Growing Demand For Sound Transit 3 Tax Reform

Growing Demand For Sound Transit 3 Tax Reform
Concerns over new Sound Transit 3 taxes are driving several bills in both the state House and Senate. The latest one is HB 2201, which passed out of the House Transportation Committee Monday, April 10. Photo: westwolves.org

Intensifying angst among central Puget Sound region drivers over a new motor vehicle excise tax (MVET) to pay for Sound Transit 3 continues to spur action by state lawmakers on both sides of the aisle. Last week, the state Senate narrowly passed SB 5893 requiring Sound Transit to reform the way it calculates vehicle values for MVETs, though the bill is unlikely to gain House approval. House Democrats this week introduced legislation they say takes a middle ground approach by providing tax relief without negatively impacting transportation projects funded through it. HB 2201 passed out of the House Transportation Committee Monday, April 10 after a public hearing that day. However, although some Republicans on the committee voted for it, they added that it doesn’t go far enough.

Achieving Tax Relief From ST3

“I really think that we can do more,” State Rep. Jesse Young (R-26) told colleagues at the House Transportation meeting. “I’m holding out in the hope that we can get greater tax relief.”

Concerns over the new vehicle depreciation schedule have been reflected in discussions over the proposed House transportation budget. Last week, several House Republicans introduced amendments that would allow cities and counties to nullify the new ST3 taxes or enable voters in those jurisdictions to opt out of the new MVET. However, Sound Transit officials have warned that changing the vehicle valuation formula could harm their finance planning for ST3 projects.

Lawmakers Eye Tax Rebate Program

Under HB 2201, Sound Transit would have to create a tax credit program by comparing the current MVET fee calculation to a 2006 depreciation schedule created by the legislature. Sound Transit’s current evaluation system was previously used and eventually rejected by Washington voters via Initiative 695 in 1999, though the initiative was later overturned by the State Supreme Court.

The state Department of Licensing would be required to inform vehicle owners of the fee amount owed as well as the tax credit amount. Drivers who have already paid the current MVET would be reimbursed based on the credit amount.

If the rebate program affected Sound Transit 3, the agency would have to identify savings and cost reduction opportunities from their projects, with highest priority on parking facilities. Although a fiscal note is not yet available, it is estimated to reduce Sound Transit revenue by $780 million.

The bill’s sole sponsor is State Rep. Mike Pellicciotti (D-30). He told colleagues that it would “allow individuals drivers and taxpayers to be paying the tax based on the accurate and current value of their cars…while at the same time making sure that the will of the voters is being met through Sound Transit 3.”

“We can do this if we’re smart about this,” he added.

Although many Republican committee members ultimately voted for the bill, they also argued that Kelley Blue Book would provide a more accurate vehicle worth. A proposed substitute by State Rep. Mark Harmsworth (R-44) would have used its valuation or the National Automobile Dealers Association. The substitute bill would have also made light rail projects top priority for identifying cost savings.

Harmsworth: “We’re Looking For Real Tax Relief Here.”

“While I appreciate the underlying bill and some of the changes it makes…I don’t believe it goes as far as it needs to,” Harmsworth said. “We’re looking for real tax relief here.”

However, Pellicciotti argued that Kelley Blue Book “does not have a consistent depreciation over many years.” Using the 2006 schedule set by the legislature is “the most appropriate way to address the current inaccurate valuation system,” he added.

The view was shared by Chair Judy Clibborn (D-41), who said “I feel that this is an overreach.”

The proposal substitute was rejected by the committee.

Responding to Taxpayer Revolt

Top-ranking Republican lawmakers were critical of HB 2201 at a Monday press conference shortly after the committee vote was taken. House Minority Leader Rep. Dan Kristiansen (R-39) told reporters that the bill would only provide minimal relief.

“When you still got 90 percent of the problem existing that’s a big problem,” he said. He added that Republicans on the Transportation Committee voted for it because “I’d rather save my folks a dime than nothing.”

State Sen. Steve O’Ban (R-28) is the primary sponsor of SB 5893. He told reporters HB 2201 is “a band aid. Ours (SB 5893) is comprehensive tax relief.”

He added that he anticipates Sound Transit and Democratic state lawmakers will back stronger MVET reform “as they keep hearing…from taxpayers, who are in near open revolt over the size of the tax increase they’re receiving.”

State Sen. Dino Rossi (R-45) also expressed skepticism to reporters about the fiscal concerns raised by Sound Transit officials, referencing the nearly $1 million the agency spent celebrating the Capitol Hill and UW light rail stations opening.

“That’s who we’re talking about here,” he said.

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