Brad Owen Acts to Uphold the Washington State Constitution

In a ruling today, March 2, 2015,  Brad Owen, the Lt Governor and presiding officer of the Senate did the right thing. He ruled that the Senate rule passed by the Republicans in the Washington State Senate earlier this year to require a 2/3 vote to raise revenue was unconstitutional and thus void. As noted in a press release by the Northwest Progressive Institute, Brad Owen stated:

“The President has previously stated, The Senate cannot pass a rule that violates the state Constitution,” …: “Perhaps that statement should be clarified to read, The Senate may adopt an unconstitutional rule, but the President will not enforce it.”

The Washington State Supreme Court ruled in 2013 that requiring a 2/3 vote of legislators to raise revenue was unconstitutional because the Washington State Constitution said laws shall be passed by majority votes. As written in the Tacoma News Tribune at the time:

The language and history of the constitution evince a principle favoring a simple majority vote for legislation,” wrote Justice Susan Owens for the 6-3 majority (previous posts mistakenly said Chief Justice Madsen wrote majority). “The State’s proposed reading of article II, section 22 would fundamentally alter our system of government, and such alteration is possible only through constitutional amendment. Washington’s government was founded as a representative democracy based on simple majority rule.” “The Supermajority Requirement unconstitutionally amends the constitution by imposing a two-thirds vote requirement for tax legislation. More importantly, the Supermajority Requirement substantially alters our system of government, thus enabling a tyranny of the minority.”

Brad Owen based his decision on the Washington State Supreme Court decision. As the Tacoma News Tribune reported today:

“The state Senate’s presiding officer said Monday he won’t enforce a Senate rule making it harder to raise taxes.The rule violates the state constitution, Lt. Gov. Brad Owen ruled. With the ruling by Owen, a Democrat, the votes of 25 of 49 senators are required to move a tax through the Senate, the same 50-percent-plus-one majority as required in the House. The rule required a two-thirds supermajority to bring a bill to a final vote if the bill created new taxes. In invalidating it, Owen relied on a 2013 state Supreme Court ruling striking down voter-passed requirements for two-thirds supermajorities for taxes.”

Unfortunately the Tacoma News also gives a plug for libertarian anti tax Tim Eyman who for years pushed the unconstitutional 2/3 voting requirement in initiative campaigns. He is now pushing a “Ted Cruz style shut down the government stop educating our kids until I get my way” initiative.While he like the 2/3 voting proposal when it suits his purpose, he hates it when it is an obstacle to get his way.
The Washington State Supreme Court said the only way a 2/3 rule could apply was if it was in the Washington State Constitution. But that’s the kicker – it takes a 2/3 vote of the legislature to put a constitutional amendment on the ballot. Eyman doesn’t have anywhere near what he needs for 2/3 since Republicans are his main base of support.  And they are in the minority in the House and barely 2 votes over a majority in the Senate.
Eyman’s answer – have voter’s cut $1 billion from the state budget until they put a constitutional amendment on the ballot. Voters would be ill served by starting to hold the legislature hostage to ransom since voters would be the ones suffering by seeing public education and other services cut even more.
Many voters miss the connection that who really benefits is large corporations who don’t want tp pay taxes like for cleaning up their pollution. Big oil companies like BP and Tesoro gave Eyman money in the past so the legislature couldn’t raise funds from them to clean up oil pollution. It the average individual and family taxpayers who suffer as a result because they have to pay instead of the polluters who are making huge profits.
In addition BP and other corporations don’t want to see their tax loopholes end.  While they only take a majority vote to enact, under the 2/3 proposal it would take a 2/3 vote of the legislature to end them, even if they provided no benefit to the state. The 2/3 vote proposal actually puts the minority in charge of tax policy since 1/3 of the Legislators in either house could then block tax legislation.
All in all it is a bad dealer for working families and most taxpayers in our state. Corporations love the idea. Don’t be fooled.  Don’t support Eyman’s latest corporate benefiting initiative that would further damage education in our state. Don’t sign Initiative 1366.

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Why Enacting HB 1239/SB 5492 Would be Good Policy for Washington State

Tax preferences and tax incentives are called tax expenditures by most other states and the US Congress – they are revenue that is not collected. Not collecting this revenue from certain taxpayers is a form of picking winners and losers and the end result is the same as if you made a direct expenditure to that same entity as a line item expenditure in the general operating budget.

