July 5, 2009 in Opinion

Editorial: I-1033 bad, but leaders need to act on tax reform

The Spokesman-Review

If it weren’t so damaging to the state, it might be good for Initiative 1033 to pass. The state’s leaders have done nothing but react to Tim Eyman’s misguided anti-tax measures, so another kick in the teeth would serve them right.

But Eyman’s latest plan is dangerous for Washingtonians. After an adjustment based on the annual inflation rate plus population growth, the measure would return the “excess revenue” for city, county and state governments via lower property taxes. There’s already a 1 percent annual cap on total property tax increases, courtesy of Initiative 747, which was tossed by the courts but reinstated by a cowed Legislature.

Some former proponents of I-747 who must balance budgets find it unrealistic. For example, Spokane County Commissioner Mark Richard, who can hardly be called a tax-and-spend liberal, said during his re-election campaign that he would not support the cap if it were put to another vote.

Health care, labor and energy costs rise much faster than 1 percent annually, which means government must continually cut services to balance budgets. I-1033 would exacerbate this decline. Currently, the county finds itself dipping into reserves, passing temporary sales tax hikes and asking voters to assess themselves more for a new jail. This same budget story is playing out in governments throughout the state.

Washington state does have taxation issues, but the biggest problem is not the property tax. Eyman has labeled it “obscene and unsustainable,” but the state ranked 29th in the nation in property taxes per $1,000 of income in 2006, according to the state Department of Revenue’s latest calculation. The state’s figure is $30.75; the national average is $34.92.

It’s an inordinately high sales tax and a counterproductive business tax, which assesses gross revenues (rather than the net), that ought to cause state leaders to cringe. The state can truly claim that it taxes the poor and businesses like no other.

But rather than take the sane advice of the Gates Commission and reform those taxes while backfilling with a modest income tax, elected officials have chosen to leave a leadership void that a full-time initiative hawker has been happy to fill with his corrosive brand of populism.

Something similar to I-1033 was attempted in Colorado, and it was a disaster. Voters eventually junked it. Many of the key costs of government, namely education and health care, do not obediently conform to the rate of inflation. So such a measure would only cause more cutting in these key areas that dominate the overall budget.

Voters should turn down this initiative, but the state’s leaders must find the courage to act, rather than react.

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10 comments on this story so far. Add yours!

Ed F on July 05 at 9:16 a.m.
I agree that the tax structure in Washington State is flawed and needs to be corrected. Having a sales tax like ours hurts poor people disproportionatly.

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TimEyman on July 05 at 10:08 a.m.
read a 'one page' on I-1033's policies and rationale here: http://www.VotersWantMoreChoices.com

we're extremely pleased with the very, very positive response we're getting from citizens concerning I-1033. we hope voters support it in November.

if it passes, what would it be like? we already know.

In 1993, the voters of Washington approved I-601, a spending limit that said government can grow at the rate of inflation plus population growth, the same formula as that used in I-1033. So it's not necessary to look to Colorado or other states who have constitutional amendments that aren't repealable or amendable and so are very different — Washington has years and years of personal experience with this same kind of thing with I-601.

And I-601 worked very well. At least, that is, until the Legislature did what it tends to do with initiatives in Washington … and that is to put loopholes in them to get around them. That started with the Republicans in 1998 and later by the D's in 2000, 2001, and 2002. Had they not done so, if they had abided by its limits on growth, there would not have been a $3.2 billion deficit in 2003 for Locke and Rossi to address. Further, there would not have been a $9 billion deficit in 2007 for Gregoire and the Democrats to address. If they had allowed the public sector to grow at the same rate as the private sector, then there wouldn't have been such high peaks and deep valleys.

For decades, they've taken their budgets on a fiscal roller coaster, overextending themselves in good times — creating unsustainable budgets — and then slashing during bad times. I-1033 gets us off that roller coaster, allowing sustainable, predictable growth, inspiring them to reform and prioritize using existing revenues (and always with the safety valve that I-1033 has which says that if they need more money, they can go to the people and ask for more — voter approved revenue is exempt from the limit)

that's reasonable, that's sustainable, that's what these 314,000 citizens believe is a better way to go.

