Tag Archives: circuit breaker

Initiative 1033 – Eyman’s Latest Wealth Transfer Scheme for the Rich

Old dog Eyman just ain’t learning any new tricks. Initiative 1033, which he filed today with the Washington State Secretary of State is just another old trick to transfer money from the poor to those better off, namely property owners.

Eyman latest scheme puts a limit on state, county and city revenue growth by limiting year to year growth to the previous year plus local population growth and a national inflation index. Because it’s indexed to the previous years growth, every time you have a bad year or two, revenues the government will be able to spend will decrease from its previous high

When you have bad times economically that’s usually when more people need help from government. But Eyman does not propose decreasing the sales tax, which is regressive. Last year 57% of state tax revenues came from the sales tax.

Eyman proposes that instead money over his national inflation and population increase will go to help reduce taxes on those that own property. For homeowners the US Census Bureau last year said that some 65% of Washington State households were owner occupied. That means that 35% of households in the state will see excess money collected from sales taxes, for example, go as a tax break to those able to afford homes.

This is very much a reverse Robin Hood economic model Tim Eyman style. Tax the poor and transfer the money to help the wealthy pay lower property taxes. We’ve already been classified as the most regressive state in the country on taxation. This will only make things worse.

If you truly want to help the people who need help on property taxes the most, low and middle income people trying to make a go of things, help them on the property taxes. Things like a Homestead Exemption on one’s principal residence or circuit breaker legislation would be the right way to go.

Initiative 1033 is not an answer to property taxes problems. If it qualifies for the ballot, voters would be wise to reject Eyman’ latest wealth transfer scheme for the rich.

Eyman I-747 Express Train Roars Through Olympia

With train bells clanking and next year election year jitters agitating them like caffeine addicted fiends, Washington State legislators at the prodding of Governor Gregoire, jumped aboard the Eyman Express. With Train Engineer Christine Gregoire driving and with Conductors Frank Chopp and Lisa Brown punching tickets and screaming this train is leaving, Washington State Legislators stampeded, trampling over each other trying to get seats on the train before it left.

Eyman could be seen laughing his head off at them. He mocked them and insulted them even as they bought his over hyped tickets for the train ride and pledged to carry out his revenue cutting agenda framed as the people’s will.

Watching the Washington State Legislature in Special Session yesterday as it dealt with Governor Gregoire’s request to re-enact Eyman’s 1% Property Tax Limit was quite a spectacle.
Unfortunately it was a sad one. They treated the Eyman contrived 1% property tax limit as if it had some relation to a reasonable and justifiable policy proposal when in reality it only related to Eyman’s continued drive to limit government and taxes.

Credit needs to go to those legislators that in the end voted no on re-enacting I-747. In the House they were Representatives Dickinson, Hunt, Nelson, Pederson, Pettigrew, Santos, Simpson and Sommers. In the Senate they were Senators Fairley, Jacobsen, Kline, Kohl-Welles, McDermott, Murray, Pridemore, Spanel and Weinstein. In addition Senator Oemig made strong efforts to amend the legislation as did Senator Kohl -Welles.

Eyman’s I-747 sugar candy solution to people hurting from rising property taxes is nothing more than that – sugar candy. The people who are most in need of property tax help are lower and middle income people who pay a higher proportion of their income in property taxes than do high income people. I -747 does not change that equation since it’s an across the board limit to a 1% increase per year in overall property tax collections. The law benefits rich property owners more than less wealthy ones.

There was no ‘taxpayer revolt’ in Olympia yesterday. Conspicuously absent were homeowners demanding that I-747 be re-enacted. Maybe they know that it really gives very little tax relief , not having seen any significant impact for the 5 years it was law before the Washington State Supreme Court overturned it.

What there was yesterday in Olympia was a railroad brought on by elected officials unwilling and unable it seems to take the time to enact real property tax reform that would help low and middle income taxpayers. What occurred was that the Legislature again turned a blind eye to the fact that I-747 does not provide relief to those that need it most – low and middle income homeowners dealing with property tax bills rising faster that their income and who pay a greater percentage of their income in property taxes than do the wealthy.

The legislature has held hearings the last two years on real property tax relief in the form of a Homestead Exemption that some 40 states have. The Washington State Budget and Policy Center has done detailed analysis on another form of property tax relief known as circuit breaker legislation. But Gregoire didn’t even put these on the table.

Instead Gregoire comes out with an unvetted bill which is nothing more that a reverse mortgage. She called her property tax relief – a deferral of up to one half of property taxes per year for people earning less than $57,000 a year that have lived in their home for 5 years and have equity buildup.