HB 1239 / SB 5492 - the Tax Exemption Transparency and Accountability Act – addresses the issue of the magnitude and consequences of off budget spending in the form of tax expenditures in Washington State.  This off budget spending from the tax base creates a lack of accountability and transparency in how tax revenue is dealt with. Tax expenditures are not included in the biennial  state budget process and this creates a lack of accountability and transparency.

One big problem with the state budget process is that we are one of only 6 states according to a 2011 Center on Budget and Policy Priorities Report that do not produce a tax expenditure report every 2 years or less. Our 2012 Tax Exemption Report is based on 2011 data and is 4 years out of date. The result is that tax exemption data is not even coordinated and integrated with the budget process.

The magnitude of off budget spending in the form of tax expenditures is staggering when compared to the regular expenditures in the state budget. The dollar value of tax expenditures in our state is about the same amount as actual revenue we collect as taxes and spend directly in the state budget.

The Washington State Department of Revenue noted in their 2012 Tax Exemption Report that the 2011-2013 budget projected collecting revenue of $22.8 billion and giving out tax expenditures equal to $21.2 billion.

They projected collecting $6.5 billion in B&O taxes but exempting as tax expenditures $7.7 billion.

In other words before we have even start looking at the regular appropriations budget we have already given away half of the potential revenue we would have if we had no tax exemptions.

There is no biennial linkage of what the Joint Legislative Audit and Review Committee (JLARC) does and the budget process for reviewing tax exemptions like what the Legislature does with the regular budget. JLARC has been producing reports for 8 years of a 10 year cycle. Very few of it’s recommendations have been acted on by the State Legislature. They are presented piecemeal over a 10 year cycle in a hearing before the House and Senate. No action is required to be taken by the Legislature.

Tax expenditures  are investments made at the  discretion of the Legislature in our state just like the expenditures they make as part of the omnibus budget appropriations bill they pass every two years. But tax expenditures never get the same scrutiny regular expenditures do because they are not part of the budget process.  They should be and that’s what HB 1239/ SB 5492 does.

HB 1239 / SB 5492 requires the State Legislature  to scrutinize and review the tax expenditures every two years and determine whether they are producing the results they were intended to.  They need to be evaluated the same as other expenditures in the state budget as to whether they are meeting the state’s needs and the priorities of government and are accomplishing the purpose for which they were enacted..

Tax expenditures are an investment just as if you invested in the stock market. Legislator’s by their tax expenditure and budget actions are  investing in the state and its economy.  It makes sense for the Legislature to scrutinize its whole spending portfolio every 2 years, not just half of it. Unfortunately individual tax expenditures which represent about half of the potential base tax revenue in the state are only reviewed piecemeal once every 10 years. And even then a number of tax expenditures are exempted from review. And for 90% of tax exemptions which have no sunset provisions on them there is no requirement for the Legislature to do anything.

Would you think the State Legislature was doing it’s job in scrutinizing state spending under the budget by only looking at individual expenditures once every 10 years? We don’t pass a state budget for 10 years at a time and decide that 90% of the expenditures actually never have to be adopted again..  Why does the Legislature think it shouldn’t have to reaffirm tax expenditures every 2 years just like it does with other state spending under the budget process?

It’s time for the Washington State Legislature to step up and be responsible for examining all state spending every two years by adopting a tax expenditure budget as part of the regular biennial budget appropriations process. It needs to enact HB 1239 / SB 5492  now!

Basic Facts on Tax Exemption Transparency and Accountability Act 2015

Tax Exemption Transparency and Accountability Act 2015–HB 1239 & SB 5492

Tax exemptions, preferences, deductions, credits and deferrals are off budget expenditures. They lack the accountability and transparency that exists for other expenditures the state makes as part of the biennial budget process. Taxpayers deserve to know who is receiving these tax exemptions, how much money is involved and for what reason they are given.

According to the Washington State Department of Revenue’s last Tax Exemption Study in 2012, while the State collected some $6.5 billion in B&O tax revenue in the previous biennium, it exempted from collection some $7.6 billion. When sales and use taxes were included with the B&O tax collected, the results were similar – the state collected $21 billion in revenue but exempted almost $20 billion total.

Washington State has created some 650 tax exemptions over the years. Over 450 of these are discretionary tax exemptions, not required by Federal or State constitutional law. These discretionary tax exemptions account for over $24 billion in revenue not collected.

