Tag: state legislature

Back-to-School Sales Tax Break Good for Consumers, State | Guest Op-Ed

Washington State’s retailers are ready to help the state Legislature balance the budget and create jobs to heal some of the financial wounds of the recession.

We’ve proposed an August back-to-school sales tax holiday weekend that a new study shows would boost state and local government revenues by $12.5 million and create 1,555 jobs while giving consumers a deserved financial break.

Though 17 other states have offered consumers such a break with successful results, Washington so far has not. It’s hard to figure out why not, especially considering the past three years of severe cuts to essential taxpayer services. In other places around the country, shoppers cross state lines to take advantage of similar promotions.

Retailers support one in four state jobs and contribute nearly half of the state’s general operating funds from sales taxes. What we need now is for the Legislature to pass a bill to allow us to put a sales tax holiday to work here, too.

Our Legislature has historically adopted a narrow view that a sales tax holiday is nothing more than a tax giveaway to consumers. But the current and more widely-accepted view reveals the economic opportunity of a tax holiday. Otherwise, why would 17 states still be offering them during these recessionary years?

The old narrow view allows fear from not collecting some sales taxes to cloud the reality that a tax holiday is really an incentive for people to get out and spend money not only  for back-to-school clothes and supplies but all the other taxable items that consumers see and buy on shopping trips.

In Florida, for example, initially skeptical elected officials showed enough faith in a study that concluded the state’s shoppers would enthusiastically embrace the idea and generate new tax dollars. The faith of Florida legislators resulted in consumers generating $7 million in new state revenues. This was a positive swing from the state’s narrow and wrong official fiscal note.

A new study by the Washington Economics Group of consultants, based in Florida, concludes that $187 million in additional sales of taxable items would result in Washington State during a sales tax holiday.

Skeptics seem to forget how people shop and how retailers prepare for events like these. Retailers would take advantage of the event, and like on days such as Black Friday, offer deep discounts on an array of products, giving shoppers good reasons to participate.

A bill in the Legislature, House Bill 2644, limits a sales tax break to three days on moderately-priced clothes and school supplies.  It is responsible, far from a blind giveaway of state tax revenues.

Since beginning the 2012 session in January, legislators took no action on the bill in a committee though it is eligible for a vote during the entire session scheduled to end in March. Considering the grave financial straits the state must overcome, retailers believe that our state legislators should place more of their faith in our knowledge of why sales tax holidays work elsewhere. Offering such an incentive would unleash the spending power of shoppers to help speed the recovery of our state’s economy.

As our Legislature prepares to ask voters to pay higher state sales taxes for the next three years, retailers are suggesting a shopping incentive that promises to raise state revenues while offering taxpayers a small tax break. It’s time for the state Legislature, consumers and retailers to support this winning idea.

 

Jan Teague is President and CEO of the Washington Retail Association, which represents 2800 storefronts across the state. Named a “Woman of Influence” by the South Sound Business Examiner, she is a Board member of the Association of Washington Business, a member of the Coalition of Washington Business Organizations and was 2010 President of the State Council of Retail Associations.

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[Article first appeared at The Olympian and reprinted here with permission from the author.]

Is the House Considering “Felony” Budget Gimmicks to Balance the Budget?

It’s been 107 days since the Governor called last December’s special session declaring “timely legislative action is needed to secure the State’s fiscal health and address the shortfall in the 2011-2013 operating budget.”

We are now in day 33 of the 60 day 2012 REGULAR Session without a budget plan being introduced let alone debated. Defending the lack of action on the budget to date lawmakers have said that they need to wait until after next week’s revenue forecast to know what the parameters of the budget will be. Hopefully none of the options actually considered will include “felony” budget gimmicks such as borrowing to balance the budget.

According to the Washington State Wire, however:

“House Democrats are thinking of going into debt to help plug the big $1.5 billion hole in the state budget, a scheme that could eliminate the need for the Legislature’s much-talked-about plan to go the voters for a tax increase.

