Thanks Tim!
I was scrounging around the dailies looking for something to blog on this morning when Tim Eyman graciously dropped a gift in my inbox. In a fundraising email CC’d to the media, Timmy once again attacks the state Department of Revenue for having the gall to release statistics during an election year.
Tim’s media strategy is very simple. He routinely emails the press — sometimes as often as two or three times a week — pushing his own “statistics” and “analysis.” With no year-round opposition to refute his arguments (at least, not until now), his unsupported claims eventually seep into the public debate on the strength of sheer repetition.
This morning’s email is a great example, as it repeats several familiar Eymanisms. But a little investigation makes it easy to pick apart.
Washington is the 7th highest taxed state in the nation (www.taxfoundation.org) but our state’s Department of Revenue says our tax burden ain’t that bad. Gimme a break.
As I’ve stated many times, DOR estimates based on US Census Bureau data show that Washington’s state and local tax burden — that’s taxes paid as a percentage of income — ranked us 32nd in 2002… well below the national average.
So are we 7th or 32nd? Well Tim cites TaxFoundation.org, so let’s go there and see where the discrepancy comes from. Ooops… according to the very first blurb at the top of WA’s page, we rank 21st nationally in state and local tax burden.
(Scroll down the page further, and you’ll see that our local property taxes rank us 35th per capita, and 41st as a percentage of personal income. I wonder why Tim hasn’t cited those stats in support of his property tax cutting measures?)
So where does Tim’s 7th ranking come from? Well, he’s using TaxFoundation.org’s ranking of total federal, state and local tax burden. So, isn’t that meaningful?
No.
TaxFoundation.org’s own charts show that WA also ranks 7th for federal tax burden. The fact that adding state and local tax burden doesn’t move the total ranking, merely shows that our state and local burden is near the national average (actually, slightly below it, even according to TaxFoundation.org.)
Washington ranks high nationally in federal tax burden because Washington is a wealthy state, with some very high incomes that skew the state average. To add federal tax burden to state and local tax burden makes national rankings of state and local tax burden meaningless.
In fact, the very notion of “ranking” can be misleading.
For example, let’s go back to 2002, the last year for which data is available from both TaxFoundation.org and the DOR. In 2002, the DOR ranks Washington 32nd nationally with 10.09% state and local tax burden. For the same year, TaxFoundation.org ranks Washington 13th nationally, with a 10.4% burden.
13th or 32nd… that’s a huge difference, right?
Not really.
According to the DOR, the difference in tax burden between top ranked New York and 6th ranked Rhode Island is equal to the difference between Rhode Island and 39th ranked Missouri! TaxFoundation.org reports similar comparative results — the difference between NY and RI (now ranked 5th) is equal to the spread between RI and 32nd ranked Montana.
In both studies, 36 states were within 1% of the national average. Thus a couple tenths of a percent shift in tax burden can result in a dramatic shift in national ranking, with relatively little real impact.
And one final comment on the discrepancy between TaxFoundation.org and DOR numbers. As I read it, TaxFoundation.org calculates WA’s tax burden as higher because it adds in over $1 billion in taxes imported into the state. This looks to me like an argument for a state income tax.
On to the rest of the email:
They say that tax bills went up 4.2% which means they’re lower. Huh? Only politicians and bureaucrats using government double-speak can make an increase into a decrease. It just shows that there’s an election in November that will again decide the direction of taxation in our state — and the government is weighing in.
That’s just plain silly.
What the DOR reported was that tax revenues grew 4.2% from 2000 to 2002, but during the same period, average personal income grew 10%. Tax experts will tell you that the best measure of growth in demand for public services is growth in personal income, which encompasses growth in population, inflation and earnings.
Tax revenues — and thus expenditures — are clearly growing slower than demand for government services. In fact, they’re barely keeping up with inflation.
I-892’s revenue-neutral $400 million property tax reduction, I-884’s $1 billion sales tax increase, and Ron Sims’ massive tax increase by adding a state income tax — the outcomes of these voter decisions will determine the trajectory of taxes for years to come.
First, I-892 is not revenue neutral. The Office of Financial Management recently released a fiscal impact study on I-892, estimating that the state general fund will lose $30 million a year in lottery revenues alone in 2008, and that local governments will lose an additional $8.4 million in taxes on other forms of gambling. And these figures don’t even begin to take into account loses to other taxable business activities.
Second, Tim has long touted his $400 million tax reduction figure without providing any documentation to back it up. The OFM estimates 2008 tax savings at $252 million, based on $112 in revenues per slot machine per day. Under I-892 we could saturate the market with over 36,000 slot machines statewide. By comparison, other saturated markets, like Las Vegas, see daily net revenues of only $88 per day on average.
And finally, Tim is just plain lying when he says that Ron Sims’ proposed tax reform plan would be a “massive tax increase by adding a state income tax.” It doesn’t “add” a state income tax, it replaces the state sales tax and B&O tax. And it results in a net reduction in total state, local and federal tax burden… the tax burden measure Tim is always so quick to tout.
I’ve already gone on too long, so I won’t bother refuting the rest of Tim’s rhetoric. Needless to say, nothing Tim says can be taken at face value.