The taxpayers of this state have a right to know:

  • Who is getting these tax breaks?
  • How much money is involved?
  • Are these tax breaks benefiting the public?

Since these tax breaks affect the overall revenue available to the state and shift the tax responsibility onto those who don’t get the tax breaks, taxpayers have a right to know the answers to these three questions.

To be able to answer these questions, there is an urgent need to increase the transparency and accountability of Washington State’s prolific use of tax exemptions.

This legislation would do that by requiring the governor to propose and the state legislature to adopt a tax expenditure budget every 2 years as part of the biennial omnibus operating appropriations act. This would give the Washington State Legislature an opportunity to periodically evaluate the need and effectiveness of these exemptions in meeting current state needs. They would do this at the same time they are making budget decisions about prioritizing other state expenditures for public services as part of the biennial budget appropriations process.

This measure would require new and existing discretionary tax preferences to be authorized every two years in a tax expenditure budget. It will add much needed transparency to the hundreds of exemptions and preferences, along with their cost and how each decision to spend money on an exemption or preference is a choice to expend funds for this purpose with particular beneficiaries.

The state biennial omnibus operating appropriations act would be required under this measure to include a tax expenditure budget to approve new and existing discretionary tax preferences, including exemptions, deductions, credits, and deferrals. The tax expenditure budget would detail the fiscal impact, purpose, and effectiveness in meeting the purpose of each tax preference. Tax preferences not included in the tax expenditure budget would expire at the end of the calendar year in which the budget is adopted.

Increasing tax exemption transparency and accountability

2015 House Bill 1239 Sponsors:

Representatives  Pollet, Appleton, Reykdal, Moscoso, S. Hunt, Stanford, Fitzgibbon, Kagi, Farrell, Ortiz-Self, Dunshee, Walkinshaw, Pettigrew, Tharinger, Ryu, Sells, Tarleton, Santos, Goodman, Cody, Wylie, McBride, Bergquist, Riccelli, Ormsby, Kirby

2015 Senate Bill 5492 Sponsors:

Senators Frockt, Kohl-Welles, Hasegawa, Billig, Conway, Keiser, Chase, Rolfes, Ranker, Jayapal, Miloscia, McAuliffe

HB 1239/SB 5492 - Official Bill Digest

Establishes the tax exemption transparency and accountability act.

Creates a tax expenditure budget as part of the biennial budget adopted by the legislature.

Reforms the tax expenditure process by including tax expenditures in a tax expenditure budget in the biennial state budget process and requires they be readopted every two years as part of the budget process or they expire.

Requires the joint legislative audit and review committee to report its findings and recommendations for scheduled tax expenditures to the citizen commission for performance measurement of tax expenditures by June 30th of each year.

 

Tax Expenditure Budget Bill Introduced Again in Washington State Legislature

Representative Gerry Pollet (LD-46) has reintroduced the Tax Exemption Transparency and Accountability Act in the 2015 Legislative Session. He was the prime sponsor of the bill in the House last year with 24 sponsors.

This year as HB 1239 it has 26 sponsors. They are Representatives Pollet, Appleton, Reykdal, Moscoso, S. Hunt, Stanford, Fitzgibbon, Kagi, Farrell, Ortiz-Self, Dunshee, Walkinshaw, Pettigrew, Tharinger, Ryu, Sells, Tarleton, Santos, Goodman, Cody, Wylie, McBride, Bergquist, Riccelli, Ormsby, Kirby

The bill has been introduced in the state Senate as SB 5492 by Senator David Frockt (LD-46). The Senate sponsors are Senators Frockt, Kohl-Welles, Hasegawa, Billig, Conway, Keiser, Chase, Rolfes, Ranker, Jayapal, Miloscia, McAuliffe

The bill digest is:

Establishes the tax exemption transparency and accountability act.
Creates a tax expenditure budget as part of the biennial budget adopted by the legislature.
Reforms the tax expenditure process by including tax expenditures in a tax expenditure budget in the biennial state budget process and requires they be readopted every two years as part of the budget process or they expire.
Requires the joint legislative audit and review committee to report its findings and recommendations for scheduled tax expenditures to the citizen commission for performance measurement of tax expenditures by June 30th of each year.