By bonding against some of the state’s big revenue streams – perhaps tobacco-settlement money and lottery revenue – majority Democrats could raise just as much cash as the governor’s half-billion-dollar proposal for a half-cent increase in the sales tax. Perhaps even more. And not only would they avoid a dicey public vote on a tax increase that might well fail, the plan also could blow all talk of big reforms this session out of the water.

Critics are aghast. They say it’s a bit like paying the grocery bill with a credit card. Eventually the bill comes due, and if the state can’t afford it now, it’s not going to be even harder paying it later. Meanwhile minority Republicans would have little leverage – the thinking is that these bonds would require only a simple majority vote.

The put-it-on-plastic solution has been rumored for days now in the hallways of the statehouse, but it went public Thursday morning when it became a leading topic of discussion at the state Labor Council’s political-endorsement convention in Olympia. Labor Council leaders said revenue bonds might be the best way to get the state over the hump, and they will be asking lawmakers to support them.

‘Ordinarily it is not the sort of thing we would be particularly in favor of, but given the depth and the magnitude of the crisis that we are having now, our folks, and I don’t just mean labor folks, are hurting,’ said Labor Council president Jeff Johnson.

House Majority Leader Pat Sullivan, D-Covington, appeared to endorse the idea in his remarks to the union delegates. ‘In the short term, revenue bonds are part of the [solution] to get us through this crisis right now, but we need progressive revenue options for the future to make sure we are not faced with the same situation in future years,’ he said.”

A similar trial balloon last year resulted in State Treasurer Jim McIntire warning lawmakers to avoid “felony gimmicks” to balance the budget:

“’I really don’t see a good rationale for the Legislature to be trying to sell junk bonds to finance operating activates for the next two years. It’s not a sustainable way to do things,’ [McIntire] said.

In 2002, the Legislature borrowed $450 million through securitization of future payments from the national settlement with tobacco companies. However Gov. Chris Gregoire, who has also criticized the non-traditional budget ideas being considered, has said that scheme will end up costing taxpayers about $1 billion in interest and principal.

‘This biennium, we’d have an extra $100 million to spend on higher education and health care if we hadn’t done (securitization) in 2002,’ the treasurer said.

Lawmakers could, conceivably, borrow further money tied to the state’s tobacco money, or seek a loan based on future revenue from liquor and lottery sales. But McIntire warned that credit rating agencies would frown on that practice.

‘Wall Street is watching,’ McIntire said. ‘To go to some kind of securitization scheme at this point is really kind of a very bad signal to send to the investor community.’”

Two of the big three national credit rating companies are already spooked by the state’s budget outlook resulting in their downgrading the state’s debt rating outlook to “negative” last month.

The last thing we need to have happen is for even more time to be wasted floating and polling “felony” budget gimmicks. It is past time to move forward with a truly balanced and sustainable state budget. The tough choices won’t get any easier with time but that amount of savings lost will only grow with each passing day without a solution.

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[Reprinted from the Washington Policy Center blog]

WEA and House Dems Sue Voters to End 2/3 Vote Requirement for Tax Hikes

In the waning hours of the “budget focused” special session Democrats in the House and Senate both attempted to cue up votes on a tax bill not assumed in the budget that no one expected to pass. The strategy was to try to gain legal standing to sue the voters to overturn the 18 year old 2/3 vote requirement for tax increases.

Today this legislative charade has come to fruition as several House Democrats have joined the Washington Education Association (WEA) and the League of Education Voters to file a lawsuit to overturn the four-time voter approved 2/3 vote requirement for tax increases.

Here is a copy of today’s legal filing.

The lawsuit highlights the failure of the Legislature to fund Initiative 728 and 732 as proof of harm as to why taxes should be easier to raise.

Since funding was not identified for I-728/732 (other than surplus funds) when originally adopted and the measures were subsequently suspended during tough budget times, voters were asked in 2004 to approve I-884 and in 2010 to approve I-1098 to pay in-part for the policies of I-728 and I-732. Both measures were overwhelming rejected statewide.

Reading the tea leaves of I-728, 732, I-884 and I-1098, it appears the voters supported the policies of I-728 and I-732 when they were “free” and wouldn’t hurt the budget or require tax increases but were against them when asked to raise taxes to pay for them.

