By: Sen. Adam Kline
My last post spoke of the magnitude of our budget shortfall. I’ll talk about why we find ourselves in this terrible situation.
A succession of Tim Eyman-inspired tax cutting initiatives made our cities, counties and the state extremely vulnerable to this nation-wide economic downturn.
Before I-695 in 1999, the state had a stable source of income, $1.7 billion per two-year budget cycle, from the motor vehicle excise tax. Local governments also received a share amounting to about $400 million per biennium. Then the property tax was capped first at 2 percent, then at 1 percent, by Initiatives 722 and 747. These initiatives were promoted by a salesman who promised they would force governments to cut the "fraud, waste and abuse" that he claimed was in their budgets -- though he refused my many attempts, and those of many others, to say precisely what it was we needed to cut.
It's no surprise that this salesman went after the MVET, since it was the only progressive state tax: it took more from the wealthy than from the rest of us. Now we are left with a tax structure that leans most heavily on the middle class. We are now the state, among all the 50, that relies most heavily on the most regressive of all taxes -- the retail sales tax, which takes a real toll on those without disposable income. Low-income folks end up a much higher percentage of their incomes -- four times as much -- towards taxes than do wealthy people. More important, the retail sales tax is also the most volatile: it is a tax on spending, and people quit spending in a recession.
Guess what? We're now taking in so little revenue that we can no longer afford the services that are among the core missions of any government.
You can rest assured that we will very carefully take into consideration the consequences of the cuts that we may have to make. This year, I have the dubious honor of being a member of the Senate Ways & Means Committee. This means I'll be joining with my colleagues in the careful line-by-line analysis of proposed expenditures and working with them to devise a budget that spreads the pain as fairly as possible.
We are not without options for raising new revenue. The Legislature will definitely use some of the Rainy Day Fund. But that's less than a billion dollars. The deficit in our revenues is over $5.8 billion, in a state General Fund budget of $33 billion. Another obvious and probably unlikely option is to attempt to muster the votes in the Legislature that are needed to raise taxes. It's unlikely that two-thirds of the legislators will vote to raise taxes, as required--I believe unconstitutionally--by Initiative 960. The result is that any large tax increase will have to go to the voters as a Referendum. We would have to go easy because most folks in Washington are experiencing their own budget crises.
As the price for my vote to raise taxes, I would insist that we not just raise some existing tax, but literally overhaul our tax structure and aim the tax directly at the discretionary income of wealthy people. Under our current post-Eyman tax structure, the wealthy escape taxation to a distressing degree.
For the long term, we'll definitely need to overhaul our "system" of taxation in order to properly fund vital public services such as education, health care, and public safety. I think the most progressive tax would be an income tax. I’ve sponsored income tax bills in the past and co-sponsored Sen. Rosa Franklin’s income tax bill this year. There’s no way in heck that we’ll be able to pass it this year, but I think it’s critically important to keep the tax reform debate alive. I hope our current budget trauma will force us to reform our tax system so that it is more progressive and reliable.
As for the current budget, I'll do my best to limit the damage we do, but we'll have no choice but to make some painful cuts.
I wish I had better news, or better yet, $5.8 billion to make up for our budget deficit.