Why the Sales Tax Debate Erupts in Washington State

Nov. 22, 2011

The buzz in Seattle and other Washington locales is over another attempt to raise taxes.  Yes, Gov. Chris Gregoire wants to raise $500 million via a temporary half-cent increase in the state portion of the sales tax to offset continued budget deficits to prevent more state government cuts in spending.

Either the Legislature could pass the increase providing it passes with a two-thirds majority in an upcoming special session. If it can’t, the Legislature can pass a referendum bill by the end of this year for voter approval.

Gov. Gregoire’s request also threatens to risk relations with Oregon and neighbors by repealing their sales tax exemption when traveling and shopping in Washington state.

Washington’s sales tax debate request follows four developments:

  1. Failure by public officials to practice good stewardship of existing revenue.
  2. Lack of jobs – nearly a double-digit unemployment rate.
  3. Businesses are struggling.
  4. Washington’s two-thirds vote requirement for tax increases – demanded by voters in four referendums.

No. 1 – the sales tax increase request is not a surprise to watchdogs in the wake of years of overspending. For years, analysts have been warning about public policies, including in this space as long as two-and-a-half years ago when this portal was launched (Analysis: Steps for Economic Success in Washington State).

Part of the problem stems from furtive policymakers and the failure to answer the right questions: Why Not Transparency for Good, Open Government in Washington State?

No. 2 – 314,700 people are unemployed in Washington state out of the 3.5 million-person workforce. In October, 4,600 jobs were created in government, education, health services, manufacturing and wholesale trade.

No. 3 – With many of the new jobs in government and education, it underscores the point about the state’s business climate. The tech sector in Seattle is doing well. But ask any business owner or manager if their companies are better off now than they were in 2006 before the recession.

No. 4 – It seems unlikely the Legislature will be able to pass such an increase, but will authorized a vote of the people thanks to I-1053, which was passed last year after the Legislature circumvented the three previous voter-approved referendums (I-1053: Critical to Washington State Businesses and Workers).

The Secretary of State’s timeline for the sales tax debate:

  • Dec. 30 – Last day for Legislature to pass tax referendum bill for March 13 election
  • February 10 – Military and overseas ballots mailed for March election
  • February 21 – Mailing of voters’ pamphlets begins for March 13 election
  • February 24 – Regular ballots mailed for March 13 election
  • March 13 – Election Day

“There will be plenty of time to debate the merits of the Governor’s tax proposal but one thing isn’t open for debate, I-1053 is working exactly the way voters intended by providing them the opportunity to ultimately decide this important question,” writes Jason Mercier of the Washington Policy Center.

He offers this proviso:

“To help ensure this opportunity continues in the future, if lawmakers are going to send voters a proposed tax referendum they should also put a constitutional amendment enforcing the four-time voter approved two-thirds vote requirement for tax increases on the ballot,” he writes.

“This would provide the public and businesses with predictability about whether this tax protection will exist from year to year and clarify whether or not the four-time approval of the voters for this policy was a fluke or actually reflects their consistent and ongoing desire for lawmakers to build a strong public consensus on the need for any proposed tax increase,” he explains.

Agreed – tax increases would be unnecessary if the public officials worked to improve the business climate and performed to voter expectations. Tax increases are never temporary in Washington and the economic environment isn’t improving.

From the Coach’s Corner, Washington state has budget woes and high unemployment because legislators don’t ask the right questions, such as What Do Small Business Owners Need from Washington State Policymakers?

“Be thankful we’re not getting all the government we’re paying for.”

-Will Rogers


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

How to Alleviate Business Uncertainty in Washington State

 July 25, 2010

Washington state is comparatively healthy. But don’t tell that to most employers. They won’t buy it. Washington state has lost more jobs, 16,000, in the past year than 41 other states.

Unemployment rates are a huge drag holding back economic development. There are many reasons why job creation is sputtering.

Actually, it’s symptomatic and related to many economic problems. The overall common denominator is uncertainty – from declining sales revenue, threats of a double-dip recession, tax increases, and unproductive public policies.

Yes, Washington faces another $3 billion shortfall.

