When running for governor in 2012, Jay Inslee was repeatedly asked if he would raise taxes. In response he said, “I would veto anything that heads in the wrong direction, and the wrong direction is new taxes in the state of Washington.” Despite his promise, Governor Inslee has consistently proposed large tax increases, including trying to impose an income tax on capital gains.
In a bit of a surprise, however, the governor’s proposed 2020 supplemental budget does not seek any general tax increases (though he does recommend a raid of the constitutionally protected emergency reserve for sheltering and housing the homeless). The no-new-general-taxes budget is an important development which, along with the recent election results, should dissuade lawmakers from further raising taxes during the 2020 legislative session.
The 2019 election provided voters a direct opportunity to pass judgment on the legion of tax increases lawmakers and the governor imposed during the 2019 session, as well as the Legislature’s failure to bring fairness to the inflated car-tab valuations used by Sound Transit.
In response, Washingtonians said they want nine of the 12 tax increases lawmakers imposed to be repealed (in nonbinding advisory votes), and they passed the $30 car-tab Initiative 976.
Responding to voters’ approval of I-976, Rep. Jake Fey, the Democratic Chair of the House Transportation Committee told Route Fifty, “I think you could say it’s an anti-tax vote, clearly.”
Shockingly, income tax advocates say the election message from voters is that people want an income tax. They make this claim despite the fact an income tax has been rejected 10 straight times at the ballot box, including the defeat of six proposed constitutional amendments.
We can look at the recent election results in Spokane to see that voter opposition to an income tax remains strong.
Although imposing a local income tax is against state law, local officials in at least one city (Seattle) are trying to impose one anyway in hopes of getting a court ruling that would allow local income taxes across the state. The Association of Washington Cities supports the Seattle case claiming that, despite the state law against local income taxes, every city in the state already has the authority to impose one.
Last July, the state court of appeals, in a truly bizarre ruling, may have opened the door for local income taxes across the state. In a terse one-page memo on Oct. 30, the appeals court refused to reconsider its shocking decision. This means it is likely the state Supreme Court will consider sometime this year whether local governments can impose an income tax.
It was against the backdrop of this legal fight that a ballot measure was proposed in Spokane to shut the door against any efforts to impose a local income tax. Over 72% of Spokane voters agreed; they adopted Proposition 2 banning a local income tax. The measure passed in every precinct in the state’s second largest city.
Shortly after the overwhelming approval of the Spokane income-tax ban, the city councils in Spokane Valley and Granger also unanimously adopted ordinances prohibiting a local income tax. More cities are considering doing the same to send a strong message to lawmakers that there is no appetite for an income tax.
The lack of an income tax has long been advertised by the state Department of Commerce as being a “competitive advantage” for Washington.
While new taxes, especially an income tax on capital gains, should be dead on arrival in the Legislature, lawmakers can work to improve voters’ understanding of the taxes they pay by setting up a tax transparency website.
There are approximately 1,800 taxing districts in the state which officials use to impose various taxes on Washingtonians. There is no single resource, however, to help individuals and businesses learn which taxing districts and rates they are subject to, and how much officials in each taxing district add to their total tax burden.
To help improve the transparency of state and local taxation, state leaders should create an online searchable database of all tax districts and tax rates in the state. A bipartisan tax transparency website proposal was previously adopted as part of the 2018 supplemental budget but was vetoed by the governor.
The governor’s decision to finally not propose general tax increases along with the clear tax election message from voters should make the decision during this legislative session very easy for lawmakers — no new taxes!