Voter + I-64=40 Mills

The People’s Initiative 64 joined Initiative 69 on the 1932 ballot and was part of an initiative-driven-tax-reform effort that looked to diversify revenues and alleviate the burden of rising property taxes.  Initiative 64 introduced strict limits on property taxes in Washington and was the beginning of the eventual ballooning of the sales and B&O tax.

Derived from a palpable distaste for skyrocketing property tax bills, Initiative 64 placed limits on the amount of tax that could be levied by the state and local municipalities against an assessed property value.  Initiative 64 was a sister initiative to Initiative 69, serving as an important point of coalition between urban and rural income tax supporters.  By introducing a property tax limit, reform advocates were able to intercept concerns that the introduction of a new tax in Washington would not provide sure and certain relief in property tax burdens.
Initiative 64 introduced a 40-mill limit on property tax in Washington eliminating any non-market based growth in property tax collections.  As a result, the sales and use tax has increased 9 times since its introduction through The Revenue Act of 1935.  Having been on the ballot twice prior, Initiative 64 passed by a smaller margin then its counterpart, Initiative 69, getting 303,384 or 61% of the ballots cast.

By limiting the amount that could be levied in property taxes and the court’s ruling against the income tax portion of Initiative 69, Washington has come to rely heavily on its retail sales tax to fund critical services.  Of the three types of major taxation (property, excise, and income), only two are present in Washington, and one is subject to a cap, leaving the retail sales tax the only collection system that is open for growth.  As a result, we have seen a dramatic increase in sales tax in Washington since it was first introduced in 1935.  The state portion of the retail sales tax was introduced at 2% and has since increased to 6.5%. 

An over dependence on sales tax has resulted in Washington having one of the most regressive tax systems in the nation.  It places the largest tax burden, as a percentage of income, on those least able to pay.  Sales tax is driven by consumers, an over dependence on sales tax compounds economic downturns when consumer confidence is at its lowest.  Further, our economy has become more complex, it is growing increasingly difficult to effectively track and collect sales tax for online or digital purchases.  Washington is struggling with sales tax erosion that is the result of many factors.  If we are to thrive, we must address these factors to ensure that the quality of life remains high in Washington State.