A July Op Ed piece in the Seattle Times by State Auditor Brian Sonntag made an excellent case for decreasing the size of state government and improving its inefficient budgeting process.

“We need to resize government’s footprint to reflect what it can and should do, balanced with what it can afford to do,” Mr. Sonntag wrote. “We will not get there unless we stop, now, the petty partisan bickering that erodes citizens’ trust in government and inhibits meaningful solutions to our greatest challenges.”

A frequent complaint on this site is the mega unfunded public pensions. Mr. Sonntag points out Washington state public pensions are skyrocketing and $8 billion is unfunded.

“Our work at the Office of State Auditor uniquely positions us to understand the state’s broad financial condition,” Mr. Sonntag explained. “For example, we know even in good economic times as well as bad, the state has not systematically funded all its long-term financial obligations.”

It’s not just the unfunded aspects of pensions, which I contend are too generous vis-à-vis the retirement plans available in the private sector.

Mr. Sonntag cited a related example: “A $4 billion liability in the health-and life-insurance benefits paid to retired public employees without any accumulation of revenue to pay for it.”

Political “courage” and “leadership” is needed, he wrote.

“It is time to end the current era of political polarization and extreme partisanship. We must transform government together,” he asserted. “We must put aside the premise of ‘I’m right, you’re wrong.’ We must do what is right instead of doing what makes the other side look bad.”

His points are astute and accurate. The tendency, as it is at the national level, is to focus on personalities and not principles. It’s time to stop shooting the messenger instead of the message, and to be honest in campaigns.

For example, it took legal action by the Association of Washington to clean up the ballot title for Referendum 52. To win passage of $505 million in bonds for energy-saving school construction projects, the wording would have tricked voters into extending the new tax on bottled water. A Thurston County judge ruled that the phrase, “job creation,” was disingenuous and removed it from the ballot title.

Alleviating uncertainty

Voters have an opportunity to start implementing solutions this fall. The most salient is transparency and voter protection against disingenuous taxation. In essence, Initiative 1053 will again require a two-thirds majority on any legislative tax increase, and approval by voters.

I-1053 must be passed. Plus, voters have to make it clear to lawmakers that they will not put up with any more games.

Three times voters have passed this protection, and each time the Legislature has circumvented it.

Initiative 1082 deserves voter approval. It would pave the way for private insurers in Washington state workers’ compensation.

Liquor sale privatization is important, too, in I-1100. It would end the state’s monopoly on liquor sales and put it in the hands of the private sector. That includes the 1,500 state-liquor employees.

The class warfare implications of I-1098 are troubling. That’s the income tax on the affluent. A similar 2010 measure in Oregon has failed to help that state’s economy.

Another opportunity to alleviate uncertainty is to comment at two remaining events: The Governor’s Committee on transforming Washington’s Budget. So far, only the special interests advocating the status quo are showing up to comment.

The final two hearings:

  • July 27, 7-9 p.m. in Vancouver – Washington State University-Vancouver, Administration Building Room 110, 14204 NE Salmon Creek Avenue.
  • July 29, 7-9 p.m. in Spokane  – Spokane City Hall, City Council Chambers, 808 W. Spokane Falls Boulevard.

Will you participate.

Meantime, productive public policy will do a lot to alleviate concerns about business uncertainty, and will make it easier for businesspeople to solve their declining sales revenue.

From the Coach’s Corner, admittedly, I haven’t budgeted the time to review the dozens of initiatives on the November ballot, but have read a few others.

For some levity, here are two extreme initiatives:

  • I-1079 – “This measure states that it is an act to require state and governmental agencies, publicly owned companies, and non profit groups to pay all mandatory overtime at the rate of three times the employees’ hourly rate.”
  • I-1069 – “This measure would require the Seal of the State of Washington to be changed to depict a vignette of a tapeworm dressed in a three piece suit attached to the lower intestine of a taxpayer shown as the central figure. The seal would be required to be encircled with the following words: ‘Committed to sucking the life blood out of each and every tax payer.’ The illustration would be selected from submissions submitted by taxpayers.”

And to see dozens other public-policy columns, visit this section.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.