Search Results for: inflation

I’ve been hitting Rep. Dave Reichert pretty hard on his uncompromising opposition to raising the federal minimum wage, which at $5.15/hour now sits at a 50-year low, adjusted for inflation. So I thought it only fair to ask the Congressman to explain his position.

I didn’t get a direct quote from Reichert, but his press secretary Kimberly Cadena was kind enough to respond. She wrote:

Congressman Reichert voted no because he believes that minimum wage should be dictated by economic indicators and state and local governments, not the federal government. That principle works successfully in Washington State, which has one of the highest minimum wage rates in the country, higher than the current federal minimum wage rate. Even if the proposed federal minimum wage increase had passed, Washington State’s minimum wage rate is still higher than the proposed increase.

Hmm. This seems to indicate that Reichert supports Washington state’s minimum wage, but opposes one nationally. Yet this not only puts Reichert in the uncomfortable position of denying to other Americans the same benefits offered to his constituents at home, it also seems to put him at odds with the Washington State Republican Party’s own platform, whose section on “economic opportunity” includes:

Reforming the current Washington State minimum wage law to make Washington businesses more competitive.

So… if as Reichert (or at least, his press secretary) says, his principle on the minimum wage “works successfully in Washington State,” how exactly does one reform it to make WA businesses “more competitive?”

Here’s a suggestion: raise the federal minimum wage to $7.25/hour so that our businesses are on a more level playing field with those in neighboring states.

Barring that, Reichert is left in a kinda logical bind. If he claims that WA state’s nation-high minimum wage has not hurt the competitiveness of our state’s businesses, thus refuting the WSRP plank that calls for reform, he undermines the argument that raising the federal minimum wage would hurt the competitiveness of businesses nationwide. Yet if he supports the competitiveness premise of the plank, but refuses to level the playing field by raising the federal minimum wage, he’s really only left with one option: lowering WA’s minimum wage to bring it in line with other states — the lowest common denominator approach.

No doubt different states have different economic conditions and different costs of living, so if one believes in a minimum wage one can make a reasonable argument that it should vary somewhat from state to state. But we’re not talking about mandating anything close to a living wage here — even at $7.25 an hour a full time worker would earn well below the poverty line. The federal minimum wage is merely a floor below which the race to the bottom by low-wage employers can go no further. Like WA, other states can always set their minimum wage higher.

So I it leaves me wondering… does Reichert really support the concept of a minimum wage at all, or does he just assume it’s not such a big deal to his own constituents because they’re already covered via state initiative?

I just have a hard time understanding how the highest minimum wage in the nation “works successfully” here in WA state, yet raising it elsewhere would somehow hurt businesses and workers nationally. Perhaps Kimberly will explain further.

Nationally, the minimum wage has not been raised in over nine years — adjusted for inflation the current $5.15/hour is now at a half-century low. In 2006 a full time minimum wage worker will earn only $10,712, about $6,000 below the poverty line.

So of course today, self-proclaimed “moderate” Rep. Dave Reichert once again voted against raising the minimum wage, joining his party in blocking a vote on H.R. 2329 for the fifth time in a month. The bill would have raised the wage $2.10 an hour over two years, to a whopping $7.25… well below WA state’s minimum wage of $7.63/hour.

Here’s a fact: Dave Reichert is a Republican, and both nationally and locally the Republican Party opposes a living minimum wage. How can I be so sure? Well, apart from counting their votes, I can also read their platform:

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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.

King County Superior Court Judge Mary Robert’s has tossed out Tim Eyman’s 2001 property tax initiative, I-747, ruling it unconstitutionally deceptive.

I-747 had been Timmy’s most wide-reaching victory, generally limiting increases in state and local property tax revenues to one percent a year… well below the rate of inflation. The fiscal impact has been catastrophic, particularly for rural taxing districts, with many now on the verge of insolvency.

Prior to 2000, local property increases were generally capped at six percent. In November of that year voter’s passed Eyman’s I-722, which amongst other things lowered that cap to two percent a year. I-722 was immediately challenged, and on November 30, 2000, the Thurston County Superior Court ordered a preliminary injunction barring implementation and enforcement.