We can't keep pouring tax revenues into a bucket that has a big hole in the bottom — it'll never be enough. The state, counties, and cities need to learn that taxpayers don't have bottomless wallets.

http://www.VotersWantMoreChoices.com

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TimEyman on July 06 at 7:46 p.m.
Why are we doing I-1033? Because for 12 years, our supporters and fellow citizens have been asking us, in fact begging us to tackle our state's growing property tax crisis with an initiative. Every year, our property tax burden gets bigger and bigger and yet there's been no answer, no response, no ACTION whatsoever from state, county, and city politicians. So we drafted and sponsored a property tax initiative that will reduce the citizens' tremendous property tax burden at the state, county and city level. That's why it's called the Lower Property Taxes Initiative.

But we wanted to make sure that after lowering property taxes, politicians couldn't shift the tax burden and raise taxes someplace else — we wanted 'net' property tax relief. So we drafted I-1033 to cap the GROWTH of overall REVENUE to ensure the property tax reductions provided for by the initiative were not replaced by increases in other taxes or fees.

What's also beneficial to the taxpayers about this approach is that it builds on and reinforces previous tax initiatives that have been undermined by subsequent legislative action. It closes existing loopholes and deters future loopholes. This is especially needed in Washington state because the lifespan of initiatives, including I-1033, can be cut short. Washington has a very unique initiative process compared to other states — here, the people can pass laws, but they cannot change the state Constitution. Part of the checks-and-balances of our state's legislative process is that lawmakers and the people's initiative are co-equal: the people can pass a law, but the Legislature can change it. Conversely, the Legislature can pass a law, but the people can change it. It is a tug-of-war where both sides have equal authority. Other states (Oregon, California, Colorado and others) allow the people even more power and permit them to change their state Constitution by initiative, leaving the Legislatures in those states with little to no flexibility.

Washington is different — one can argue that this is a weakness (lawmakers can change initiatives they don't like which frustrates many people) but it can also be seen as a strength (lawmakers can adjust people-initiated policies to adapt to changing conditions). Regardless of how you view it, it is the way it works in Washington state.

This is one of the main reasons why the doomsday predictions made by opponents of our initiatives are so easily dismissed as absurd. If an earthquake, small pox, alien attack, or other hysterically bad thing occurs, the Legislature is empowered to change the policies in any initiative. They've done so before and they will do so again.

It is for this reason that follow-up initiatives like I-1033 are especially helpful — they give the people the chance to reinforce policies that voters previously approved but that politicians subsequently changed. With I-1033, there are three previous taxpayer protection initiatives that are reinforced by I-1033:

CONTINUED …

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TimEyman on July 06 at 7:47 p.m.
CONTINUED FROM BELOW:

1) In 2007, voters approved Initiative 960, making it tougher to raise taxes. It's only been two years, but there's already rumblings from politicians telling reporters that I-960's policies are on the chopping block next session. Passage of I-1033 removes their incentive to do so. As was explained in Friday's Seattle Times:

Eyman said he's worried lawmakers will try to unravel I-960 next session because two years will have passed since the initiative was approved. He sees I-1033 as another barrier to raising taxes without voter approval. The initiative “says if you raise taxes without a vote of the people you'll have to give it back the following year by lowering the property-tax burden. So maybe you shouldn't do that,” Eyman said. I-1033 allows governments to put tax increases to the voters. If approved, the new tax revenue would be exempt from the initiative's limits.

The major theme of I-960, continued and reinforced by I-1033, is encouraging politicians to get the people's permission before taking more of their money. This year's initiative puts a limit on how much of an increase they automatically get — under I-1033, they can always go to the people to get more — 1033 has a built-in safety valve that allows the voters to approve higher revenue if government makes the case for it (that voter approval safety valve is contained in all our tax initiatives).

