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Eye On Olympia

I-747 property tax cap thrown out by state Supreme Court…

In a split decision, Washington's highest court minutes ago ruled that a property tax cap approved by voters in 2001 is unconstitutional.

"The text of the initiative misled voters about the substantive impact of the initiative on existing law," Justice Bobbe Bridge wrote for the court's 5-4 majority.

Initiative 747, approved by 58 percent of voters, generally capped total property tax increases at 1 percent a year, unless voters approved more. Today's state Supreme Court decision means that limit reverts to its 1997 level: 6 percent more per year.

In a dissent, Justice Charles Johnson wrote that voters clearly understood what they were doing: reducing the tax increases to 1 percent.

"The majority seems to suggest that the voters are unable to think or read for themselves, when in fact our democratic process is based on the assumption that voters do in fact read and understand the impact of their votes," he wrote.

The initiative was challenged by three non-profit groups and one county: Whitman County.
The county commissioners there have said that they were worried that limiting the tax increases to 1 percent -- below the average rate of inflation -- would slowly eat away at the budgets of fire departments and other small taxing districts in the region.

The central issue in the court case was whether voters thought they were reducing the cap from.
In November of 2000, voters approved anti-tax activist Tim Eyman's Initiative 722, which lowered the cap from 6 percent to 2 percent unless voters okayed more. The lower cap was promptly challenged in court.

While that court fight was going on, Eyman in 2001 launched a yet-stricter measure -- Initiative 747 -- to bring the cap down to 1 percent.

In February 2001, the 2-percent cap was declared unconstitutional, a decision that the state Supreme Court upheld that September. The property tax cap reverted back to 6 percent more per year.

Meanwhile, however, Eyman was pushing ahead with I-747, gathering and filing signatures and getting the measure on the ballot in November 2001. It passed.

The problem: the new ballot measure language cited the old 2 percent cap.

As a result, King County Superior Court udge Mary E. Roberts ruled a year ago, voters were led to believe they were voting for just a modest reduction in the cap -- from 2 percent to 1 percent. In reality, the cut was much more dramatic: from 6 percent to 1 percent.

"The voters were misled as to the nature and content of the law to be amended," Roberts wrote in a June 2006 ruling. "...The constitution forbids this." So she declared I-747 to be unconstitutional.

The state Supreme Court today agreed, with Bridge saying "Simply put, a voter reading the textt of the initiative would have perceived a much smaller impact on government coffers than would actually occur under I-747, a fact the dissent ignores. The text of the initiative misled voters about the substantive impact of the initiative on existing law."

Wrote Johnson: "Here, voters were informed there was a previous higher tax, and this amendment reduced that maximum tax to one percent.

Whether the former tax cap was six percent or two percent, the voters understood the effect of this law was to reduce the tax, and this is what they voted to approve."

UPDATE: "Now every homeowner in Washington is threatened with a massive property tax hike," said Senate Minority Leader Mike Hewitt, R-Walla Walla. Such jumps could be particularly big, he suggested, if state tax officials interpret today's ruling to mean that cities, counties and other local taxing districts could have increased taxes 6 percent a year all along.

Hewitt, R-Walla Walla, said Republicans will again try to pass a bill to reinstate the 1 percent limit. But doing so would require significant support from Democrats, who have a strong majority in both the House and Senate. Gov. Chris Gregoire, a Democrat, said earlier this year that she thinks she and lawmakers can find a middle ground somewhere between 1 percent and 6 percent.

UPDATE 2: Eyman -- working the phones hard with reporters this morning -- sounds indignant, although the ruling seems likely to spin up the anti-tax folks that tend to write him checks.

There are 1,700 local taxing districts, he said, and "every single one of them now has a checkbook that's been granted to them by five justices of the Supreme Court."

What happens next, Eyman said, will be a crucial test for the governor and legislative leaders, including Senate Majority Leader Lisa Brown, D-Spokane, and House Speaker Frank Chopp, D-Seattle.

"The liberal justices did Frank Chopp, Lisa Brown and Christine Gregoire no favors by dropping this powder keg in their laps right now" on the eve of a major election year, Eyman said.

If the Legislature and governor reinstate a cap that's higher than 1 percent, Eyman said, "all the people that are just dying to have their property taxes lower are going to storm the castle in Olympia."

Update 3: GOP gubernatorial candidate Dino Rossi says he's not surprised that Gov. Gregoire doesn't support a return to the 1 percent cap: "...She is after all the governor for the government who is more concerned about making people pay higher taxes than honoring the will of the voters."

Short takes and breaking news from the Washington Legislature and the state capital.