In a concise, six-page decision, Judge Robert’s explains what happened next:

On January 11, 2001, after I-722’s implementation was halted, I-747 was filed with the secretary of state. By its language, I-747 sought to amend I-722, by decreasing the cap on property taxes from two percent to one percent, unless the voters approved a higher cap.

Amendatory legislation such as I-747 is subject to article II, section 37 of the state constitution, which requires that,

No act shall ever be revised or amended by mere reference to its title, but the act revised or the section amended shall be set forth at full length.

Wash. Const. art. 2,

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[NWPT54]Since 1940, Washington state’s gas tax has risen more than fivefold, from 5 cents a gallon to 28 cents a gallon… and yet, adjusted for inflation, the per-gallon value of the tax has actually fallen almost in half. Indeed, even when the recently enacted 9.5 cent a gallon increase is fully implemented in 2009, the effective tax rate in real dollars will still be below historically average levels.

The chart above tracks the gas tax from 1940 though 2009. The orange line represents the nominal gas tax in actual dollars (well… cents.) The blue line represents the gas tax adjusted to 2005 dollars, using the Gross Domestic Product Deflator historical data included in the US budget. (The GDP Deflator is estimated for 2004 through 2009.)

Because the gas tax is levied as a fixed dollar-value per gallon, rather than as a percentage of the sale price, the value of the tax is gradually eaten away by inflation unless the tax is periodically increased… which is exactly what the Legislature has routinely done since the tax was first implemented in 1921. Indeed, one of the reasons the recent round of tax hikes seems so shocking, is that the Legislature failed to raise the tax from 1991 through 2002, allowing real revenues per gallon to fall near an all-time low. It is no wonder that during that time, maintainance was deferred, and our transportation infrastructure was allowed to slip into its current state of gradual decay.

If we want to have a real debate about the transportation bill and the initiative to repeal it, then we’re going to have to start with some real numbers.

I’ll be on the air with Kirby Wilbur, KVI-570, tomorrow morning (Thurs.) at 8 AM to discuss I-912, the “no new gas tax” initiative. Hope I don’t bore the audience, but I plan to come armed with some facts… you know, like the fact that this isn’t actually a “new” gas tax, but rather an increase intended to help match revenues to inflation.

[NWPT55]Even though I voted against it, it really bothers me to criticize the Seattle Monorail, because a) I sorta, really want it, and b) some of its most vocal opponents are vicious, lying bastards, who take great joy in scuttling any public project that doesn’t directly benefit their corporate overseers. But after seeing the SMP’s response to public criticism of the final plan’s financing and less than aesthetic design, I am underwhelmed.

The news today is about the long term interest costs to build the Monorail Green Line.

The newspaper is correct when it adds all of those future interest payments together and gets to around $11 billion. However, the value of these interest payments in 2005 dollars is closer to $1.9 billion, or roughly the same as the total cost of the Project which is just under $2 billion (in 2005 dollars). Keep in mind that most of the dollars added up and presented in the Seattle PI article will be paid 30 or 40 years into the future, when a dollar then is worth about 10 to 15 cents today.

It is similar to when someone buys a home with a 30-year mortgage and the interest payments over the 30 years end up being greater than the initial price of the home.

Well yeah, that’s kinda true… from the financial perspective of the SMP… but not for the individual taxpayers who are being asked to pay off the bonds. Presumably, the SMP will issue bonds with fixed regular payments, similar to a mortgage. So due to inflation, a fixed payment today of $100 might be worth only $0.10 in 2005 dollars, several decades hence. But individual taxpayers’ car tabs will rise with inflation along with the price of cars.

The SMP’s 1.4% car tab tax currently costs me $177.00 a year on my 4 year-old car. Due to wear and tear and changing circumstances, I expect I’ll buy several new cars over the coming decades… and each of those will be purchased in inflation-adjusted dollars. So assuming I buy a new car of similar value every 8 to 10 years, my average annual Monorail tax will remain about $177.00 in 2005 dollars. Thus, at the same time the SMP’s annual bond repayments are worth ten cents on the inflation-adjusted dollar, I’ll be paying $1770.00 a year, not $17.00.