The state biennial omnibus operating appropriations act would be required under this measure to include a tax expenditure budget to approve new and existing discretionary tax preferences, including exemptions, deductions, credits and deferrals.  The tax expenditure budget would detail the fiscal impact, purpose, and effectiveness in meeting the purpose of each tax preference.  Tax preferences not included in the tax expenditure budget would expire at the end of the calendar year in which the budget is adopted.

This bill would require new and discretionary tax preferences to be authorized every two years in  tax expenditure budget.  It would add much needed transparency to the hundreds of tax preferences or  exemptions, along with their cost and how much each decision to spend money on an exemption or preference is a choice to expend funds for this purpose with particular beneficiaries.

 

Washington State Senate Republicans Again Want to Ignore State Constitution

.The Republicans in the Washington State Senate when the Legislature convenes on Monday Jan 12, 2014 will try to bypass the Washington State Constitution calling for majority votes to pass legislation. Two Republicans – Doug Erickson of Bellingham and Mike Baumgartner of Spokane – have announced that they intend to try to amend Senate Rules to require a 2/3 vote of the Senate to bring any legislation calling for a tax increase to the floor for a vote. In a great display of hypocrisy, this vote will require by their calculation only a majority of Senators to pass it.

Republicans in the Senate have a 26 to 23 majority but it seems they are not content with even that – wanting to give 1/3 of the sitting Senators veto power over the other 2/3. Thus a minority of 17 Senators, if this rule change passes, would have veto power over the wishes of 32 Senators – a clear coup of rule by the minority. As the Spokesman Review’s Jim Camden notes ” This would cover bills with new taxes …, raises in existing taxes and reduction or elimination in tax exemptions, sometimes known as loopholes — unless they had a referendum clause that was sending them to the ballot for voter approval”

This rule would require that any attempt to repeal non performing tax exemptions or reduce the exemption would also need to have a 2/3 vote to come to the senate floor for a vote. In again a twisted sense of majority rules it would only require a simple majority to pass a tax exemption. All of the current 650 plus tax exemptions in place only required a majority vote. Yet even if the Legislature through its JLARC review process determined that a specific exemption was not resulting in any benefit to state taxpayers, like increasing state employment and jobs, 1/3 of the members of the Senate could prevent the exemption being cut. This is the power of minority rule – whereby even if a majority wants to eliminate a tax exemption because it is not benefiting the state or meeting state priorities, the minority position wins.

The framers of the US Constitution looked at this issue in the Federalist papers. Alexander Hamilton in The Federalist Papers No.#22 noted:

“To give a minority a negative upon the majority (which is always the case where more than a majority is requisite to a decision), is, in its tendency, to subject the sense of the greater number to that of the lesser.”

“…The necessity of unanimity in public bodies, or of something approaching towards it, has been founded upon a supposition that it would contribute to security. But its real operation is to embarrass the administration, to destroy the energy of the government, and to substitute the pleasure, caprice, or artifices of an insignificant, turbulent, or corrupt junto, to the regular deliberations and decisions of a respectable majority. In those emergencies of a nation, in which the goodness or badness, the weakness or strength of its government, is of the greatest importance, there is commonly a necessity for action. The public business must, in some way or other, go forward. If a pertinacious minority can control the opinion of a majority, respecting the best mode of conducting it, the majority, in order that something may be done, must conform to the views of the minority; and thus the sense of the smaller number will overrule that of the greater, and give a tone to the national proceedings. Hence, tedious delays; continual negotiation and intrigue; contemptible compromises of the public good. And yet, in such a system, it is even happy when such compromises can take place: for upon some occasions things will not admit of accommodation; and then the measures of government must be injuriously suspended, or fatally defeated. It is often, by the impracticability of obtaining the concurrence of the necessary number of votes, kept in a state of inaction. Its situation must always savor of weakness, sometimes border upon anarchy.”

Ironic isn’t it that Republicans who profess they want to uphold the Constitution would try to impose rules of legislative action that run opposite of what the framers of the US Constitution felt that government needed to do to be effective. Majority rules for legislative action must be adhered to in passing legislation, not the imposition of rule by a minority to impose their will on the majority.

The Washington State Supreme Court has already ruled on the issue of majority votes being required for passing legislation. It has ruled that requiring a supermajority like a 2/3 vote of all legislators is unconstitutional. This latest Republican proposed attempt to circumvent the Washington State Constitution shows the repeated hypocrisy of those that profess the need to adhere to the Constitution, in this case the Washington State Constitution, but repeatedly attempt to come up with ways to bypass it or ignore it to further their personal political agenda.

