax on haircuts, rather than see 65,000 people lose Basic Health plans. According to the Rebuilding our Economic Future Coalition, a recent poll showed that–after hearing how deep the cuts in services would be–65% of Washingtonians supported increasing revenues.

Legislators should also use this crisis as an opportunity to take needed steps toward an income tax for high-earners, couples making over $500,000. This 1% tax would be constitutional if Washington law defined income as different from property. Sens. Adam Kline and Rosa Franklin’s SJB 8205 ¬†addresses this and should be given an early hearing.

Most of all, Democrats should take courage, and note that Seattle passed the Seattle Housing Levy in a time of economic downturn by its biggest margin ever, 68%. Trust the voters to know that you’re doing the right thing.
(This post first appeared as a comment on the Northwest Progressive Institute blog.)

Initiative 1033’s Fatal Flaw

Tim Eyman’s Initiative 1033 does not give “refunds to taxpayers”. It is much more complicated than that. It is a wealth redistribution scheme that shifts tax burden onto lower income folks to benefit just those that own property.

Under I-1033, sales taxes and other fees will still be the same as before. Last year sales taxes accounted for 57% of state revenue. Everyone pays sales taxes but not everyone has property.

The conservative Tax Foundation notes that Washington State ranks 25th in terms of property taxes per capita but number 1 in terms of sales taxes. We have no state income tax yet rank 8th highest in income per capita. Overall the Tax Foundation says that we are in the bottom third of states in terms of state and local tax burden, coming in at 35th (with 1 being the highest)

Those who lose under I-1033 are renters; those who gain are wealthy property owners. You see the rebate Eyman proposes is not based on what you pay in sales taxes and fees but on what you own in property. The more property you own, the more you benefit. But not everyone owns property.

Senior citizens on fixed income and working families who don’t own homes lose twice; they pay the same taxes but get no rebate or see new or restored public services.

The US Census Bureau says last year that some 35% of households in Washington State are not owner occupied but rented or leased. If you want to reduce taxes do it fairly; like just cut sales taxes or property taxes.

But to shift the burden of paying property taxes onto people who don’t own property is ridiculous and unfair.

In addition some 40% of the property tax rebate goes to pay commercial property taxes. Yet businesses already have a sales tax exemption for goods they purchase for resale. Consumers pay the sales tax on the end product.

Property taxes already are limited to a 1% aggregate increase a year which in most years does not even keep up with inflation.

All in all, Initiative 1033 is a poorly thought out proposal. Read the initiative yourself before voting. It’s not as simple or straight forward as Eyman wants you to believe.

http://www.secstate.wa.gov/elections/initiatives/text/i1033.pdf

New Report Confirms Initiative 1033 Will Make Recovery Worse for Washington State

A just released report by the Rockefeller Institute of Government confirms analysis that Initiative 1033, if passed by voters in November, will likely make economic recovery in Washington State more difficult. While not directly addressing I-1033, the negative impact of the initiative is clear from the current economic figures.

Steeply declining revenue would reset the baseline from which next year’s inflation plus population growth would occur under I-1033. Analysis by the Washington State Budget and Policy Center notes that deceases in revenue during a recession will permanently lower the baseline and revenue to fund government services in future years.

The Rockefeller Report is entitled “State Tax Decline in Early 2009 was the Sharpest on Record“. Overall it notes that “State tax collections for the first quarter of 2009 showed a drop of 11.7%, the sharpest decline in the 46 years for which quarterly data are available. Combining the census Bureau’s quarterly data with its annual statistical series, which extends back to 1952, the most recent decline in state tax revenues was the worst on record.”

The figures given for Washington State in the report in Table 9 points to a 13.2% drop in sales tax and a 9% overall drop in quarterly state tax revenue comparing the January – March 2008 revenue to the January – March 2009 revenue.

The report also notes in looking ahead for all states that “The January – March quarter was the worst on record for states. The worst decline in sales tax in 50 years represents historic weakness in one of two major tax sources for states. Preliminary data for the April – June quarter suggest that fiscal conditions deteriorated even further …Such extraordinary weakness in revenues, along with continued if more moderate growth in expenditures, make widespread budget shortfalls highly likely this year.”

For Washington State a decreased revenue baseline under I-1033 will mean the emergency budget cuts this year become permanent budget cuts. There will be no new money to reduce classroom size or fund educational reform. Cuts to state health care are permanent. Cuts to all state services will not be restored. And future budget cuts due to the recession lowering the state’s revenue baseline will be necessary.

A state budget that only keeps pace with inflation and population growth under I-1033 is at best only able to keep pace with decreased purchasing power and increased population growth. An ever decreasing ability to fund government services under the recession resetting baseline that I-1033 mandates allows its sponsor Tim Eyman to follow in the footsteps of conservative Grover Norquist and his goal to continually reduce government spending and drown it in the bathtub.

The problem with this philosophy is that it doesn’t track reality. The free market economy does not solve many of society’s problems. Government is needed to help meet basic needs and provide balance and legal protections from those motivated by self interest and greed. History has shown us the shortcomings of societies that only serve the privileged few. It is the vision of being compassionate and providing legal protections and helping people that sets us apart from those like Eyman that make it their life’s mission to berate government serving people.

Taxes provide police and fire protection, free libraries, health care, roads and buses and sidewalks, education, environmental protection, parks and much more. Those that berate taxes like Eyman too often demagogue the issues while using these public services.

Eyman for example went to Washington State University and received a subsidy of his education because public tax dollars paid part of the cost. Maybe he should refund what the state paid for his education. Likewise he went to public school – maybe he should refund what others paid for his education there.

One could go on and on – the point is that government is not some evil leach sucking up tax dollars. It is providing benefits day in and day out that we all use and too frequently take for granted. Taxes are part of the cost we pay to live in our society. While no one really likes to pay taxes, we all benefit from the multitude of services government provides.

You can also find a write up of the Rockefeller Institute report in today’s New York Times.