In simple terms, if the car tab is levied for 50 years, not the originally projected 25, the Monorail will end up personally costing me about twice as much… roughly $8500 in 2005 dollars. (Though to be fair, I’ll likely be dead before the bonds are paid off, so my total bill will be somewhat less.)

And that has always been my primary complaint about the Monorail… its financing. We are asking taxpayers to ostensibly pay 1.4% of the value of their cars, every year for the rest of their lives. And I wonder… will taxpayers be willing to pony up additional revenues to fund anything else? Or, as I suspect, will the 14-mile Green Line be the only transportation project Seattle voters build over the next half-century?

The SMP’s response generated one more disappointment. They told us we have only two options:

1) We can move forward with this plan.

2) We can decide to not build the Monorail Green Line at all.

Yes I know… politically, those are likely the only two options. But there is a third, if the SMP board has the patience, fortitude and leadership to pursue it. They could pause from the rush to break ground, go back to the drawing board, and come up with a new proposal that simply makes more financial sense. Lob a few miles off one end or the other, propose a more reliable mix of financing, and give us back the sleek design that will make the Monorail an icon rather than an eyesore. Then come back to the polls for another vote if they have to, but this time with all their ducks in a row, and the fixed price contracts in hand. Sure, it could delay the project a couple more years, and they always risk losing a close vote rather than winning one. But it would be the responsible, creative thing to do given the circumstances.

As a progressive, I believe in the social benefits of public transit, and I’m willing to put my tax dollars where my mouth is. But we should only support those public projects that make sense.

It pains me to write this, because in doing so, I am not living up to my responsibility to parry the rhetorical blows of the right-wing critics who will surely paint any decision by the SMP as the ultimate in bureaucratic bungling and arrogance. The anti-transit crowd is in this battle on purely ideological grounds — they are unwilling to give an inch, and the temptation is to be just as inch-stingy in return. Indeed, if this were a national or even a state-wide issue, I would be much more reluctant to voice my reasoned opposition to a transit project I kinda, sorta want.

But this is Seattle, a bastion of progressivism, and quite frankly the political and rhetorical machinations of a handful of marginal, anti-transit blowhards shouldn’t even enter into the equation. We have the opportunity to build a 21st Century transit system, and the responsibility to build it right.

And I simply am not convinced that the current proposal is the right way to build the Monorail.

[NWPT47]No doubt, there has been a lot of anger in some quarters over the Legislature’s decision to raise the gasoline tax 9.5 cents over four years. The question, however, is anger over what?

There’s been talk about legislative “arrogance”… you know, like the arrogance of the Legislature for actually passing legislation. But really, much of the opposition to the gas tax is simply based on the fact that people don’t like paying higher taxes. Hell… who does? Still, while 9.5 cents tacked onto our existing 28 cent gas tax seems like a lot of money, I couldn’t help but wonder how high our gas tax really is, in real dollars, relative to historical levels. My preliminary research might surprise some people.

The chart above plots three lines, the Nominal Gas Tax in pennies per gallon, the gas tax in year-2000 dollars, adjusted using the Gross Domestic Product Deflator, and the gas tax expressed as a sales tax rate (tax per gallon / national average for regular gas.) I’m working on a more in-depth report, and will make my raw data, references and methodology available at that time, but while the specific numbers may adjust slightly in the final analysis, the trends will remain the same.

As you can see, while the nominal gas tax rose from 6.5 cents per gallon in 1950 to the current 28 cents in 2005, the actual cost of this tax both in real dollars, and as a percentage of the price of a gallon of gas, has substantially declined over the past 55 years. Once the full 9.5 cent increase is implemented in 2009, the total nominal gas tax of 37.5 cents per gallon would only come to 32.2 cents in year-2000 equivalent dollars, according to current GDP projections. That figure is well below historical highs, and will decline steadily in the years that follow, as inflation eats away at its value.

This is, after all, the nature of excise taxes. Because they represent fixed dollar-values per unit, rather than a percentage rate like most taxes, inflation causes the revenue per unit to decline over time, unless the tax is periodically increased. For example the nickel a gallon hike in 2003, only brought the gas tax (in real dollars) back up to 1991 levels… the last time the tax had been raised. Yes, revenues continue to rise with consumption, but the gas tax is a user fee, mandated by the state constitution to be spent on roads only, so increases in consumption also represent increased wear and tear on existing roads, as well as increased demand for new infrastructure.

