It was the talk of conservative talk radio Monday and Tuesday, after the Seattle Times published an editorial Sunday with the dire headline “Warning: New taxes will be permanent.” Only problem was, the Times got it wrong. Dead wrong.
A change in the state law regarding property taxes has silently transformed what have been temporary tax increases into permanent ones.
We say “silently” because the Legislature, which made the change, did not name what it was doing in the bill title or the bill reports. The change is something every voter should keep in mind as the election arrives Tuesday and more new taxes are proposed in November.
Hmm. You’d think before the state’s largest newspaper prints an editorial impugning the integrity and/or competency of the Legislature, it might have given legislators or their staffers an opportunity to explain themselves, huh? And you’d think just maybe, before warning voters that “new taxes will be permanent” — just days ahead of crucial levy votes in yesterday’s election — the Times might want to double- or even triple-check their facts, right?
But the Times didn’t. As a result, thousands of voters went to the polls yesterday angry and confused, and had any of the regional levy votes been close, the Times’ factual error and lack of editorial judgment could have flipped the outcome.
On the surface, Senate Bill 5498 allows fire districts and other special-purpose taxing districts to ask voters for multiyear tax increases. It is the same authority cities and counties already had.
That’s the one part of the editorial the Times got right, except for their implication that there is something nefarious beneath the surface. There is in fact nothing beneath the surface.
The nonobvious part of the bill changed the old rule that unless a tax levy said specifically it was permanent, it wasn’t. Under the old rule, after a levy expired, Washington’s 1-percent property-tax limit would be set as if the levy had never happened. If voters didn’t renew the levy, their taxes would go down.
And what makes this change particularly “nonobvious” is that it just isn’t there. Here’s the “old rule” the Times talks about:
(2) After a levy authorized pursuant to this section is made, the dollar amount of such levy shall be used for the purpose of computing the limitations for subsequent levies provided for in this chapter, except as provided in subsections (3) and (4) of this section.
That’s also the text of the new rule, except it now references subsection (5). What this means is that the default behavior of a lid lift is now, and always has been, to permanently raise the base on which the limit factor is calculated… except as otherwise provided. That was the default under the old rule. That is the default under the new rule.
Under SB 5498 — a governor’s-request bill passed by large majorities in both houses — unless a tax levy says it is temporary, its authority is permanent. So says the Department of Revenue in an official memo to county assessors.
A) It wasn’t a “governor’s-request bill.” It just wasn’t. B) If the Times’ editors don’t understand the difference between a “permanent” lid lift and a “temporary” lid lift, they really shouldn’t be editorializing on the issue without thoroughly researching the subject. All they’ve succeeded in doing is making an already confusing issue even more confusing, but I’ll try to clear things up.
The whole purpose of a permanent lid lift is to permanently reset the base on which the limit factor is calculated. For example, lets say a fire district levied $100,000 in taxes from existing construction in 2003, the year I-747 went into effect. Under the initiative’s arbitrary 101-percent annual limit factor, the maximum dollar amount the district could levy by 2007 would be $104,060. But due to inflation, the purchasing power of this revenue is really only equivalent to $91,920 in 2003 dollars. Year after year, the fire district would steadily lose purchasing power, and be forced to steadily cut back services.
Or, the district could put before voters a permanent lid lift with a dollar rate that would increase total revenues to $115,000 in 2008, a figure that would pretty much reset the district’s revenue to 2003 levels in inflation-adjusted dollars. The 101-percent limit factor would subsequently be calculated on this new base, but over the years, that too would be eaten away by inflation. Better than slowly starving to death, but not a stable means of securing a reliable revenue stream for longterm planning. And also, quite costly. According to public testimony, South King Fire and Rescue has spent over half a million dollars over the past six years running a string of successful permanent lid lifts.
