The Washington State Supreme Court held a hearing yesterday to give state lawyers a chance to explain why the legislature should not be held in contempt for failing to make adequate progress toward meeting the terms of the court’s landmark McCleary decision. And while I’ve seen a ton of media coverage on the hearing, I haven’t seen much mention of the ginormous elephant standing quietly in the back of the courtroom: taxes.
In McCleary, the court ruled that the state was failing to meet its constitutional “paramount duty” to amply fund our K-12 schools. Exactly how much more money McCleary requires the state to spend on basic education is unclear, but we’re talking billions. Roughly an additional $4.5 billion in the 2017-2019 biennial budget. Give or take. That’s equivalent to over 13 percent of our current $34 billion biennial budget!
And the honest to God truth is that there is simply no way to meet this obligation without raising tax revenue. Everybody knows it. There isn’t $4.5 billion in waste, fraud, or abuse available to cut. So there are only two choices: raise revenue, or defy the court.
If I wielded the unfettered powers of a benevolent dictator I’d just overhaul our entire antiquated tax structure and replace much of it with an adequate, fair, and sustainable income tax. Problem solved. But our non-dictatorial democratically elected legislators aren’t entirely without options either.
The first revenue item on the table should be a substantial hike in the state property tax, which is, after all, a school levy. Given our current fiscal crisis it is just plain stupid that the state is currently using only $2.39 per $1,000 of value (and falling!) out of its $3.60 per $1,000 of value statutory cap. We can’t responsibly use it all, for various technical reasons, but we could generate at least another $1 billion per biennium in state property taxes, easy.
Next (and I know this is being bandied about in some circles in Olympia) the state could raise at least another $1 billion or so per biennium through a targeted capital gains tax that only hit, say, the top one half of one percent of Washington households. It would be a new tax, with some ramp up time and administrative overhead, so it’s not as easy as just hiking the property tax, but it’s perfectly doable.
Hike the state school levy, tax capital gains, close a few hundred million dollars in unproductive tax “preferences,” and cross your fingers that a strong economy bumps up other revenues, and before you know it the supremes could be congratulating legislators on a job well done. But let’s not pretend that we have a snowball’s chance of meeting McCleary without raising taxes. It just can’t be done.
The sad truth is, we have more than just a structural revenue deficit in Olympia. We have a structural honesty deficit. And we can’t begin to address the former until we fix the latter.