Notes from Feb 5 and next steps

Hey everyone: We had a small but productive meeting today; here's a summary and next steps!

In attendance: Yoram Bauman, Catherine Carey, Todd Myers

Update #1: WCI is still looking iffy (maybe 30% chance?) as far as the legislature goes, and our plan is still to be prepared to step in fast with a proposal if the WCI doesn't pass. That's a challenge because so many eyes are focused on the WCI, but I'm confident that we can make good progress in the next month or so.

Update #2: Bruce Flory tracked down some information on limitations on property tax growth (e.g., from Eyman initiatives); his whole email is below but the key message is that something in the 3.0-3.5% range is a good guess for annual property tax growth (in nominal terms), so our assumption of 4% is a good conservative assumption.

Policy: Todd Myers made a strong case that Assoc. of WA Business and other elements of the business community would be more attracted to a slimmed down proposal that focused on just three things: (1) eliminating the state property tax, (2) setting aside 10% of revenue to offset impacts on low-income households, and (3) rebating state B&O taxes. Getting business support would be amazing, so those ideas are reflected in the current spreadsheet. (If you want to compare with the previous version, there's a tab in the spreadsheet that has the old version.) However, it is also important to note that the policy discussion is still continuing (see below!) so if your favorite idea was left out then there's still hope for major changes, which I think are especially likely if the business community does not get behind this.

Next steps: In the next month we should all attempt to have one-on-one meetings with various stakeholders &etc to see (1) what they think, (2) what it would take to get their names attached to an op-ed supporting this, and (3) who else we should talk to. Todd is going to talk to the business community (and his other right-wing friends :). Yoram is going to talk to his contacts in the business and environmental and education and social justice communities, and everybody else should join in the fun. This is pretty time-sensitive stuff, so feedback via email to me would be best.

Overview: If we can get the voting public on board because of the elimination of the state property tax, the environmental community on board because of the carbon tax, the business community on board because of a hefty cut in B&O taxes, and the social justice community on board because of the offsets for low-income households, that would make one super-attractive package. Let's see if we can make it happen!

Next meeting: Th March 5, 12-1pm, same downtown location.

PS. Todd is also going to investigate the "tax creep" issue that was brought up by one Republican legislator who was concerned that local governments would respond to the elimination of the state property tax by just raising local property taxes.

PPS. Here's the property tax info, from Bruce Flory: OK, here's the scoop. The Eyman initiative that is operative is I-747. Although it passed in 2001, it was actually overturned by the Supreme Court in 2007 but then immediately reinstated by the legislature. It provides that property tax revenue from existing properties can increase by no more than 1% or the rate of inflation (as measured by the U.S. Implicit Price Deflator) - whichever is LESS - from the highest revenue over the prior 3 years. However, this restriction does not apply to new construction (anything requiring a building permit), "improvements" to property (e.g. the increase in value from subdividing a parcel even if it isn't built on), and a few odds and ends like the value of new wind turbines. Statewide, the value of new construction, improvements, etc., averages around $20.5 billion per year. With an average state property tax rate of about $1.75 per $1000, that works out to revenue of almost $36 million which is 2% of total annual revenue of $1.8 billion. This implies that the maximum increase in state property tax revenue is about 3% per year. This is confirmed by some figures I was able to get on actual and forecast increases in revenue from 2005 thru 2015. They are: 2005->2006: 3.4%, 2007: 3.8%, 2008: 3.6%, 2009: 3.1%, 2010: 0.0%, 2011: 3.1%, 2012: 3.2%, 2013: 3.2%, 2014: 3.2%, 2015: 3.1%. So I'm pretty comfortable using something in the low 3% range for our forecast of annual growth in NOMINAL state property tax revenue. For our purposes, using 4% would be very conservative. This of course assumes no change in the regulatory environment. My source for information on the I-747 limits is Kathy Beith in the Dept of Revenue Property Tax Division. My source for historical and forecast revenue growth is Valerie Torres, a tax policy specialist in the Research Division of the Dept of Revenue.