Voters need to take note of Washington Legislators like Senators Ericksen and Baumgartner who are not willing to abide by the intent and language of the Washington State Constitution and the Washington State Supreme Court and vote them out of office.

cross posted on Majority Rules -

Tax Exemption Transparency and Accountability Act Filed in Legislature

Legislation to create a Tax Expenditure Budget as part of the regular biennial budget appropriations process has took a big step forward. Companion bills have been introduced in both the House and the Senate in the Washington State Legislature. They both had strong support.

Representative Gerry Pollet (LD 46) introduced HB  2721 with 25 sponsors total. Sponsors included Pollet, Reykdal, Fitzgibbon, Moscoso, Ryu, Appleton, Dunshee, Stanford, Farrell, Bergquist, Tarleton, Walkinshaw, Cody, Kagi, Pettigrew, Freeman, Riccelli, Jinkins, Lytton, Roberts, Wylie, Sells, Ortiz-Self, Gregerson, Goodman.

Senator Maralyn Chase (LD32) introduced SB 6477 with 9 total sponsors. These included Senators Chase, Hasegawa, Kline, Rolfes, Keiser, Kohl-Welles, Conway, Frockt, Ranker.

This legislation would require new and existing discretionary tax preferences to be authorized every two years in a tax expenditure budget. It will add much needed transparency to the hundreds of exemptions and preferences, along with their cost and how each decision to spend money on an exemption or preference is a choice to expend funds for this purpose with particular beneficiaries.

The state biennial omnibus operating appropriations act would be required under this measure to include a tax expenditure budget to approve new and existing discretionary tax preferences, including exemptions, deductions, credits, and deferrals. The tax expenditure budget would detail the fiscal impact, purpose, and effectiveness in meeting the purpose, of each tax preference. Tax preferences not included in the tax expenditure budget would expire at the end of the calendar year in which the budget is adopted.

Support to help publicize and push for passage of this legislation is needed. We expect passage to be difficult given the current makeup of the State Senate but we are planning to reintroduce the legislation next year if it doesn’t move this year. We are heartened by the strong support of Legislators and others we have received to date.

Libertarian Eyman Continues Anti-Tax Rant with 2014 Initiative to Cut State Funding by $1 Billion/yr

Eyman’s 2014 Initiative 1325 is a rehash of Eyman’s previous unconstitutional 2/3 voting requirement initiatives imposed on  the Washington State Legislature to try to prevent them from raising revenue.  The Washington State Supreme Court in 2013  ruled that his previous initiatives requiring a 2/3 vote were unconstitutional.  The Court said the only way they would be valid would be if the 2/3 requirement were passed as a Constitutional Amendment.

His latest proposal, I-1325, proposes that voters approve cutting the state component of the sales tax, from 6.5 cents to 5.5 cents, if the state legislature does not put a constitutional amendment for a 2/3 vote requirement on the ballot for people to vote on. The 6.5 cents to 5.5 cents reduction is equal to a 15.4% cut in sales tax revenue to the state.  This would reduce the state revenue from sales tax by 1 billion dollars a year!

This would completely wipe out the State Legislature’s Budget increase last year of $1 billion as a down payment on meeting the mandate of the Washington State Supreme Court under the McCleary decision to fulfill the requirements of the Washington State Constitution to fully fund public K-12 education.  The current estimate is that by 2017 the Washington State Legislature will have to come up with over $4 billion dollars to do this.

Fortunately in Washington State you can not pass a constitutional amendment by initiative as some states can. To place a constitutional amendment on the ballot you need to get 2/3 of the Legislators in both houses to vote to do so.  And that is almost impossible to do as you only need 1/3 of the Legislators to oppose it to stop it being placed on the ballot. Note the irony here that the very system Eyman is proposing to require to raise taxes – namely a 2/3 vote of the legislators, is the same thing he is not able to get 2/3 of the Legislators to do   – to put a constitutional amendment on the ballot.

So Eyman, who seems to be channeling Ted Cruz and the Tea Party, has decided to repeat the same failed coercive, extortionist style tactics that failed so miserably for the Republicans last year in the US Congress when they decided to shut down the Government until they got what they wanted. They failed and are still suffering the public backlash.

