With the underlying framework of Washington’s tax system essentially unchanged since the 1930’s, it’s not a surprise that our state’s tax base is shrinking relative to the state’s economy. The state’s General Fund relies on three major sources of revenue: sales, business (B&O), and property taxes.
These taxes concentrate on parts of the economy that were very important back in the day (like land and purchases of goods), while leaving key components of the modern economy untouched (such as investment wealth and purchases of services).
By failing to capture revenue from a changing economy, we are starving our state of needed investments in education, transportation, and health. And the myriad of tax breaks, exemptions and deferrals (that once in place, are rarely – if ever – reviewed again) is compounding the problem.
Simply raising existing rates to fund new services only makes these problems with the tax structure worse and fuels voter discontent. And the old, shopworn argument about government waste don’t hold water here either.
The key to staying competitive in the 21st century is a fairer tax system that keeps pace with economic growth and provides the revenues for high-priority public investments in the public infrastructure necessary for shared prosperity.
The New America Foundation notes an interesting solution to this in Florida. Legislators wrote specific legislative language a few years to ensure that “communications services” would continue to be taxed despite changing technology that alters the mechanics of the call itself.
Closer to home, perhaps it’s time for Washington’s elected officials and voters to examine tax exemptions as closely as it monitors tax increases.
Initiative 960 prevents the state Legislature from approving any revenue increase unless a two thirds supermajority approves. All revenue increases (whether they be taxes or fees) are subject to a nonbinding public vote.
If taxes are so important to monitor that every school or fire levy, park bond issue, or sales tax change must go to a vote of the people, then exceptions to the tax code, which deprive our communities of revenue for important public services, certainly merit the same close examination.
While we’re at it, let’s require an automatic sunset clause in every tax break passed by the legislature. That would give our elected officials the opportunity to re-examine the trade-offs — and take a repeated public stand on whether those special tax breaks still make sense for our state.