The November ballot in Washington state includes five deceptive “advisory vote of the people” measures in which voters are asked to weigh-in on several modest tax changes adopted by the legislature earlier this year. Yet, the law establishing these advisory votes was purposefully tailored to deny voters key facts and context about the tax changes at issue.
Confused? Enter your friendly neighborhood schmudget. We are here to help.
As we wrote last week, public advisory votes are the brainchild of conservative activist Tim Eyman, who deliberately structured the votes to mislead voters and dissuade lawmakers from taking any action to raise additional funds for health care, education, public safety, and other investments that create jobs and build a strong state economy.
Below is detailed information about each of the five public advisory votes on the ballot—information that you won’t find in the ballot titles or the voters’ guide.
Advisory Vote No. 3
“The legislature eliminated, without a vote of the people, a leasehold excise tax credit for taxpayers who lease publicly-owned property, costing approximately $2,000,000 in the first ten years, for government spending.”
Context: Senate Bill 5444 was introduced during the 2013 legislative session in order to reduce costs and improve efficiency at county property tax assessors’ offices throughout Washington state. Before this bill was enacted, county property tax assessors were required to perform costly and time consuming assessments of publically owned properties, an activity that served little purpose since property owned by the state or local governments are exempt from the property tax. However, in eliminating these costly assessments policymakers also had to eliminate a small leasehold excise tax credit, which was calculated using property tax assessments, available to certain businesses that lease publicly-owned land.
Revenue impact: The elimination of this tax break was projected to increase leasehold excise tax collections by $145,000 per year at the state level and by $127,000 per year at the local level.
Advisory Vote No. 4
“The legislature imposed, without a vote of the people, an aircraft excise tax on commuter air carriers in lieu of property tax, costing approximately $500,000 in its first ten years, for government spending.”
Context: Senate Bill 5627 was championed by Governor Inslee in order to reduce taxes for Kenmore Air, a commuter air carrier located in Washington state. Prior to the adoption of this legislation, commuter aircraft were subject to the state property tax. Under SB 5627 commuter aircraft were exempted from the state property tax and instead became subject to the aircraft excise tax.
Revenue impact: Although Kenmore Air will pay an additional $35,000 per year in aircraft excise taxes, its state and local property tax bills will fall by about $51,000 per year, a cost that will automatically be recouped through higher property tax bills for other homeowners and businesses.
Advisory Vote No. 5
“The legislature extended, without a vote of the people, the insurance premium tax to some insurance for pediatric oral services, costing an amount that cannot currently be estimated, for government spending.”
Context: House Bill 1846 was enacted by policymakers to ensure that consumers purchasing health insurance plans through Washington state’s new insurance exchange, a major component of the Affordable Care Act (Obamacare), would be able to purchase stand-alone dental coverage for their children, if such coverage wasn’t included in their health plan. HB 1846 also created a more even playing field by eliminating an insurance premiums tax exemption. Without this change, pediatric dental services offered in the exchange would not have been subject to the tax while those operating outside of the exchange would have been required to pay it.
There was no opposition to this bill when it received a public hearing before the Senate Ways & Means Committee on April 8, 2013. Representatives of health and dental insurers and the Washington Dental Service all testified in favor of this bill.
Revenue impact: Indeterminate.
Advisory Vote No. 6
“The legislature eliminated, without a vote of the people, a retail sales tax exemption for certain telephone and telecommunications services, costing approximately $397,000,000 in the first ten years, for government spending.“
Context: Policymakers enacted House Bill 1971 in order to foster more stable funding for emergency 911 services (E-911) and investments that ensure lower-income and rural residents have access to affordable telephone and voicemail services. In doing so, this bill also brought greater equity and parity to taxes applied to landline, cellular, and internet, telephone services. This was accomplished by extending the sales tax to previously exempt landline telephone services. (Cell phone services were already subject to the sales tax.) It also eliminated two excise taxes that applied only to landline telephone services.
By adopting these changes and clarifying the law, policymakers also negated an ongoing and potentially costly lawsuit that was brought by mobile telecommunications companies in 2007 over sales taxes applied to cell phone services.
Revenue impact: Extending the sales tax to landline telephone services along with the elimination of two landline-only excise taxes will increase state tax revenues by about $30 million per year.
Advisory Vote No. 7
“The legislature extended, without a vote of the people, estate tax on certain property transfers and increased rates for estates over $4,000,000, costing approximately $478,000,000 in the first ten years, for government spending.”
Context: House Bill 2075 closed a legal loophole that would have allowed certain, very wealthy estates to avoid paying any estate taxes used to fund public schools. Without this fix, the state would have lost roughly $120 million in resources used to educate our children.
The estate tax was overwhelmingly approved by voters in 2006. However, as part of the “Bracken decision,” the State Supreme Court effectively eliminated the tax for certain married couples due to a legal technicality.
HB2075 closed this loophole. It also changed the law so that the tax threshold, which exempts any estate valued less $2 million from paying any estate taxes, will rise annually according to the rate of inflation. The bill also provided a $2.5 million deduction for small businesses and increased the rates for the wealthiest households by 1 percentage point to offset the costs of the new deduction and the increased exemption threshold.
Revenue Impact: In the fiscal year that ends in July 2014, this measure will prevent a $118 million loss in estate tax revenues for public schools. Going forward, HB 2075 will increase revenues by about $40 million per year.
Be sure to check out our post from last week which details how the advisory votes distort the facts.