Tim Eyman makes his living promoting anti-tax, anti government initiatives in Washington State. For over 10 years he has been filing numerous initiatives, usually getting one on the ballot every year.  In 2014 he has again already filed five measures and has said he is going to collect signatures on  Initiative 1325. Whether he has a sugar daddy this year to pay for the signatures remains to be seen but regardless it is not too early to discuss why I-1325 would be bad for Washington State.

Eyman’s initiatives are never about really solving problems, but are driven by the libertarian philosophy that the lower taxes are, the better, and the smaller the government is, the better.Unfortunately this is not going to provide the funding needed to run our state. It’s like your car needs repair and rather than fixing it, you say you’re not going to spend any money because you don’t like paying car repair people to fix your car. So you just keep driving it until it breaks down or you get in an accident.  No one like paying taxes but they are the price to have public services, like roads and schools and libraries and police and fire. We can either have a society where we all work together for the common good or we can vote for Tim Eyman’s measures where it’s everyone for himself or herself and tough luck if you can’t make it.

Two thirds votes run counter to basic democracy and working for the common good.  Rather than have a majority of legislators decide an issue like raising taxes, instead it lets one third of the Legislators in one House make the decision.  If they oppose raising revenue it takes only 17 Senators out of 49 Senators and 98 Representatives to vote no and their side prevails.  It allows a minority vote to decide.  The minority vote overrules the majority vote.

Who would support a constitutional amendment to allow a third of Legislators to pass legislation?  Yet Eyman’s proposal would allow a third of Legislators in one House to prevent legislation being passed, even if a majority of Legislators support it.

And it would allow a third of Legislators in one House to prevent repeal of tax exemptions that no longer work or are just tax loopholes not providing benefit to the state. Yet it only  took a simple majority vote to enact them.  This 2/3 constitutional amendment proposal is basically a tax loophole protection amendment – benefiting special interests like big corporations and BP Oil and Conoco Phillips and the Beer Institute who supported Eyman in the past who may have a loophole but making it impossible to repeal them in the future. That’s because Eyman defines repealing a tax loophole as a tax increase.

This is a bad policy proposal and Washington State voters need to not sign I-1325 or support it in any other way.

Tax Exemption Transparency and Accountability Initiative Recieves Ballot Title

Initiative 636 – the Tax Exemption Transparency and Accountability Act has received a ballot title from the Washington State Attorney General. According to  Washington State’s Department of Revenue’s figures, tax expenditures account for as much spending as the state spends in its general operating budget every 2 years.

Washington State’s tax structure is broken. Not only do we have the distinction of having the most regressive  tax system in the nation, we also have an out of control tax exemption system that is unfair.

According to the Washington State Department of Revenue, we have a tax system that results in exempting many business, special interests and others from paying half the base taxes that are levied if everyone paid the same. For example in the last biennium the state collected from B&O taxes on businesses about $6.5 billion. At the same time they exempted through tax preferences, tax exemptions, tax deductions and tax exclusions some $7.5 billion in B&O taxes.

Washington State currently has over 650 tax exemptions on the books. Only about 10% of them have sunset provisions. These exemptions are more accurately called tax expenditures because they represent money the state is spending. The problem is that they lack the accountability and transparency that other expenditures by the state go through in the normal budget process.

Every two years the state prepares a  omnibus operating appropriations budget. Tax expenditures are not included in this budget but are off budget spending by the Legislature.  This needs to end.

To increase transparency and accountability, Tax Sanity proposes that all discretionary tax expenditures be part of a Tax Expenditure Budget that the Legislature must adopt every two years as part of the biennial omnibus operating appropriations act.

The citizens group Tax Sanity has been writing drafts of proposed legislation to create a Tax Expenditure Budget. Initiative 626 is the latest draft. While they hope the Washington State Legislature will act to reform the current runaway tax exemption system that is full of tax loopholes that don’t benefit the state, they are not optimistic that the Legislature will adopt the needed changes. So they have also been filing their proposed legislation as initiative drafts for feedback and discussion. They recently received the following ballot title and summary.

Ballot Title
Initiative Measure No. 636 concerns taxes.

