Open Government

WPC's Center for Government Reform's mission is to partner with stakeholders and citizens to work toward a government focused on its core functions while improving its transparency, accountability, performance, and effectiveness for taxpayers.

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Overview of Property Tax Levies for Pike Place Market and Seattle Parks

November 8, 2008 in Publications

This November, Seattle voters are being asked to approve three new tax increases. Two are proposed by Seattle’s elected leaders, who are again urging voters to authorize an increase in the tax burden, over and above what citizens pay now, to pay for core public amenities.

"Wiggle room" on tax increases?

November 6, 2008 in Blog

With the prospect of a projected $3.2 billion budget problem growing even larger after this month's revenue forecast, some in Olympia are already talking about tax increases - this only two days removed from the election. According to the Seattle Times (Gregoire's next big test: balancing budget without raising taxes):

. . . Senate Majority Leader Lisa Brown, D-Spokane, didn't rule out the prospect of tax or fee increases.

Brown also said lawmakers could look at targeted taxes or fees, or consider ending certain tax exemptions.

"If you look at a tax exemption and you decide you need to close it or limit it somehow, is that raising a tax? Some of it comes down to definitions," she said.

Gregoire was pretty explicit during the campaign when pressed on whether she'd support increasing taxes or fees next year. She said no and reaffirmed the vow Wednesday.

"Now is not the time you put taxes on people," she said, adding that during the campaign she has met people across the state who are suffering from the economic problems that have shaken the nation.

Still, some Democrats see wiggle room for the governor.

Paul Berendt, a former chairman of the state Democratic Party, said he thinks Gregoire and lawmakers could put together a tax package that would help balance the budget and support new programs — and send it to voters.

That would allow Gregoire to propose additional spending without signing a tax increase.

The fact that voters agreed to raise sales taxes for a $17.9 billion Sound Transit light-rail expansion suggests that approach could work, Berendt said.

When asked recently if she'd support sending a tax increase to voters, Gregoire said, "I will leave that to my colleagues in the Legislature. I will forever maintain that the voters ought to be able to decide that. ... I wouldn't be involved in it. It would bypass me. It would not be something that the governor would sign on to or sign off on."

While sending a tax increase proposal to voters would be consistent with the Governor's comments that any tax increase should receive voter-approval, how would a tax increase referendum provide any "wiggle room" on her repeated campaign statements reaffirmed in the Times article that now is not the time to raise taxes on Washingtonians?

Based on her comments above, any doubt now that Sen. Brown's lawsuit to overturn the voter-approved 2/3 vote requirement for tax increases has more to do with the ability to easily raise taxes than the Senator let on?

Oregon running away from income taxes?

October 31, 2008 in Blog

While some in Washington continue to flirt with the theory that if only the state had an income tax we'd never have another budget problem, our neighbor to the south is discussing repealing its income taxes and moving instead to sales taxes.

According to The Oregonian (Panel offers long-term tax ideas for Oregon):

Oregon's state government system relies heavily on income taxes, with about 90 percent of its general fund and lottery revenues coming from individual income taxes. That system is volatile because income tax receipts drop during economic downturns, leaving the state short of money to pay for education and other services.

Long-term options listed by the task force include:

Eliminating the state's personal income tax and imposing an 8.5 percent sales tax with exemptions for items such as shelter and in-home food. The group notes this approach would reduce net income for most households without offsetting provisions . . . The task force began meeting a year ago. While it does not favor any long-term approach over another, it does recommend some short-term changes, including having Oregonians vote on placing the state's rainy day fund, created by the 2007 Legislature, in the Oregon Constitution and increasing the fund's cap.

As demonstrated by Oregon's experience with income tax receipts, there is no recession proof tax structure. Policy makers should not focus tax reform discussions around raising more revenue but instead should ensure the tax system is based on sound principles of taxation.

This is why the state's notorious B&O tax is ripe for reform or replacement - it fails the principles of sound taxation on many levels as identified by WPC's Carl Gipson in this four-part series:

So what exactly are sound principles of taxation? We answer that question here: Guiding Principles of Taxation for Elected Officials

What is GMAP?

October 29, 2008 in Blog

Ok, I know, with Election Day less than a week away you may be thinking "who cares what GMAP is?"

Well, I care and I think you should too, even if I am suffering from "prolonged GMAP exposure."

Braving the world of data nerds, The Olympian ran this story about GMAP today. 

GMAP stands for Government Management Accountability and Performance.  The program came out of a 2005 executive order that replaced a 1997 "Quality Improvement" executive order.

The goals of GMAP were also placed into statute by the Legislature in 2005 meaning regardless of who wins the election some version of the program will continue. RCW 43.17.385 reads:

(1) Each state agency shall, within available funds, develop and implement a quality management, accountability, and performance system to improve the public services it provides.

