Earlier today I argued that Democrats need to take advantage of our current short-term revenue crisis to fix our long-term revenue deficit, by taking the budget crisis as an opportunity to win voter approval of a high-earners income tax. But how do we do this at the same time we meet the very real need to raise additional revenues now?
It’s not all that complicated.
Gov. Gregoire supports a revenue package, and the Legislature will likely pass one, no doubt comprised of hikes in alcohol and tobacco taxes, elimination of some tax breaks, and perhaps extension of the sales tax to professional services and/or a small hike in the sales tax rate itself. None of this will be popular, and most of it will be regressive, and while an emergency clause would eliminate the possibility of the tax hikes being delayed by a referendum, we should expect an attempt to repeal the package by initiative. So my suggestion to legislators is, why not pass the package, and then just put a repeal measure on the ballot yourselves?
Sound crazy? Not really. Take this scenario for example.
Let’s say you pass a package that raises an additional $1 billion a year in new revenue, while at the same time putting on the ballot a referendum that would repeal the hikes and replace them with a tax on household income in excess of $300,000 a year. Voters are given a choice: they can keep the current taxes that hit just about everybody by voting No on the measure, or they can vote Yes and shift these taxes to a handful of our state’s wealthiest households… those same households that profit most from Washington’s most regressive tax structure in the nation.
But one could take this concept even further. Instead of a dollar for dollar offset, the high-earners income tax could be set at a rate that raises, say, $1.5 billion a year, with the extra $500 million coming back to voters in the form of a half cent reduction in the state sales tax below our current 6% rate, or maybe a similar sized reduction in the state property tax.
Vote Yes, and not only do you get rid of the new tax hikes, the vast majority of voters would actually lower their own taxes. That’s how Tim Eyman wins initiatives (when he wins them), by promising to put money back into voters’ pockets. And unlike an Eyman initiative, there’s no corresponding cut in popular state services.
This isn’t just smart policy, it’s smart politics, as it leverages the short-term crisis to help address a long-term problem, while providing an outlet for voters who might otherwise vote for a straight repeal initiative. In fact, the Legislature’s referred referendum could be written in such a way as to protect the short-term revenue against repeal by initiative, essentially by re-enacting the hikes in the not so unlikely circumstance that both ballot measures passed.
Step 1: enact the revenue package legislatively. Step 2: refer a referendum to the ballot that enacts the same revenue package, but replaces it with a high-earners income tax once implemented. (In the eventuality that an income tax is passed, but ruled unconstitutional, the existing revenue package would remain in effect.)
Simple really, and not all that confusing.
And a helluva lot more responsible than passing up the best opportunity we’ve had in decades to seriously debate an income tax.