Way back in November I proposed that one of the funding mechanisms for coming up with the extra bucks to replace the Alaska Way Viaduct with a tunnel should be a “special taxing district,” much like the local improvement district that is funding half the costs of the South Lake Union streetcar line. And just for good measure I repeated the suggestion again in March.
Well, whatever his inspiration, it is gratifying to see Mayor Greg Nickels asking property owners who stand to benefit most from the tunnel alternative to consider exactly that — a local improvement district that could defray as much as $250 million of the project’s cost. According to Office of Policy and Management deputy director Michael Mann:
“It’s an appropriate way to help fund it,” he said “There are clearly properties that will benefit, so that’s what we’re working on.”
Sure, this is a pretty obvious piece of the funding puzzle so I’m certainly not suggesting that the Mayor is getting his budgeting cues from the pages of HA. (Though he could certainly do worse.) Still, you can’t blame me for patting myself on the back for being so far out in front on such a creative revenue proposal.
And it wouldn’t be the first the time.
After the recent ruling invalidating Initiative 747’s property tax revenue limits, Governor Christine Gregoire and other elected officials were quick to reassure voters that they would restore some sort of property tax relief should the decision survive appeal. But before Olympia jumps to re-legislate Tim Eyman’s ridiculous one percent cap — or even some higher, more reasonable figure — I hope they carefully consider a proposal I have been pushing for nearly three years: a Property Tax Homestead Exemption.
The concept is simple; every homeowner is offered a flat exemption on their primary residence — their “homestead” — while property tax rates are increased to offset any lost revenues. Because the proportion of property exempted declines the higher the relative price of the home, the amount of relief provided, both in real dollars and percent of total burden, declines accordingly. Essentially, the lowest priced homes see the greatest tax relief while the highest priced homes would see a modest tax increase.
Sound confusing? Link on over to TaxSanity.org where a handy chart shows the impact a $30,000 homestead exemption would have had on average property taxes back in 2004. Forget about the actual numbers, as that part is up for negotiation. The point is that only the top 4% of homeowners would see a rise in property taxes, while owners of low priced homes would realize substantial tax relief.
Like my proposal for a local improvement district to help pay for a tunnel, the Property Tax Homestead Exemption is not some harebrained idea I pulled out of my ass… indeed 37 other states already have a similar exemption, credit or circuit-breaker to help protect low- and middle-income homeowners from the tax impact of rapidly rising property values. Over the past few years such an exemption was twice introduced to the Legislature, and was an integral part of Ron Sims’ tax restructuring plan when he ran for governor.
I raise the issue again now because if lawmakers are going to consider tax relief, they need to start considering tax fairness as well as total tax burden. Washington state has the most regressive tax structure in the nation, and it is interesting to note that all that separates us from number two, Florida, is the fact that they happen to have a homestead exemption on the books.
Even if the state Supreme Court eventually upholds I-747, the lower court decision has given us an opportunity to have a reasoned public debate over the wisdom of tax cutting policies that inevitably give the greatest benefit to our wealthiest citizens while heaping the greatest impact on those who can afford it least. Many local taxing districts, particularly those in rural areas, are on the verge of insolvency due to unrealistic revenue growth limits that fail to accommodate for inflationary pressures on fire, police, public health and other vital public services, let alone increases in demand. And while the promise of “tax relief” surely has great political appeal, any policy that ignores adequacy and fairness is irresponsible.
It is time for our elected officials to stop reacting to anti-tax demagogues like Tim Eyman, and start proposing proactive, creative solutions. It is time for a little leadership.