This measure would require new and existing discretionary tax preferences to be authorized every two years in a tax expenditure budget, which would detail the revenue impact, purpose, and effectiveness of each preference.
Should this measure be enacted into law? Yes [ ] No [ ]
Ballot Measure Summary
This measure would require each state biennial omnibus operating appropriations act to include a tax expenditure budget to approve new and existing discretionary tax preferences, including exemptions, deductions, credits, and deferrals. The tax expenditure budget would detail the fiscal impact, purpose, and effectiveness in meeting the purpose, of each tax preference. Tax preferences not included in the tax expenditure budget would expire at the end of the calendar year in which the budget is adopted.

View Complete Text PDF

It is too late in the year to collect signatures on this measure so Tax Sanity will be trying to get the Legislature to adopt this bill. Unfortunately with the State Senate being in the hands of the Republicans who have opposed dealing with most tax exemption reforms it will be a long shot on their passing legislation.  So it is likely that Tax Sanity and concerned citizens will have to eventually go the initiative route for reform.

You can view Tax Sanity’s website at www.taxsanity.org. They also have a facebook page entitled Tax Sanity.  You can contact them at info@taxsanity.org if you want to be keep informed of their efforts or want to help move this proposal forward.

Initiative 626 Receives Ballot Title from Washington State Attorney General

Tax Sanity has been busy this year filing initiative drafts for proposed legislation to create a tax expenditure budget.  The goal is to draft legislation that will increase tax exemption accountability and transparency. Initiative 626 is the latest version to receive a ballot title.

Ballot Title
Initiative Measure No. 626 concerns taxes.

This measure would require new and existing discretionary tax preferences to be authorized every two years in a tax expenditure budget and repeal requirements for advisory votes of the people on tax increases.

Should this measure be enacted into law? Yes [ ] No [ ]

Ballot Measure Summary
This measure would require the legislature to approve new and existing discretionary tax preferences every two years, in a tax expenditure budget detailing the fiscal impact and purpose of each tax preference. The tax expenditure budget would be included in the biennial omnibus operating appropriations act. Tax preferences not included in the tax exemption budget would expire at the end of the fiscal year. The measure would repeal requirements for advisory votes on tax increases.

View Complete Text PDF

Why is Initiative 626 needed?

Washington state currently has some 650 tax exemptions also frequently called tax preferences which are more accurately called tax expenditures.

Unknown to most Washington state voters is the fact that we exempt about the same amount of revenue from tax collection as we actually collect if all taxpayers were taxed at the same base rate.

For example, The Washington State Department of Revenue  in it’s 2012 Tax Exemption Study said that in the last biennium Washington State  collected from businesses about $6.5 billion in B&O taxes.  However it also stated that it exempted from tax collection some $7.5 billion.  This is a broken system when more dollars are exempted from collection than are collected.

Washington State taxpayers have a right to know who is being taxed and who is not being taxed and why. Right now these exemptions represent off budget spending with many benefiting various special interests. Only about 10% of these expenditures have sunset provisions on them. They are not revisited or approved by the Legislature on a biennial basis like other state expenditures are. They lack the transparency and accountability that other state expenditures undergo when the biennial budget is adopted.

Tax Sanity believes this unaccountability is unacceptable and needs to end. This out of control off budget spending in the form of unaccountable tax expenditures needs to end. As noted by the Citizen Commission for Performance Measurement of Tax Preferences that reviews tax preferences and has been doing so for about 7 years, many of these exemptions were passed by previous legislatures with no purpose stated as to what state need they are addressing and most lack  clear measurable standards by which to determine whether they are benefiting the state. This needs to change.

State expenditures in the regular budget process meanwhile are required by law to comply with meeting  the state priorities of government when the Governor submits his proposed budget to the State legislature for adoption. Tax expenditures undergo no similar evaluation.

Initiative 626’s language would require the Governor to submit and the Legislature to adopt as part of the biennial omnibus operating appropriations act , a tax expenditure budget detailing each of the tax expenditures existing, how much they are costing and their purpose.Tax expenditures required because of the US Constitution or the State Constitution  are exempt from being included in the tax expenditure budget.

Because no past Legislature can bind a future Legislature in the actions they take, the final tax expenditure budget adopted can remove, add, or modify the tax expenditure budget to meet the current state needs, priorities and fiscal situation. The proposed legislation as outlined in Initiative 626  does not in its language repeal, modify or add any tax exemptions. That remains the job of our elected Legislators.