Here are additional details on what the voters were promised concerning tax increases when voting on I-728 and I-732.

As for the 4-time approval of the 2/3 vote requirement, however, voters have consistently said yes to imposing this restriction on lawmakers.

Voters first enacted the 2/3 vote requirement for tax increases in 1993 with I-601, reaffirmed it 1998 with Referendum 49, reenacted it in 2007 with I-960, and again last year with 64% approving I-1053.

The Legislature has also enacted the 2/3 vote restriction including a 2006 bill that was signed by Governor Gregoire. That proposal (SB 6896) was primarily focused at redefining the spending limit adopted in 1993 to facilitate the large increase in spending that help set the stage for our current budget challenges. To throw voters a bone when rewriting the spending limit, Democrats also ended their 2005 suspension of the 2/3 vote requirement a year early. According to the bill report for SB 6896:

“The authority of the Legislature to increase state revenues without a two-thirds vote is terminated on June 30, 2006.”

Despite numerous legislative amendments to the law, the Legislature has never fully repealed the mandate from voters that tax increases require a two-thirds vote and in the case of SB 6896 in 2006, Democrats voted to reinstate the restriction a year early.

Not able or willing to fully eliminate the 2/3 restriction legislatively, opponents have tried over the last 18 years to get the Court to throw out the requirement.

Here is what the Attorney General’s Office said (in-part) back in 2008 about the constitutionality of the 2/3 vote requirement when it was last challenged in court (page 37 – legal citations omitted):

“Petitioner attempts to meet her ‘responsibility of proving that [RCW 43.135.035(1)] is unconstitutional beyond a reasonable doubt’ on the basis of a constitutional provision that, by its own terms, does not prohibit the statute that she challenges. Article 2, Section 22 provides, ‘[n]o bill shall become a law unless . . . a majority of the members elected to each house be recorded thereon as voting in its favor.’ Article 2, Section 22 establishes a constitutional minimum number of votes for a bill to become law. It only describes the circumstances under which a bill does not pass. In other words, Article 2, Section 22 does not prohibit statutes by which the legislature (or the people) express their legislative policy judgment that certain types of bills warrant greater than simple majority consensus for passage. RCW 43.135.035(1) expresses such a legislative policy judgment—that a two-thirds majority vote of each house should be required for passage of bills raising taxes. The statute hardly conflicts with the constitutional floor set by Article 2, Section 22, as any bill receiving its supermajority support has met the requirement of Article 2, Section 22 . . .

Both the framers of the constitution and subsequent legislatures and voters have recognized that certain specified actions should command the support of more than a simple majority. Petitioners, to the contrary, urge that the same constitutional convention that embraced supermajorities for some purposes intended to prohibit statutes requiring supermajorities for any other purposes. The Constitution contains no language supporting this notion, however. The framers may not reasonably be presumed to have implied the prohibition of a political mechanism that they themselves adopted through language that does not say so. Given the plenary legislative authority of the people and the legislature, and the absence of a clear constitutional prohibition, the Court should not conclude otherwise.”

Seeing how the Court has had 18 years (since I-601 in 1993) and multiple opportunities to rule on 2/3 but has refused to do so there is no guarantee the latest ploy to gain legal standing will work.

As evident by the latest legal challenge, however, this issue needs to finally be put to rest. The only sure way to end this debate once and for all is for voters to have the opportunity to vote on a constitutional amendment.

Lawmakers opposed to this policy could simply use their talking points from 2005 when they placed a constitutional amendment on the ballot to reduce the vote threshold needed for voter approved school levies. At the time several lawmakers said they didn’t necessarily support the policy but the voters should have the opportunity to weigh in. Seeing how the voters have already weighed in four times for the 2/3 vote requirement for tax increases it would be better to let them resolve the debate instead of hoping for a judicial hailmary.

Of the sixteen states with supermajority tax restrictions, only Washington’s is statutory.

It is time to put all the cards on the table and let the voters decide with a constitutional amendment in a winner take all pot – not try to deal from the bottom of the deck with the ever elusive judicial card.

