Tag Archives: state and local taxes

Initiative 1033 Offers Taxpayers Free Lunch

Posted on August 21st, 2009 | Comments Off on Initiative 1033 Offers Taxpayers Free Lunch

No one likes to pay taxes but it is how we fund public services. And who wouldn’t like to get a break on your property taxes as I-1033 proposes. Yet beware, there is no free lunch.

I-1033 basically proposes to freeze government services. Government will not grow under I-1033 and it is false and misleading for Eyman to suggest it will.

Local and state government spending is frozen next year at this year level and will only increase to adjust for inflation and population. And so on for every year thereafter.

If government spending to pay for services increased exactly as Eyman’s consumer price index adjustment allows, all that you’re doing is paying for the same services at their increased cost due to inflation. The problem is that many services government provides like Medicaid for seniors has historically grown faster than the consumer price index.

And any population adjustment just means you can pay for providing services for new members of your community. Individual taxpayers will not see any increase in services provided to them.

So if the economy improves and more sales tax revenue comes in next year compared to this year, any revenue above the I-1033 limit will have to go to pay property taxes. But this is a reverse Robin Hood scheme of transferring wealth to just property owners despite everyone paying sales tax.

There are two problems with this. First not everyone owns property. The US Census Bureau says that only 65% of the households in Washington State are owner occupied. So 35% of households will not see any benefit from I-1033 despite paying sales taxes.

And second the real estate tax reduction covers all property. Some 40% of real estate taxes are commercial. So large corporations like Boeing or Weyerhaeuser and shopping malls like Bellevue Square will also get the same tax break. That’s probably why Kemper Freeman gave Eyman $25,000 to help get I-1033 on the ballot. The more property anyone owns the more of a tax break they will get. Of course Eyman didn’t tell you that you will be helping to pay Kemper Freeman’s real estate taxes.

So besides freezing government services, I-1033 is also a complex wealth redistribution scheme that benefits wealthy property owners. The average homeowner will not see much benefit and will lose much more in terms of public services that we take for granted but which are not free. These include police and fire protection, public libraries, public health, K-12 schools and college and universities, parks and open space, road repair and public transit, services for seniors and disabled people, environmental protection, clean drinking water and clean air, our judicial system and much more.

Read the initiative and understand its impacts before you vote. If you want to keep local control over the quality of life in your community, vote No on Initiative 1033 this November 3rd, 2009. If something sounds too good to be true, it probably isn’t.

for more information on I-1033 go to www.no1033.com .

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Posted in Economy, Elections, Initiatives, Washington State Legislature

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Eyman Continues to Use Erroneous Information to Support I-1033 Overtaxed Rant

Posted on August 2nd, 2009 | Comments Off on Eyman Continues to Use Erroneous Information to Support I-1033 Overtaxed Rant

Part of the impetus behind Initiative 1033 according to Tim Eyman is his repeated rant that Washington State is overburdened with State and Local Taxes. Hence his claim that Washington State is 8th highest in terms of tax burden. He cites a recent Forbes magazine article as his source of information.

The problem is that the information is wrong and was miscalculated by Forbes. It’s even noted by a number of people in the comment thread that the article presents erroneous information like saying Hawaii has no property tax when it does and someone else noting that Washington’s ranking is calculated wrongly.

Here is Washington State, the Department of Revenue looked at the figures and came up with the following analysis entitled “Tax Rankings can be Misleading”

Tax rankings are a popular way of comparing tax burdens among states, but the results can be misleading. A recent report by Forbes Magazine that Washington ranked eighth-highest in personal taxes per capita is an example of how apples sometimes get compared to oranges.

The Forbes comparison purports to only count personal taxes paid by state residents, but erred by mistakenly counting Washington’s Business and Occupation Tax as a personal tax while excluding corporate income and other business taxes paid in other states. That error occurred because the Census Bureau classifies the B&O tax as a sales tax, and the Forbes analysts failed to notice that. Excluding the B&O tax as it should have done would have dropped Washington’s ranking substantially. In addition, because the ranking only compares certain state taxes and leaves out local taxes, the Forbes ranking fails to take into account some unique aspects of Washington’s tax system.

Washington has a state school property tax levy that flows into the state general fund only to be redistributed to local schools. In other states, all property taxes for schools remain at the local level. The ranking also assumes that only individuals pay sales and property taxes, when in fact businesses pay a substantial share. The only accurate way to compare tax burdens is by comparing both state and local taxes among states. By that measure, Washington ranks 19th-highest per capita and 35th-highest in taxes as a percentage of personal income, http://www.taxfoundation.org/files/sr163.pdf. Economists generally prefer measuring as a percentage of personal income because it takes into account economic activity and demand for services. Rankings have become a popular staple among certain national publications, but they can be misleading. The most recent Forbes ranking is one of those. After being contacted by the Department, Forbes subsequently published a tax ranking based on the Tax Foundation’s analysis.

