State lawmakers should return the extra money they are taking from taxpayers
December 2006
This holiday season most of us are hoping to see a Christmas bonus from the boss. The state Legislature could provide another kind of bonus. Lawmakers now control a budget surplus – that is, tax money they have collected beyond what is needed to fund the government – of almost $2 billion. That’s enough to cut a check worth $416 for every adult in the state.
Just because legislators could return our money, though, doesn’t mean they will. When lawmakers find themselves with excess taxes, they have two choices: 1) spend it; 2) return it. (They could, of course, put it in reserve, but that’s just a decision to spend it later.) The political pressure in Olympia to spend the surplus is tremendous. Special interests, from government unions to political activists, are already gathering in the capitol with their wish lists of higher spending.
Lawmakers like having extra revenue too. It makes everything so much easier...for them. Legislators work in a world of constant spending requests, because government unions and other interest groups have full-time lobbyists in Olympia, while the average taxpayer does not. Controlling more public money allows legislators to say “yes” to these requests more often.
If legislators do think of returning some or all of the tax surplus, though, here are some options for them to consider.
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A tax rebate. A full tax rebate would equal $416 for every adult, $832 per couple, in the state. The advantage of a rebate is that it is immediate and transparent. It also brings rapid stimulus to the economy, spurring jobs and investment. The downside is that people who receive a rebate are not always the same people who paid higher taxes in the first place.
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Cut the property tax. The state collects the single largest portion of total property taxes, roughly one-third of every property owner’s tax bill. Property tax relief would help people across the state, especially the elderly and families living on fixed incomes. Even renters benefit when the yearly cost of owning and managing property goes down.
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Cut the sales tax. Reducing the state sales tax rate, currently 6.5%, would return the surplus and reduce the cost of living for everyone in Washington, while not impairing the state’s ability to pay for current public services.
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Increase the Business and Operating tax credit. Increasing how much a small business can earn before paying taxes would improve the business climate for start-ups and small enterprises. It would also help workers. More than half of working Washingtonians own or work for a small business.
No one can say Washingtonians don’t already pay their share of taxes. Washington is one of the most heavily-taxed states in the nation. In all, we pay over 50 different kinds of taxes at the state and local level. The sales tax and the excise tax on homesales are particularly lucrative cash sources for the state. The large number of taxes, combined with a growing economy, is why a record level of revenues is flowing from the people to the treasury in Olympia.
The result is a state government with plenty of money. The two-year General Fund budget spends more today than at any point in state history, about $27 billion. Much of government spending growth is set on auto-pilot by entitlement policies. The total biennial state budget tops $53 billion, when entitlements and federal grants are included. In the most recent two-year budget, the legislature increased the size of government by 17%, almost triple the rate of inflation.
Opponents of easing the tax burden claim it would lead to disastrous program cuts. But that’s the advantage of returning a surplus – no cuts to existing programs are required. The current growth in state programs is already built into the budget. The $2 billion surplus is money that has arrived on top of previously estimated revenues.
Besides, a tax cut is 100% voluntary. For those who oppose receiving a refund, simply tear up your rebate check and throw it away. The legislature will gladly find other ways to spend your share.
To repeat, these are surplus revenues. Returning them to the people would have no impact on the state’s ability to fund public services. It’s a matter of simple fairness – lawmakers should not take more money from us than is needed to pay for government programs. Returning the surplus shows basic respect for people, and besides, a chance to receive some of our own tax money back might be the best Christmas bonus ever.