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[Reprinted from the Washington Policy Center blog]

Joint Committee Report on Tax Preferences Given to Legislators in Olympia

One of the hot topics from the 2011 Legislative Session sure to resurface next year is what to do about the state’s various tax preferences. To assist the Legislature in answering this question, in 2006, lawmakers adopted HB 1069 which set up the Citizen Commission for Performance Measurement of Tax Preferences administered by the Joint Legislative Audit Review Committee (JLARC). WPC’s Vice President for Research Paul Guppy serves on the commission.

Today JLARC released the commission’s 2011 tax preference report. Of the 25 tax preferences reviewed, JLARC recommends the Legislature:

Terminate one tax preference:

  • Repaired Goods Delivered Out-of-State (Sales Tax) – $0

Allow two tax preferences to expire:

  • Hog Fuel to Produce Energy (Sales & Use Tax) – $2.9 million
  • Renewable Energy Machinery (Sales & Use Tax) – $40.9 million

Review and/or clarify the intent of eight tax preferences

  • Aircraft Fuel Tax, Export and Commercial Use (Aircraft Fuel Tax) – $299.9 million
  • Extracted Fuel (Use Tax) – $69.2 million
  • Interest on Real Estate Loans (Business & Occupation Tax) – $172.6 million
  • Limited Income Property Tax Deferral (Property Tax) – $271 thousand
  • Meat Processors (Business & Occupation Tax) – $30.5 million
  • Municipal Sewer Charges (Business & Occupation Tax) – $3 million
  • Nonprofit Sheltered Workshops (Property Tax) – $4.4 million
  • Shared Real Estate Commissions (Business & Occupation Tax) – $36 million

Continue 14 tax preferences:

  • Boat Sales to Nonresidents/Foreign Residents (Sales Tax) – $13.7 million
  • Church Camps (Property Tax) – $6.9 million
  • Display Items for Trade Shows (Use Tax) – $5 million
  • Interest from State and Municipal Obligations (Business & Occupation Tax) – $1.8 million
  • Interstate Bridges (Property and Other Taxes) – $29 million
  • Investment of Businesses in Related Entities (Business & Occupation Tax) – $14.4 million
  • Laundry Services for Nonprofit Health Care Facilities (Sales Tax – $8.8 million
  • Nonprofit Blood and Tissue Banks (Property Tax) – $6.1 million
  • Nonprofit Day Care Centers (Property Tax) – $15.8 million
  • Open Space Compensating Tax (Property Tax) – $3.9 million
  • Real Estate Excise Tax Exemptions (Real Estate Excise Tax) – $1.4 billion
  • Sales of Goods to Certain Nonresidents for Use Outside the State (Sales Tax) – $58 million
  • Sales or Use Tax Paid in Another State (Use Tax) – $1 million
  • State-Chartered Credit Unions (Business & Occupation Tax) – $60.9 million

Here is the report’s methodology according to JLARC:

“JLARC staff analyzed the following evidence in conducting these reviews: 1) legal and public policy history of the tax preferences; 2) beneficiaries of the tax preferences; 3) government data pertaining to the utilization of these tax preferences and other relevant data; 4) economic and revenue impact of the tax preferences; and 5) other states’ laws to identify similar tax preferences.

Staff placed particular emphasis on the legislative history of the tax preferences, researching the original enactments as well as any subsequent amendments. Staff reviewed state Supreme Court, lower court, or Board of Tax Appeals decisions relevant to each tax preference. JLARC staff conducted extensive research on other state practices using the Commerce Clearing House database of state laws and regulations.

Staff interviewed the agencies that administer the tax preferences or are knowledgeable of the industries affected by the tax (the Department of Revenue, the Department of Licensing, the Department of Transportation, and the Department of Financial Institutions). These parties provided data on the value and usage of the tax preference and the beneficiaries. JLARC staff also obtained data from other state and federal agencies to which the beneficiaries are required to report.”

A hearing on the report has been scheduled for Wednesday, July 20th at 10:00 a.m. in Senate Hearing Room 4.

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[Reprinted from the Washington Policy Center blog; photo credit: flickr]

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