So as we continue to discuss the gas tax, and the initiative to repeal it, I think it is important to understand that we’re not really talking about raising the gas tax, as much as we are adjusting it to keep pace with inflation.

Every child deserves a puppy, and my daughter is every child. So I’m headed out to pick up a crate, some puppy food, a few chew toys, and oh yeah… a puppy. I’ll post a picture of “Feisty” later today.

In the meanwhile, I’m bound to be distracted, so expect some light posting. I’m working on a historical analysis of gasoline prices and the WA state motor fuels tax, adjusted for inflation, so that we can all have a fair, balanced and totally unprejudiced discussion of the incredibly stupid and misleading gas-tax-repeal initiative that was filed last week. I’ve also got some interesting observations in the works about last November’s poorly written “Top-Two Primary” initiative.

In the meanwhile, I think I’ll just take the easy way out and point you towards The General’s advanced preview of the coming line-up for Republicanized public broadcast: “Tonight on GOPBS.”

Okay, I’ve heard enough bellyaching already from editorialists whining about legislation to amend Initiative 601’s spending limits. Passed in 1993, I-601 uses population growth plus inflation to calculate increases in the state spending cap; any spending above the limit requires a two-thirds vote in both houses.

In practice, it only takes a simple majority to amend or suspend I-601 (as has been done in the past,) and thus the super majority provision is utterly toothless — not to mention, undemocratic. And it has probably always been unconstitutional to boot, as only the state Constitution can dictate the majorities required to pass legislation. Complain all you want about removing this provision, but if you really want to require a super majority vote, you need to do it by constitutional amendment.

Yesterday the Tacoma News Tribune chimed in, criticizing SB 6078 for seeking to change the way the cap is calculated (the new formula would link growth in spending to growth in personal income): “Gutting I-601 spending limits a bad idea.”

Gutting? Gimme a break.

As has been explained by the Gates Commission, and nearly every reputable expert on these issues, the economic metric that most close tracks growth in demand for public services is aggregate growth in personal income. This is because most government services are commodities, and like most commodities, consumption increases with income. (Hey… that’s free market economics for you.) As the TNT points out, a growth in personal income calculation would indeed result in a higher spending cap than the current formula.

But to continue to impose a spending limit calculated on population plus inflation, is to ensure that over the long run, government services simply cannot keep pace with demand. And that is exactly what has happened since I-601 passed in 1993: expenditures as a percentage of personal income have declined steadily. And with non-discretionary spending like health care rising much faster than inflation — and thus eating up a larger portion of the budget — the impact of the spending limit is exaggerated on essential services like K-12 education.

K-12 Expenditures per $1,000 Personal Income
(State & Local Government)

In fiscal year 2002, Washington ranked 41st among states in state and local government K-12 spending as a percentage of personal income, down from 36th in 2000. As long as we continue to rely on a structurally inadequate tax system, and tie our spending limits to unrealistic economic metrics, we can expect the level of essential services to continue to decline.

I’m a big proponent of balanced budgets, and I’m not necessarily opposed to spending limits as a guideline for writing them. Indeed, I’m a helluva lot more fiscally conservative than most of my righty critics would imagine (or my liberal cohorts might like.) But my main complaint with I-601’s spending limits calculation, is that like our current tax structure, when projected out into the future, it guarantees that we will have a smaller and smaller government providing fewer and fewer services… without ever asking voters if this is what they truly want!

I welcome a knock-down, drag ’em out, no holds barred public debate on the proper size and scope of government, because I believe that most voters want safer streets, better schools, and all the other essential services that government provides. But the Republican leadership refuses to talk about the real issues, because they understand that the status quo will eventually produce their libertarian dystopia, without debate, if only they show a little patience.

Attacking SB 6078 as “gutting” I-601, ignores the whole purpose of imposing spending limits in the first place. I-601 was not intended to shrink the government, it was intended to keep government growth in line with our economy… and to this end the limit factor should reflect an accurate economic metric. It’s simple math.