Two additional versions have been filed, Initiative 636 and Initiative 638 and are awaiting ballot titles from the Washington State Attorney General. They are initiatives to the legislature but no effort will be made to collect signatures this year as the deadline to file signatures on 2013  initiatives to the legislature is Jan 5, 2014.

Tax Sanity will be urging the Legislature to adopt legislation to create a Tax Expenditure Budget like in I-626, but realizes this is a difficult process when one looks at the Legislature’s past reluctance to reform the tax expenditure process.  They in fact adopted 15 new tax exemptions in the last session. Accordingly Tax Sanity will continue to discuss and explore the option of running a statewide initiative in the future as well as work with state legislators to pass legislation to adopt a tax expenditure budget. .

Let’s fix our unfair tax system in Washington State

Washington state’s tax system is broken. We have pressing state needs but do not fairly collect  revenue to adequately fund needed state public services like education and health care. We rank in the bottom third of states in raising revenue.  The Department of Revenue in January 2013 stated:

Washington ranked 36th from the top in state and local taxes paid per $1,000 of personal income in 2010, according to Census Bureau data published by the Washington State Department of Revenue.

At the same time we are ranked by the Institute on Taxation & Economic Policy as having the most regressive tax system in the country.

Washington State, which does not have an income tax, is the highest-tax state in the country for poor people. In fact, when all state and local sales, excise and property taxes are tallied up, Washington’s poor families pay 16.9 percent of their total income in state and local taxes.

Meanwhile the top 1% pay only 2.8% of their income in state and local taxes. This is a terribly unfair tax system that has shifted taxes onto those least able to pay.

Don Smith and I co-authored a MoveOn.org petition calling for the Washington State Legislature and Governor Inslee to pass legislation and funding to create a new Tax Reform Commission to study and recommend ways to fix our broken tax system.

We ask that you show your support for a new Tax Study Commission and the need for reforming our tax system by signing our petition. Add your name to the 3800 people  have already signed. Thanks.

Click on the headline directly below to sign the petition.

Let’s fix our unfair tax system in Washington State

Washington State has one of the most regressive tax systems in the country. In order to fix our broken, upside-down tax system, we first need to educate the public about the facts. But neither Governor Inslee nor the state legislators are making significant effort towards educating the public about why we need progressive taxation. We ask Governor Inslee to appoint a high level commission to evaluate our regressive tax system and propose changes that would allow the state to adequately fund education, social services and other essential needs. The commission should hold hearings throughout the state, solicit input from the public, and publicize its findings widely. We also call on Governor Inslee and the Democratic leadership to make speeches, publish essays, and hold public forums for discussion of this central issue.

Petition Background

In Washington State, the middle class and poor pay a higher percentage of their income in state taxes than do the rich, due to a reliance on the regressive sales tax to fund state government.

Even the Business and Occupation tax is regressive: it taxes revenue, not profit, and so it favors profitable corporations over struggling small businesses.

Another cause of unfairness is the existence of tax loopholes for certain wealthy corporations.

In fact, according to the Institute on Taxation and Economic Policy, Washington State has the most regressive tax system in the nation. The poorest 20% of non-elderly Washingtonians pay 17% of their income in state taxes; the richest 1% pay under 3% of their income in state taxes. (Source: http://www.itep.org/pdf/wa.pdf .)

The state desperately needs a reliable source of funds to pay for education pursuant to the State Supreme Court decision in the McCleary case, which declares that the legislature is underfunding K-12 education.

Additionally, in recent years the state has had to slash funding for social services and for higher education, causing real suffering among vulnerable people, threatening our prosperity and safety, and drastically raising the cost of a college education.

Voters in 2010 rejected I-1098, the initiative to establish a high earners’ income tax in Washington State. Most voters were voting against their own self-interest, because only the richest 2% of citizens would have seen their taxes rise.

But up until now, only a few advocacy groups have spoken up about this issue. Our political leaders should make the effort to educate the public about all the ways we need government and about progressive taxation. In other words, our political leaders should actually lead and not just follow.

The proposed high level commission, hearings, speeches and essays will help move the state towards a sustainable and equitable funding model.

For discussion of this effort, please visit:

http://fairtaxesnow.us/

https://groups.google.com/d/forum/wafairtaxes

To see the list of signers and their comments, please visit: http://waliberals.org/WATaxFixers.html

cross posted on www.MajorityRules.org