The Washington State Legislature is going to hold a special session this Thursday to consider re-enacting Initiative 747. I-747 was overturned by the Washington State Supreme Court. Governor Gregoire has called for the Special Session to put I-747’s 1% overall property tax increase limit back as law.
The Legislature needs time to consider property tax reform that helps those that need help most – low and middle income homeowners. Legislators should only consider enacting I-747 as a holding pattern until they can present and consider other measures like a circuit breaker or homestead exemption. By placing a sunset clause on I-747, like Jan 2009, Legislators can consider alternatives and hold meaningful hearings and allow time for adequate public input and evaluation of real property tax reform – something a one day special session doesn’t allow.
The best one or two proposals, if the legislators want public acceptance and involvement and debate, could be placed on the November 2008 ballot and go into law if passed. If the public rejects them I-747 would stay in place.
I-747 is not progressive tax legislation and does nothing to change the regressiveness of existing property tax laws that put a burden on low and middle income homeowners, forcing them to pay a higher proportion of their income in property taxes than those in higher income brackets.
I-747 is a quick fix that helps rich property taxpayers like mall owners and housing development owners. Gregoire called the special session out of a concern that some property taxing districts might hike their property taxes by more than the 1% limit before the regular legislative session starts in January. Reverting to the old law in place gives taxing districts the ability to increase property taxes collections up to 6% or inflation whichever is lower. Inflation last year, tracking the consumer price index, was about 3.7%.
This does not means that your property taxes under the old law would have gone up 3.7% last year if I-747 hadn’t been law. It means overall property tax collections to keep pace with inflation could have risen 3.7%, which includes combined taxes on existing houses as well as new construction.
There actually is a 1% limit on your property taxes independent of I-747. You can not be taxed more than 1% per year of the value of your home. Why your taxes would go up is because the value of your home has gone up. What is confusing is that I-747 does not limit ant tax increase on your home to 1% per year – it limited overall property tax collections to no more than 1% per year.
Property taxes need to be balanced with the need to pay for public services. Even with no income tax, Washington state’s property taxes are about the median according to the Washington State Department of Revenue.
Enacting an income tax like over 40 other states have would be a fairer system, allowing a reduction in real estate taxes or sales taxes, while paying for public services. It’s something for taxpayers to consider. You have to pay property taxes whether your income has gone up or not. The same is true for sales tax. Both are regressive taxes. But with the income tax, you only pay tax if you have income. If your income goes down you pay less tax.