To support the current formula is to support the Republican effort to dramatically shrink government by “starving the beast,” a disingenuous strategy to impose a radical vision of government they couldn’t possibly win at the polls. It is a stunningly clever act of political legerdemain, that distracts the eye by focusing exclusively on taxes, while ignoring the services they finance. Then, while voters aren’t looking, tada… government services disappear.

But there’s nothing magical about I-601’s population plus inflation calculation; it simply does not allow our government to keep pace with the growing demands of our growing economy, and thus necessarily results in diminished services over time.

Math may not be as entertaining as magic… but it’s a damn more reliable way to predict the future.

Andrew Garber has done an excellent job in today’s Seattle Times, of explaining in layman’s terms why it is the state government faces cutting services, even as existing taxes are producing an estimated $1 billion in additional revenues over next two year budget: “State budget writers tangle with high cost of just standing still.” I hope the Times doesn’t mind if borrow one of their graphics, to help explain:

What we have is a “structural deficit,” where the costs of maintaining existing services at current levels are rising faster than tax revenues. The economic figure that most close tracks growth in demand for public services, is growth in personal income, yet because our tax structure is so heavily dependent on sales and excise taxes (only New Hampshire is more dependent on a single tax) government revenues simply cannot keep up with demand.

Excise taxes, like those on gasoline, alcohol and tobacco, are taxes on volume, not price, and as such rise slower than consumption over time, as inflation raises the price of the product and eats away at the value of the dollar. For example, while the Legislature added a nickel a gallon to the gas tax last year, the gas tax is now half what it was a couple years ago as a percentage of the retail price. While that is a dramatic example, it illustrates the impact of inflation on excise taxes in general.

The general sales tax, which is by far our largest source of revenue, also becomes less adequate over time, for a number of reasons, not the least of which being that we only tax goods… an ever decreasing portion of our post-industrial service economy. At the same time, inflation, particularly in health care, is hitting the state budget much harder than it is the private sector.

Nowhere is the state’s inflation problem better illustrated than in health care, which has been described as the “Pac-Man eating the state budget.”

For example, a single dose of Avinza, a prescription pain-relief medication, jumped $72 in the past year to $208 a dose. The cost of an electric hospital bed went up $101, to $1,407. And the cost of a wheelchair increased by $98, to $2,366.

Add cost and caseload increases to expected cuts in federal Medicaid spending, and the state suddenly finds it needs about $695 million in additional funds over the next two years to maintain existing health-care services for the poor.

Some would argue the solution is to simply cut health-care services for the poor. But even if one were to follow such a Hobbesian policy, it would end up costing our economy more, not less. Poor people will continue to get sick, showing up at emergency rooms at more advance stages of illness, when treatment is more expensive, and shifting the costs to the rest of us. Whatever savings we might see in lower taxes will more than be eaten up in higher insurance premiums.

And the inflationary pressures aren’t just limited to health-care:

To maintain existing levels of service, the state needs to come up with an additional $90 million to pay for prisons over the next two years, $164 million to run colleges and universities, $383 million for public-employee pensions and $444 million for public schools. That doesn’t include pay raises or benefits increases.

Of course, Republicans argue that the solution is simply to reign-in spending, but their usual metaphors fall flat. Running a government is not like running a business, or balancing your household budget. Increasing class size does not make teachers more productive, and we just can’t cut federally mandated “No Child Left Behind” requirements, like a family might cancel cable TV.

Indeed, the whole anti-tax movement that is partially responsible for our perpetual budget crises, has government finances exactly ass-backwards.

After all, people want the services, said Senate Majority Leader Lisa Brown, D-Spokane. Perhaps the true question is, “how much [money] do we need, to do what we want to do?”

Exactly!

We levy taxes to provide the services voters want; we don’t provide services simply to spend the tax dollars we have. What’s missing from the debate is the real debate… the debate over the proper size and scope of government. Republicans don’t want to have this debate because they know they’ll lose, and because they know that without the debate, we’ll just continue continue hobbling along with the status quo, gradually defunding and eliminating government programs, until their dream of a libertarian dystopia is achieved by default.

