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To invest in the high-quality K-12 education Washington’s kids deserve, lawmakers should clean up the state’s primary source of school funding – the property tax code. There’s a way to clean up the tax code while also creating a more sustainable, equitable source of funding for our kids’ schools. Here’s how:
Washington’s state and local property taxes have historically been a reliable source of funding for schools, public safety, and other important priorities that serve all Washingtonians. But the property tax’s ability to support these investments has steadily eroded since Tim Eyman’s Initiative 747 – which built on previous limitations enacted in the late 1990s – was approved in 2001.
I-747 limited the annual growth in property tax collections to a maximum of 1 percent per year¹ for the state’s portion of the property tax revenue and for all local property tax levies that don’t have to be regularly re-approved by voters. Because the state’s portion of the property tax is dedicated to K-12 public schools under the state constitution, this restriction on property tax revenue means it can’t keep pace with the annual growth in essential education costs, like heating classrooms and providing manageable class sizes.
Washington’s kids have been paying the price for this disastrous law ever since it was first enacted. As the chart below shows, in 2016 alone, the 1 percent levy growth limit left $1.5 billion on the table that could – and should – have been invested in our school kids. Those resources would have gone a long way toward closing the gap on the Supreme Court mandate for school funding per the McCleary decision.
To reverse this trend, lawmakers should repeal Eyman’s 1 percent levy growth limit and raise the state property tax rate to $3.60 per $1,000 of assessed value. Doing so would inject at least $1.5 billion per year back into our kids’ classrooms.
The across-the-board 1 percent levy growth limit is the wrong way to address our upside-down tax code – in which Washingtonians with the lowest incomes are paying the way for the wealthiest. A safeguard rebate is a better way to ensure that our property tax system is both sustainable and equitable. It allows policymakers to raise additional resources for schools while reducing taxes for middle- and lower-income homeowners and renters. (Read more about our safeguard rebate proposal on this schmudget blog post.)
1. The 1 percent levy growth limit caps growth in property tax revenue from regular levies by the lesser of 1 percent or the rate of inflation per year plus the value of new construction.