Understanding the effects of tax cuts in the initiative process

Last time we looked at issues around passing expensive initiatives without outlining how to pay for them (click here in case you missed it). This entry will focus on the opposite occurrence, that of the public limiting the state’s ability to raise taxes or reducing certain revenue sources. Before going further, I want to say that I’m not trying to demean our initiative process or take away from its significance. Ballot initiatives have made many positive changes in Washington State including: the Public Records Act (I-276), the Clean Indoor Air Act (I-901), Mandatory Performance Audits (I-900), and many others.  There are plenty of examples depending on your political cup of tea that you could find to your liking.  My goal is to simply show the power of this process and the importance of understanding the fiscal consequences of using it.

When talking about limiting government through the initiative process, one has to mention Tim Eyman who, love him or hate him, has become quite adept at using Washington’s direct democracy to pass laws that circumvent the Legislature and the Governor.  Some recent reductions in state funding are a result of his efforts including: I-695 - Cut the state motor vehicle excise tax and required voter approval for all tax, I-747-Cut state and local property taxes, and I-1053 - Concerns Tax and Fee Increases by State Government.

In brief I-695 was commonly known as the law that capped car tabs at $30 and I-747 limited increases in total property-tax collections by a taxing district to 1% a year. If there’s anything consistent in our state’s history, it’s our disdain for property taxes (click here for Justin’s piece on I-64). Both of these laws have a similar story.  The initiatives that passed were declared unconstitutional by the State Supreme Court but were resurrected by the Legislature shortly afterwards due to their popularity with the voters.  Lastly, I-1053 (and it’s predecessor I-960) requires the Legislature to have a two-thirds majority in both chambers before raising any taxes.

So what happens when reductions like this occur? In 2009, the Kitsap Sun wrote an article that looked at the effects of I-695 ten years after it passed.  “[Washington State Ferries] drive-on customers are clearly worse off for I-695. Frequent-user books for drivers jumped from $104 to $189.60 for 10 round trips. That equates to a $2,225.60 increase for this year alone.” The story goes on to talk about other modes of transit since this tax reduction targeted transportation services and projects.

Lastly, the voting requirement on taxes outlined in I-1053 has severely limited the Legislature’s options for dealing with the current recession. Over $12 billion has been cut in the last 4 years and taxes haven’t been able to help address this shortfall. The only time the state came close was with the candy and soda tax, which was overturned by I-1107 (click here for Catherine’s post on this issue).

After saying all of this I have to ask, do citizens fully understand how tax cuts affect them? Would the public have vetoed the soda tax if it were commonly known that it could have saved a service or health care program? Or would I-695 have passed if everyone had a full understanding of its impact on local transportation?  While I can’t answer these questions with accuracy, I can say that it’s important for both the public and government to be more engaged with each other in this discussion. If citizens can look beyond the appeal of tax cuts or large ideas and know where the money goes, and if government can work harder to explain clearly where specific tax dollars are going then that’s a start. I know it’s a tall order, but anything less leaves Washington at risk to ballot initiatives that aren’t fully understood by the electorate.