Watching the Legislators deal with the Governor’s tax deferral bill was truly like watching sausage being made. The bill was surprise legislation not introduced in the Legislature before, that had only a day to be analyzed and considered. Committee Chairs were not allowing amendments to be made to it in the hope it would be rushed through. Many objections were raised in the two committee hearings, particularly by county auditors who saw many problems.

It was obvious from the discussion and critique at the hearings in the House and Senate that the bill had lot of problems. One Legislator characterized it as no more than a reverse mortgage that as a mortgage broker he said he would never offer. Eyman called it predatory lending. In this I agree with him. The current senior deferral has a fixed 5% interest rate.

The interest rate on the Governor’s deferral bill is 2% over the current Fed short term lending rate which is now 5%. This make the interest 7% this year. Since it is in essence an adjustable interest rate, what happens when inflation surges? The homeowner unfortunately goes more and more into debt.

Probably very few people will take advantage of her tax deferral. But she will still claim that she did something.

Put Sunset Clause on any I-747 Legislation.

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.

Governor Gregoire Panders to Ghosts of Christmas Past

It’s Christmas time and Governor Gregoire has become like Ebenezer Scrooge. She’s busy visiting and revisiting the ghosts of Christmas past. In a trance like daze she calls for a Special Session of the Washington State Legislature to re-enact a flawed policy wish of her right wing opponents – Initiative 747.

Never mind that the Legislature is scheduled to meet in January and the issue of property tax reform deserves more than a one day session to fairly resolve.

The ghosts of Tiny Tim and Dino the DINO flit about in her harried brain. “I must be re-elected. I must be re-elected. Remove these demons!” she screams. “Give them whatever they want, just leave me alone.

Quite the contrary, Christine, feeding these waifs of thin air only give them more substance and embolden them in their mischievous pranks to throw rotten eggs at state and local governments.

These ghosts are not here to help the citizens of this state that are looking for leadership to change the way we raise revenue in Washington state and end our de facto tax motto of “most regressive tax system in the nation.

These ghosts are not here to tell the public “when compared to the other 49 states, state and local property taxes in Washington appear to be about in the middle. For fiscal year 2004, Washington state ranked 28th in property taxes at $31.68 per $1000 of personal income, below the national average of $34.75. Calculated on a per capita basis, Washington ranked 18th at $3452 per person.

The above statement comes from “2007 Legislative Guide to Washington State Property Taxes ” and was prepared by the Senate Ways and Means Committee and the Legislative Evaluation and Accountability Program.

These ghosts will not tell the public that those most in need of property tax help are lower and middle class homeowners whose tax bill is going up due to assessed values on homes increasing faster than their income is going up.

What the ghosts will not tell you is that “In 1995, commercial value of property represented 41.5 percent of the statewide assessed value, and therefore paid 41.5% of the property tax. Since then, the relative share of commercial assessed value (and therefore taxes) has decreased by 8.7% points to 32.8%.” (from 2007 Legislative Guide.)

Re-enacting I-747 will do nothing to address this fact – that homeowners are picking up more and more of the property tax burden.

And I-747 will do nothing to address the fact the the Washington State Legislature also continues to give new tax breaks to businesses .This further reduces the available revenue base and shifts more and more tax tax burden onto individuals and families.

As the Economic Opportunity Institute noted in it’s report “Adding Up: New Tax Breaks in Washington 2004 -2006″ “In the three Legislative sessions from 2004 through 2006, the Washington Legislature passed at least 61 measures either granting new tax preferences or extending old ones. These new tax breaks will cost the state nearly half a billion dollars in the 2007 – 2009 biennium.”

Washington state needs to do tax reform, not keep failed tax policies in place. When compared with alternatives like Circuit Breaker Legislation as proposed by the Washington Budget & Policy Center or a Homestead Exemption as proposed by Tax Sanity.org, Initiative 747 pales.

The Legislature needs to look at property tax alternatives that will help those most feeling the increased pressure of residential property taxes – low and middle income individuals and families . Relief should be considered first on one’s principal residence which homestead exemptions do or by circuit breaker legislation which specifically helps lower income families and homeowners.

But Governor Gregoire and the Democratic controlled Legislature need to leave behind the ghosts of Christmas past and look to what the future can bring. This is why it was encouraging to read the comments of Senate Majority Leader Lisa Brown and House Finance Committee Chair Ross Hunter in today’s Seattle PI. that the issue is not as simple as just passing a 1% limit.

Senate Majority Leader Brown notes that “The 1 percent limit has been in place for 5 years and there are still people out there who are struggling with property taxes.”