Tax scratch fever

Initiative 695 proposes to give you cheap car tabs and make state government disappear.

The tax revolt is motoring into Washington in a shiny new car with cheap license plates.

More than half a million voters signed petitions supporting Initiative 695, a ballot issue designed to all but eliminate the state's motor vehicle excise tax. The missing money is hardly small potatoes—the state would lose 2.9 billion bucks over the next four years.

State legislators couldn't go looking in another cookie jar for more greenbacks either—the initiative would also force all governmental entities to take a public vote before increasing any tax or fee.

So why do backers feel this extreme measure will fly with voters? The measure would replace the state's current auto license tax of 2.2 percent of your car's value with a flat fee of $30. Promoters of the initiative haven't missed the obvious appeal to car owners—especially those with expensive new gas hogs. They've dubbed their measure "The $30 Car Tab Initiative," a sound bite calculated to lull even the most civic-minded state resident into voting their wallet.

Initiative sponsor Tim Eyman cites the state's $1 billion revenue surplus as proof that voters are overtaxed. While the Legislature has had no trouble approving corporate tax breaks, he continues, the last significant tax cut for ordinary citizens was the 1978 elimination of the sales tax on food. "It's really been 20 years since the little guys got any sort of tax break," he says. "It's a matter of returning the billion-dollar surplus back to the people."

But, while that refund would be completed within a year and a half, I-695 would be the gift that keeps on giving. Or taking. Particularly hard hit would be local public transit districts, which would lose more than $345 million of the $450 million they now receive every two years from state coffers.

"This is one of the dumbest, most destructive proposals I've ever seen," says Aaron Ostrom, board president of the Transportation Choices Coalition. "It will wreck our public transit." In King County alone, Ostrom says, Metro would have to cut $100 million out of its budget, eliminating more than one million hours of bus service.

Dan Snow of the Washington State Transit Association says the short-term effect will inevitably be devastating cuts in public transit service all around the state, especially for small systems in rural areas. He cites Island Transit, the bus system serving Whidbey and Camano Islands, which could lose 60 percent of its budgeted revenues. "From my perspective, it's unfortunate, because Washington state enjoys one of the best [transit] funding bases in the country," says Snow. "It's the envy of other states."

Ron Posthuma, deputy director of the King County Department of Transportation, could face dual cuts, both in funding for his transit division and for road repair programs. The department is feverishly working up a financial contingency plan.

Ironically, one of the main criticisms of the motor vehicle excise tax (MVET) system has been that too much of the money is spent on nonautomobile transportation projects, such as public transit and the ferry system. This was changed by state voters last year when they approved Referendum 49, a six-year highway repair and construction program. Among its other provisions, R-49 shifted half of the MVET revenues to the state's transportation fund. If voters decide that paying $30 for car tabs is more important than fixing roads, the transportation fund would lose more than $2 billion over the next three and a half years.

The state Republican Party, a major backer of R-49, has remained neutral on the $30 Car Tab Initiative. Although party leaders aren't pleased with seeing funding for their highway repair proposals slashed, most of the rabid tax-cutters tend to be Republicans.

The Association of Washington Business has already come out against I-695, mainly because of that group's role in backing increased funding for roadway improvements.

An anti-I-695 campaign is already forming, but Eyman argues that they have an uphill battle. The major enemy of the opponents is voter apathy. One of the many indications that voters aren't paying attention: a counter on the anti-I-695 Web site has recorded just 2,047 hits. Without extensive discussion of the financial effects, opponents fear, the $30 Car Tab Initiative will be a slam dunk.

Even more problematic is I-695's ban on non-voter approved tax increases, which defines taxes so broadly that it would include any fee charged by any governmental entity. Want to raise the rates at city pools? Let's call an election. How 'bout a hike in dog license fees? Now there's an issue we all need to debate and vote on!

Even KVI shock jock John Carlson—like Eyman a major leader in last year's anti-affirmative action Initiative 200—has balked at this provision, calling it micromanagement.

Eyman responds that many taxpayers were unenthusiastic about last year's unsuccessful version of the car tab initiative, which didn't include the no-tax increase provision. They argued that government officials would simply raise other taxes to make up for the cut, says Eyman. Without the provision, I-695 could actually end up as a net tax hike, he notes. "Every taxing authority in the state, whether their budgets are affected by I-695 or not, would use the initiative as an excuse to raise their taxes and fees. So we want to make sure the taxpayers are protected from that kind of retaliation."

And Eyman's not just blowing smoke; he's actually got some evidence. Just two years ago, Washington state voters approved Referendum 47, a measure slashing property taxes. R-47 forced local governments to limit property tax increases to the rate of inflation unless they can show a "substantial need" to do so. However, since then local governments have done much to confirm the suspicions of the antitax crowd: This year, 25 of Washington's 39 counties found—you guessed it— "a substantial need" to increase taxes above the .85 percent inflation rate.

Eyman further argues that most of the money returned to taxpayers will be spent on goods and services, which would bolster the state's major revenue sources—sales and business taxes. He also says that the state has enough surplus money to delay the financial effects of I-695 until programs can be scrutinized for appropriate cuts. "Every single government program that is funded by license tab fees is going to have to rejustify their funding," he adds.

Tax-cutting measures such as I-695 are nothing new. The granddaddy of tax revolt measures, California's Proposition 13, was approved by that state's voters in 1978, in part as a response to a state budget surplus. That measure cut property taxes by 30 percent and capped future increases. Within five years, more than half of US states had passed similar ballot measures. Proposition 13 critics argue that the property tax-slashing measure has severely eroded California's ability to provide basic services, including road repair and schools. Before the proposition, California ranked 5th among US states in school funding; now it has fallen to 40th. One California county repaves its roads on a 120-year cycle; highway engineers recommend repaving every 20 years.

But Proposition 13 supporters point to the continued growth in California government spending despite the measure's limitations. Stephen Moore of the libertarian Cato Institute notes that state government spending in California grew at a rate of 75 percent over inflation in the dozen years after the initiative went into effect. "Only in government would a 75 percent real spending hike be considered inadequate and neglectful," he observed recently.

For the short-term, Washington's Initiative 695 will probably end up where many voter-proposed measures have found themselves in recent years—in court. Attorneys in many jurisdictions are examining the legality of the initiative. Cliff Traisman, Seattle's intergovernmental relations chief, observes, "For every five lawyers in this state, I'll bet two are thinking about this."

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