In the end, Washington state will be faced with the choice between implementing an income tax… or becoming Mississippi. There are many in the Republican leadership who would greatly prefer the latter.

If Tim Eyman calls a press conference, and no reporters show up, did he make a sound? Apparently not, for the most striking thing about the media coverage of Tim’s performance audits initiative was the almost total lack thereof.

Yesterday was the opening day of the initiative filing season, an event Tim has traditionally turned into an annual photo op… but this year, few reporters took advantage of the opportunity. Indeed, scanning the papers, Tim’s “I-900” received nary a headline and barely a mention in the wrap-ups of the day’s political events.

Of course, with the filing coinciding with the first day of the legislative session, and the GOP’s failed efforts to block certification of Christine Gregoire’s election, part of Tim’s failure to grab headlines was due to timing. But it is also due to the fact that Tim Eyman’s time may have passed.

In fact, the most press coverage an Eyman initiative got today was actually his four-year-old I-747. A group of environmentalists, social organizations and at least one county have filed suit to have the measure tossed out. [Lawsuit says I-747 violates state constitution]

I-747 is a particularly nefarious initiative because its impact is so gradual, masking from the public the enormous cuts projected out onto future budgets. I-747 limits property tax revenue growth to 1% a year… well below inflation, let alone growth in population or personal income. As revenues grow slower than demand for public services, these services are gradually cut. Without revision or repeal, many local taxing districts — particularly in rural communities in eastern Washington — face insolvency over the next few years.

Eyman claims the initiative was carefully drafted to avoid constitutional problems, but as usual, I tend to trust experts over lying blowhards:

Attorney Hugh Spitzer, whose firm has challenged many of Eyman’s initiatives, said it was clear after the initiative passed that there were constitutional issues that could be raised, but there wasn’t a group of cities and counties that wanted to spend the time and effort to litigate it.

If Hugh Spitzer says there are valid constitutional issues, then there are valid constitutional issues. Whereas if Tim Eyman says the sky is blue, I’d have my doubts.

Anyway, it’s nice to see Timmy on the defensive, and it’s unlikely we’ll see him recover any time soon. His newest initiative is a dog, and even if it wasn’t about to be obviated by a more reasonable legislative proposal, he still lacks the grassroots and financial resources to qualify it for the ballot. And now I-747, his most lasting contribution to our state of perpetual budget crisis, is under legal attack.

Tim has failed to pass an initiative two years running, and as his ethical scandals continue to outnumber his electoral victories, he will continue his inevitable slide towards political irrelevance.

Who knows, maybe next year, when the media fails to show up for yet another filing day press conference… perhaps I won’t even bother to blog on it?

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.

For months now Tim Eyman has been touting the “statistic” that property taxes in WA state have increased from $1 billion in 1980 to $6.25 billion in 2003, a figure he calls “obscene.” He even used a chart based on this stat as the backdrop for his lonely press conference on Monday.

What is really obscene is that this misleading piece of propaganda is repeated in the media without any context or analysis. So I want to give you a preview of some research I plan to post later this week to TaxSanity.org, that examines Tim’s chart and dispassionately explains why it is a meaningless piece of crap.

Take a look at this alternative chart from the state Dept. of Revenue:

Apart from the fact that state and local taxes as a percentage of personal income have actually been declining steadily for years, one thing really jumps out from this chart… that Tim’s start date of 1980 is intentional misleading, as it represents an anomalous twenty-year low in tax rates. Indeed, if you start one year earlier, in 1979, tax burden has clearly and dramatically decreased.

Tim’s figures are taken out of both historical and economic context to present the false impression that government growth is exploding out of control. It fails to consider, population growth, inflation, loss of federal funds, and shifts of revenues from one tax source to another. And oh what a difference a year makes.

According to the Washington State Tax Structure Committee (chaired by Bill Gates Sr.) and every other reputable source, the economic figure that most close tracks growth in demand for public services is growth in personal income. Personal income is also the only number which permits a true measure of tax burden, for obvious reasons.

It is not surprising that the entire premise of Tim’s tax revolt is built on lies, but it is disappointing that nobody has bothered to expose it sooner.