2) In 2001, voters approved a 1% cap on the growth of regular property tax levies with Initiative 747. Six years later, following the High Court's goofy 'voters-were-misled' 5-4 ruling, Gregoire and the Legislature reinstated the 1% cap during a special session, but they refused to repeal banked capacity, the ability of state and local governments to get around their 1% cap. I-1033 removes their incentive to use that unilateral tax-hiking authority because any revenue collected from it would be refunded the following year. Also, many citizens believe that state and local governments and county assessors are simply jacking up property tax valuations / property tax assessments in order to get around the 1% cap. Under I-1033, moneys collected from ANY revenue source that exceed I-1033's revenue cap must be used to reduce the subsequent year's property tax levy. I-1033 removes the incentive for politicians to get around the 1% property tax cap.

3) In 1993, voters approved I-601, a spending cap initiative that said government can grow at the rate of inflation plus population growth, the same formula used in I-1033. And I-601 worked very well. At least, that is, until the Legislature did what it tends to do with initiatives in Washington … and that is to put loopholes in them to get around them. It started with the Republicans in 1998 and later by the Democrats in 2000, 2001, 2002, and 2005. Had they not done so, if they had abided by its limits on growth, there would not have been a $3.2 billion deficit in 2003 for Gov. Locke and Rossi to address. Further, there would not have been a $9 billion deficit in 2009 for Gregoire and the Democrats to address. If they had allowed the public sector to grow at the same rate as the private sector, then there wouldn't have been such high peaks and deep valleys.

CONTINUED …

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TimEyman on July 06 at 7:47 p.m.
CONTINUED FROM EMAIL BELOW:

One of the reasons it was easier for the Legislature to get around I-601 was because it was a spending cap. Politicians are endlessly creative at avoiding limits on their spending. In fact, we would argue that it's not possible to ever limit politicians' spending by initiative (in our view, that can only be done by electing fiscally responsible people for office). So we didn't do another spending cap initiative — I-1033 doesn't amend the state's spending limit — because we don't believe it would work. Instead, we drafted I-1033 to do what we believe is possible: to limit the growth of the citizens' overall tax burden by instituting a new revenue cap. Under I-1033, revenue will continue to go up, but it'll go up at a rate the citizens can control and the taxpayers can afford.

I-601's spending cap had a good run, but we believe that a new revenue cap is the way to go. We can't control politicians' uncontrollable spending, but we can at least make sure that the overall amount of money they take from taxpayers doesn't grow faster than the taxpayers' ability to afford it.

For decades, they've taken their budgets on a fiscal roller coaster, overextending themselves in good times — creating unsustainable budgets — and then slashing during bad times. I-1033 gets us off that roller coaster, allowing sustainable, predictable growth, inspiring them to reform and prioritize using existing revenues (and always with the safety valve that I-1033 has which says that if they need more money, they can go to the people and ask for more — voter approved revenue is exempt from the limit). That's reasonable, that's sustainable, that's what 314,000 citizens believe is a better way to go. We can't keep pouring tax revenues into a bucket that has a big hole in the bottom — it'll never be enough. The state, counties, and cities need to learn that taxpayers don't have bottomless wallets.

http://www.VotersWantMoreChoices.com

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Steve Zemke on August 14 at 7:26 p.m.
Initiative 1033 is a clone of a failed measure in Colorado called TABOR or Taxpayer Bill of Rights. Voters were taken in by the same idea Eyman is exposing that government spending is out of control. So they passed the measure as a Constitutional Amendment in 1992.

The results were disastrous for Colorado.The result was every year government services declined. They found that the measure just didn't limit spending it continually decreased it. Roads fell into disrepair. K-12 education fell from 35th to 49th lowest in the nation. Childhood vaccinations fell. Healthcare for low income children dropped 50%. School programs were cut . Teachers pay dropped . Parents had to hold fundraisers to buy new textbooks.

Voters in Colorado finally voted to suspend the measure and allow public services to grow.

The problem is that I-1033 is not a simple measure. Limiting public spending to the national consumer price index as I-1033 does ignores the fact that healthcare, education and many other governemnt services rise faster in cost than the consumer price index. So each year the amount of services that could be paid for decreases.

