The cost of a property tax cut

The cost of a property tax cut
The Senate narrowly approved ESSB 6614, which reduces the $1 state property tax rate increase by $.30. However, opponents criticized a provision in the bill that redirects extraordinary state revenue meant for the rainy-day fund into an education account. Photo author: Created by Dooder -

Washingtonians could get a state property tax rate reduction next year, but it may cost them more than they want to pay.

After debating the merits and legality of ESSB 6614, the Senate on Mar. 7 narrowly approved the proposal that cuts $.30 from the $1 state property tax rate increase passed last year – a total of $400 million in savings to taxpayers. However, the legislation also redirects $700 million in unexpected revenue intended for the budget stabilization account and education spending.

The move was criticized by state lawmakers, who say the provision circumvents the supermajority requirement to spend emergency reserves and is unnecessary at a time when the state is expecting billions in unanticipated revenue growth.

During the floor debate, Sen. Hans Zeiger (R-25) told colleagues that “this is reckless. It is irresponsible. It is unconstitutional. We can do better. I’m troubled that we find ourselves on the brink of an unconstitutional act not in a time of desperation, not in a time where our budgets are inclined, not in a time of want, but in a time of great prosperity.”

However, after the bill’s constitutionality was called into question, Democrat Lieutenant Governor Cyrus Habibi ruled it did not violate the spirit or the letter of the constitutional amendment approved by 67 percent of voters in 2008 because it did not actually withdraw money from the rainy-day fund.

Despite warnings from State Treasurer Duane Davidson that the appropriation could harm the state’s bond ratings, Sen. Mark Mullet (D-5) told colleagues that “taking $400 million out of the rainy-day fund or taking $400 million before it goes into the rainy day, from a financial perspective, is not putting the state at any additional risk.”

He added that the debate felt like a bizarro world situation where “we’re arguing this much about cutting $400 million in property taxes.”

Sen. Kevin Ranker (D-40) agreed. “That is real tax relief for middle class, working families in Washington.”

For some Senate fiscal hawks, the bill represents neither a true property tax nor prudent budgeting. Sen. Doug Ericksen (R-42) remarked sardonically that “I’m sure they’re (taxpayers) waiting to just jump up and down in their homes and say ‘Thank you so much for being so benevolent and kind and gracious to me, the humble taxpayer’. Come on! If you raise property taxes by $1, you should return the property taxes by $1 when you have three billion dollars more to spend. This is just crazy.”

What’s more concerning is the bill’s long-term precedent for preemptively draining the rainy-day fund by seizing the money before it enters the account. That’s according to Jason Mercier, government reform director at the Washington Policy Center.

In a blog post he wrote: “Like all controversial budget moves, this development happened in the last few days of session with little public involvement. During my younger years I thought you could design mechanisms to force fiscal discipline on the legislature. Experience has taught me, however, those efforts are like trying to use a spaghetti strainer to hold water. SB 6614 is the perfect example of that.

“While it is good to see the legislature recognize the need to provide property tax relief, the terrible precedent set by SB 6614 will surely come back to bite us again in the future,” he added.

Sen. John Braun (R-20) voiced a similar opinion on the Senate floor. “They (state residents) want fiscal restraint, and this is going around fiscal restraint. I think that what this will ultimately be seen as is an unconscionable breach of the public trust.”

The Washington Research Council has noted that although the state has experienced “extraordinary” revenue since the 2013-15 biennium, “the Legislature has spent almost all of it.”

ESSB 6614 received a public hearing early Mar. 8 in the House Finance Committee.


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