Under the old rules, counties, cities and towns had an additional tool at their disposal. They could instead choose to put before voters a multi-year temporary lid lift (up to six years) which states a dollar rate for the first year (just like a permanent lid lift,) but also specifies an index to be used as the limit factor for subsequent years of the levy, superseding I-747’s 101-percent limit. Each of the parks levies passed yesterday did exactly that, raising an additional $0.05 per $1000 of assessed value in the first year, and authorizing annual increases on that amount indexed to inflation. The parks levies thus produce a stable revenue stream of inflation-adjusted dollars throughout their six-year term.
But these lid lifts are temporary under both the old and the new rules, and when they expire the basis for calculating revenue limits under I-747 reverts to the maximum amount it would have been had the parks levies never been passed. It appears the Times kinda-sorta understands this, but then at the same time kinda-sorta doesn’t:
To be deemed temporary, a measure has to say when the tax expires, and it has to limit itself to specific purchases.
Right, and the parks levies do both these things.
Otherwise, in the year after the last tax increase authorized by voters, the new tax limit is 1 percent higher. Even if voters don’t renew the levy, the taxing authority can keep pushing taxes up — at a slower rate, but still up.
Poorly phrased, but um… what’s your point? That’s what permanent lid lifts have always been intended to do. You know, the kind of permanent lid lift the parks levies are not.
King County Assessor Scott Noble, who drew our attention to this, has looked over the 11 property-tax measures that will be on county ballots Tuesday: two for King County parks, two for Redmond, one for a hospital district and six for fire districts.
“All of them are permanent increases in new levy capacity,” he says.
Um… no they’re not, and the Times being
misled confused by Scott Noble being misled confused by a confusing DOR memo is no excuse for a string of sentences that clearly contradict each other. To be deemed temporary, a lid lift must limit itself to a period of time or a specific purpose, and the parks levies clearly do that. The new rules specifically state that “except as otherwise provided in an approved ballot measure under this section, after the expiration of a limited period … or the satisfaction of a limited purpose … subsequent levies shall be computed as if … the limited proposition … had not been approved.” The parks levies are temporary, and temporary levies by definition do not permanently increase levy capacity.
How can I be so sure? Well for starts I, um… read the fucking bill. And the RCW. And the WAC. And in the Times defense, this stuff is pretty damn confusing. So I called the House Finance Committee and asked a staffer to step me through it. He did. And he stands by the succinctly worded summary in the final bill report:
Any property taxing district with regular levying authority may seek multi-year lid lifts over a six year period in the same manner as counties, cities, and towns.
That was the clear legislative intent of the bill, and that is how committee staffers expect it to be written into the rules.
Of course, to the Times’ demerit, this stuff is pretty damn confusing, and so I simply cannot believe that they didn’t ask a legislator or staffer to step them through it before running such a hyperbolic and misleading editorial. The Times clearly considers foul-mouthed bloggers like me to be unserious, but at least I took the time to do my homework. Meanwhile Times editorial page editor James Vesely only compounds his paper’s error in a separate column, denouncing “a sneaky tax” he clearly doesn’t understand:
Voters should also pay attention to The Times editorial opinion on the fourth page of this section about an obscure change in state law that turns temporary taxes into permanent ones. Instead of asking for a four- or six-year levy increase on your property taxes, the new law takes the opposite view — that taxes are permanent unless they are specifically noted as temporary. It turns the approval of a levy from something voters see as binding for a few years into a perpetual tax that can be renewed, but at always higher levels.
No, no, no. Multi-year lid lifts are temporary by default, and remain so under the amended statute. Furthermore, Vesely clearly doesn’t understand the relative roles of permanent vs. temporary lid lifts, and now neither do his readers.
Sure, the lid lift statutes are complicated and confusing; hell, I didn’t get it right the first couple times I read through SB 5498. But the Times’ editors didn’t just get it wrong, they implied ill intent. Had the editors been strong supporters of the parks levies (or levies in general,) one wonders if they would have been so quick to jump to conclusions… or so eager to publish them just days before the vote?
Either way, the tone and timing of this editorial was simply irresponsible, and as such it deserves a retraction as prominently placed as the editorial itself. I eagerly await Sunday’s op/ed page.