In its August 2008 report, entitled “State – Local Tax Burden Dip as Income Growth Outpaces Tax Growth” the Tax Foundation ranks Washington State as 35th (with 1 being the highest) in terms of state and local tax burden per capita. Eyman of course ignores this analysis because its pretty hard for him to continue has rant of saying we’re overburdened with state and local taxes when we rank 35th in terms of state and local tax burden compared to other states.

A similar analysis of some of Eyman’s false claims can be found on the Northwest Progressive Institute Advocate.

see also our earlier post “Tim Eyman’s Initiative 1033 Overtaxed Hoax“

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Tim Eyman’s Initiative 1033 Overtaxed Hoax

Posted on July 22nd, 2009 | Comments Off on Tim Eyman’s Initiative 1033 Overtaxed Hoax

Washington’s state and local tax burden last year was ranked 35th (1 is highest) according to the conservative Tax Foundation. These figures include both state and local property taxes in their calculation.

These and other figures below are taken from data available at the Tax Foundation’s website and point out the misrepresentation of Washington’s tax situation as espoused by Tim Eyman and Initiative 1033.

The preamble of I-1033 claims that it is “to protect taxpayers by reducing our state’s obscene and unsustainable property tax burden by controlling the growth of government to an affordable level.” An another point it references “our state’s crushing property tax burden.”

Yet is it such a crushing burden compared to other states?

Analysis by the Tax Foundation showed Washington State ranking 23rd (1 is highest) in terms of property taxes on owner occupied housing. The figures are given in terms of median real estate taxes as a percentage of median home values. Washington State had a value of .82% for 2007, which came in 23rd when compared to the other states.

Some other higher state values for comparison are Texas 1.84%, Ohio 1.3%, Pennsylvania 1.39%, Illinois 1.53% and Michigan 1.38%.

Two comparable neighboring states were Oregon at .80% and Montana at .82%. California came in at .50%, below the national average which might explain some of their budget problems.

Another table compared state spending per capita. In 2007 Washington State spent $5780 per capita. This ranked us number 19 (1 is highest). Again not an alarming figure.

Another interesting figure was looking at income per capita. Washington State ranked 8th highest in income per capita at $48,574 in 2008. Income is obviously an indication of ability to pay taxes.

Ironically Washington State does not have an income tax even though an income tax is a fairer tax than a sales tax or property tax. If you have no income you pay no income tax. But property tax you have to pay whether you’re working or not. This is also the case with a sales tax when you buy goods. And the business B&O tax is on gross receipts not net.

It is easy to demagogue issues like taxes which no one likes to pay. But taxes pay for basic services like police and fire protection, public safety, transportation, parks, education, health care for children, libraries, colleges, environmental protection, and help for the disadvantaged and elderly.

People want these services while not wanting taxes. But just like it costs money to maintain your home so it doesn’t fall apart, taxes help to maintain our society. While taxes may be a burden, it’s questionable whether they are an overburden for most people in Washington State.

We certainly could use a fairer tax system. An income tax is one you pay only if you’re making money but people like Eyman have demagogued against that and politicians are afraid to make a change. Yet it is fairer than a sales tax which hits lower income people the hardest.

But I-1033 is not the answer to tax reform. It only makes things worst because it transfers money collected by sales taxes everyone pays to reduce taxes on property owners. This includes reducing taxes for large corporations like Boeing and Weyerhauser and shopping mall owners and real estate developers. The more property you have the more you’ll benefit. I-1033 is basically another Eyman wealth transfer scheme from the poor to the wealthy who own property.

Eyman is correct when he says “during these tough economic times, struggling families and fixed income senior citizens desperately need and deserve meaningful property tax relief” The key word is “meaningful.” I-1033 is not meaningful property tax relief for working families or fixed income senior citizens.

Meaningful property tax relief would be targeted to help those that need help most. I-1033 doesn’t do that. The most relief goes to the largest property owners and those with McMansions and second homes.

Real property tax relief would be a targeted homestead exemption, exempting the first $50,000 or $75,000 of the property tax evaluation on your principal residence from taxation. Many other states do that.

Also circuit breaker legislation would provide relief, by also helping renters. Eighteen states have circuit breaker legislation to help lower income homeowners. Some 35% of Washington households are not owner occupied according to the Census Bureau.

Initiative 1033 is not the answer. It is not meaningful property tax relief for those who need it most. Vote No on I-1033 in November.

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