One of the most important issues confronting our state is the estimated $2.2 Billion budget deficit we face. The legislature must eliminate this deficit by passing a balanced budget by April 24th, 2005. The Revenue Forecast is due out March 17, 2005. Governor Gregoire will release her proposed budget shortly thereafter. It is vital that your elected representatives receive input as they face crucial financial decisions. Now is an important time to let your legislators and the governor know your concerns. Urge them not to balance the budget at the expense of “the least of these among us.”
In order to pass a balanced budget, our representatives must chose one of three options:
1. Cut $2.2 billion from existing state activities and services.
2. Raise $2.2 billion in new revenues (taxes) to cover the shortfall.
3. Agree to some combination of the above two options
Since the legislature cannot cut K-12 funding or long-term obligations, is resistant to the idea of cutting higher education or prisons, and has other on-going obligations, a high proportion of any cuts typically come from health and human services. These cuts almost always have a proportionately higher impact on the poor and vulnerable. Funding for relief from poverty, mental health services, health care, children, and other vital programs depends on adequate revenue for their continued existence.
On both sides of the budget equation, revenue and expenses, we can challenge some of the current thinking. On the revenue side, FCWPP is tracking and supporting legislation thatprovides accountability for tax breaks, as well as possible sources of revenue that move us towards our goal of a balanced tax structure that is fair and adequate and stable.
It is vital that your voice is heard in Olympia . Again, we encourage you to email, call or write the governor and your legislators to maintain safety net services for “the least of these among us,” even as they must make hard choices.
Hear are some talking points:
Tax Exemptions: Washington State has over 500 tax breaks on the books. Some of these breaks are good, such as the exemption of food from sales tax. Tax breaks result in revenue losses to the state. We pay for these reductions through higher tax rates and/or cuts in services. These decisions, like our spending decisions, should be open to public review and input. Many of these tax breaks were set up decades ago and have never been reviewed. The Department of Revenue estimates that $13 billion in tax breaks could be recovered as revenue. Many of these tax breaks require no reporting of results to the state government. HB 1094 and HB 1096 are two important bills addressing exemption accountability issues.
New Sources of Revenue: Our tax structure is unfair and inadequate, as our budget deficit indicates. A fair tax system asks citizens to contribute to the cost of government services based on their ability to pay. This is a venerable idea, as old as the biblical notion that a few pennies from a poor woman’s purse cost her more than many pieces of gold from a rich man’s hoard.
A major study “Who Pays?” released in January of 2004 shows that Washington ‘s tax system is the most unfair in the nation. According to the study, by the Institute on Taxation and Economic Policy, Washington ‘s low- and moderate-income families are taxed at a much higher rate than better-off households. The lowest-income families—those earning less than $17,000 a year—pay 17.6% of their income in state and local taxes; the wealthiest—making more than $922,000 a year—pay only 3.3%. (McIntyre, Who Pays? A Distrbutional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, 2003, p. 110)
A state income tax is the most obvious solution, however, the political environment in Olympiamakes it unlikely that this will be acted upon soon. However, there are other alternatives that may move us closer to our goal of fair, adequate and more stable taxation. (Also see the Economic Opportunity Institute’s recent study “Where Do We Go From Here” at http://www.econop.org/Taxes/ReformingWATaxSystem2005.pdf that provides greater depth on the material cited in this alert.)
One possibility is extending the retail sales tax to consumer services. Extending the current sales tax to consumer services, such as veterinarians, cable TV, barbers, and entertainment, would raise an estimated $280 million in new state revenue for the 2005-07 biennium. Local governments, which have been particularly hard hit by initiatives limiting property tax, would gain $81.8 million in new revenue. The B&O tax rate for businesses providing those services would fall from 1.5% to 0.471%. (The effects of lost B&O revenue are included in the revenue estimates.) Extending the sales tax to consumer services would broaden the tax base and would be somewhat less regressive than the sales tax on goods. The Tax Structure Study Committee, chaired by Wm. Gates, Sr., recommended this course of action. Most states with sales tax apply it to at least some services.
Reinstatement of the estate tax is another possible option. Earlier this month, the Supreme Court ended Washington ’s inheritance/estate tax. The Washington estate tax annually affects only about 1,000 estates worth more than $950,000, out of 44,000 Washington residents who die each year. The rates range from 2.5% to 16% for estates of $1 billion or more. In 2004 the estate tax raised $139.9 million for the state, and was projected to raise $131.6 in 2005. These large estates have never paid tax on more than one half of their assets. The estate tax is a fair repayment for the benefits the wealthy gain from society. The legislature has the ability to reinstate this tax.
Please contact your legislator and the governor and let them know your concerns. Drop Roger and me an email to let us know the result. Our personal lobbying efforts are enhanced when you let your legislators know you support the Friends Committee on Washington Public Policy, and are responding to concerns you share with our lobbyists in Olympia .
FCWPP Legislative Committee Clerk
To contact your FCWPP Lobbyist, Roger Kluck, email email@example.com or call him at 206-856-4444.
To donate to FCWPP send your check to:
c/o Annie Capestaney
1333 Alvarado Terrace
Walla Walla , WA 99362
If monthly contributions work best for you, many banks will send checks automatically without charge.
How to Contact Your Legislators:
During business hours, you can leave a message for all three of your legislators and the Governor at the toll free hotline (the operators can even tell you who your legislators are!) 1-800-562-6000
Write your Senator and Representatives at:
PO Box 4048
Olympia , WA 98504-0482
PO Box 40600
Olympia , WA 98504-0600
Use http://dfind.leg.wa.gov/dfinder.cfm to identify your legislators. Contact information for your senators can then be found at http://www.leg.wa.gov/senate/members/default.htm , and for representatives is at http://www.leg.wa.gov/house/default.htm.
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