Also demographic changes like an increasing senior population needing help with Medicaid and other senior services is not covered by I-1033 because while the population is the same,we are getting more seniors because of the baby boomers turning 65.

One size doesn't fit all. I-1033 covers the state and cities and counties. Rather than allowing for local control and decisions and spending, Tim Eyman would limit and reduce public services on all levels and across the state. No money for investing in education or healthcare or roads or parks or police or fire. From now one under I-1033 there will be less and less money available to fund these services each year.

You can watch a video here on YouTube that has citizens of Colorado talk about their experience. Watch it and I think you will agree that we don't need to repeat Colorado's mistake.

http://www.youtube.com/watch?v=kbF3_C…

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Steve Zemke on August 14 at 7:57 p.m.
In response to Eyman's comment that I-1033 allows for “sustainable predictable growth” that is ludricuous!
I-1033 is a no growth measure at best and a negative growth measure at worst.

It initially freezes growth of services because even if the cost of public services rose identical to inflation, all you are doing is providing the same services at a higher cost. And covering population growth does not increase services for anyone who already has them, there are just more citizens needing services.

But as Colorado found, public services historically have risen faster in costs than the consumer price index. The end result is a continual decrease in public services each year.

Now if your goal is to cut police and fire protection, quit fixing roads, decrease teachers pay, cut libraries, close parks, not invest in new infastrutcure, decrease bus service, cut public health programs, stop vaccinating kids, quit helping seniors stay at home and the like, then by all means Eyman's your hero.

But don't be fooled by I-1033. It will cut public services because that is it's intent. It is an anti-government measure intended to .reduce taxes and services. Yes it will give you predictable growth. Every year public services will predictably decrease.

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Steve Zemke on August 15 at 2:50 p.m.
Initiative 1033 is a complex measure but besides it's efforts to reduce public spending by state and local governement it also sets up a complicated wealth transfer scheme.

Last year state sales tax revenue accounted for 57% of state revenue. Everyone pays sales taxes, whether your rich or poor. I-1033 is a reverse Robin Hood wealth transfer scheme in that it will transfer tax dollars paid by everyone to just those that own property.

But its even more complicated than that. Some 40% of real estate taxes are commercial.. That means sales tax dollars paid by everyone will go to pay real estate taxes for large corporations like Boeing and Weyerhauser and Simpson Timber and Bellevue Square and other malls around the state and real estate developers. The more real estate a business has the more of a tax break they will get at the taxpayers expense.

On the residential side only 65% of households in Washington State are owner occupied according to the US Census Bureau. That means some 35% of households will pay taxes like sales taxes but will see no benefit from I-1033. If you own residential property the more you own the more of a tax break you will see.

A fairer way to help senior citizens and working families on limited income would be to expand the current tax break senior citizens have on their principal residence. It's a form of Homestead Exemption. Some 36 states have Homestead Exemptions. Eyman has opposed Homestead Exemptions.

Another form of help for low income families is called circuit breaker legislation which some 42 states have. But I-1033 really will not provide any significant help to low income seniors and low income working families because the tax break goes to benefit businesses and homeowners in direct proportion to the amount of property they own. The more property one owns, the more of a tax break you get.

Meanwhile pubic services like K-12 education, colleges, roads, transit, parks, police and fire protection, health care, libraries will all see service cuts to pay for this special tax break for property owners.

Vote No on I-1033 this Nov 3, 2009. Don't support another tax break for wealthy.property owners.

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TimEyman on August 16 at 8:01 p.m.
Here's an excellent 'one page' description of I-1033 and its policies and principles:

http://kpbj.com/headlines/2009-08-04_…

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Steve Zemke on August 25 at 2:08 p.m.
Government doesn't grow under I-1033. Public services will be cut. These are parks you go to, roads you ride on, public health, education for our kids, buses you ride, police and fire protection, libraries and the like. I-1033 is a clone of a dismal experiment Colorado tried and is still suffering the consequences. Watch the video here on YouTube and decide if this sounds like something good for Washington State. I don't think so.

http://www.youtube.com/watch?v=kbF3_C…

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