(2) Each agency shall ensure that managers and staff at all levels, including those who directly deliver services, are engaged in the system and shall provide managers and staff with the training necessary for successful implementation.

(3) Each agency shall, within available funds, ensure that its quality management, accountability, and performance system:

     (a) Uses strategic business planning to establish goals, objectives, and activities consistent with the priorities of government, as provided in statute;

     (b) Engages stakeholders and customers in establishing service requirements and improving service delivery systems;

     (c) Includes clear, relevant, and !
easy-to-understand measures for each activity;

     (d) Gathers, monitors, and analyzes activity data;

     (e) Uses the data to evaluate the effectiveness of programs to manage process performance, improve efficiency, and reduce costs;

     (f) Establishes performance goals and expectations for employees that reflect the organization's objectives; and provides for regular assessments of employee performance;

     (g) Uses activity measures to report progress toward agency objectives to the agency director at least quarterly;

     (h) Where performance is not meeting intended objectives, holds regular problem-solving sessions to develop and implement a plan for addressing gaps; and

     (i) Allocates resources based on strategies to improve performance.

>(4) Each agency shall conduct a yearly assessment of its qual!
ity management, accountability, and performance system.

(5) State agencies whose chief executives are appointed by the governor shall report to the governor on agency performance at least quarterly. The reports shall be included on the agencies', the governor's, and the office of financial management's web sites.

(6) The governor shall report annually to citizens on the performance of state agency programs. The governor's report shall include:

     (a) Progress made toward the priorities of government as a result of agency activities; and

     (b) Improvements in agency quality management systems, fiscal efficiency, process efficiency, asset management, personnel management, statutory and regulatory compliance, and management of technology systems.

(7) Each state agency shall integrate efforts made under this section with other management, accountability, a!
nd performance systems undertaken under executive order or other authority.

So why should you care? 

If properly utilized GMAP has the potential to help move the budget discussion away from spending outputs and instead focusing the debate on purchasing performance outcomes. This means that if we ever get a meaningful spending limit, a tag team effort of GMAP, Performance Audits, and Priorities of Government budgeting (POG) could lay the groundwork for a sustainable performance based budget focused on purchasing outcomes for Washington citizens instead of the state budget being used as a laundry list of spending goodies for special interest.

Unfortunately this potential hasn't been realized yet.

Economic Bail-Out of 2008

October 24, 2008 in Events
Date: 
Friday, October 24th, 2008
Time: 
11:00 am - 1:00 pm
Place: 
Washington Athletic Club
Seattle, WA

The Puget Sound Lawyers Chapter of The Federalist Society and Washington Policy Center presented a panel discussion on the economic bail-out.

Panel included:

Dr. John Lott, Senior Research Scientist, University of Maryland Foundation,

Dr. Alan Hess, Professor of Finance and Business Economics, University of Washington,

Dr. Mike Siegel, long-time Seattle talk-radio host as moderator

"Intergovernmental cannibalism"

October 22, 2008 in Blog

There are a couple of great articles on taxes this morning discussing why voters should pay closer attention to the tax increase requests of elected officials. The first is in the Seattle PI (Time for Seattle to say no to taxes) quoting WPC's Paul Guppy:

Seattle voters have shown a remarkable willingness to tax themselves, even in the face of folly.

Not even President Bush, in his oil exploration days, managed to drill as many dry holes as elected officials operating out of Seattle's arid new City Hall.

We spent $444 million on the downtown bus tunnel, only to find that light rail tracks were the wrong size. A $45 million retrofit was required.

The monorail was a bust that cost local motorists $110 million. After investing $5 million in self-cleaning, high-tech toilets, the city ended up selling them on eBay for $12,500.

With a passive public -- and no political opposition -- city fathers and mothers have continued to pile on parking taxes, head taxes, bag taxes and various costs associated with politically correct garbage disposal and food recycling.

Paul Guppy, vice president for research at the conservative Washington Policy Center, offers up a provocative argument that every liberal Emerald City voter ought to ponder.

"Seattle leaders have learned that when they shape public funding choices in a certain way, voters will almost always go along," he writes. "From an elected official's point of view, this funding strategy makes perfect sense. After all, as long as voters continue to say 'yes' to paying more taxes, why not keep asking them for more taxes?

"One would expect this pattern to continue until city officials see voters express an unwillingness to go along and, because of economic worries or awareness of the accumulating tax burden, reject a special levy."

In short, just say no.

The second article is in the Seattle Times (Can we tax Peter, pay Paul?) highlighting the prospect of "intergovernmental cannibalism" on taxes:

OK. So I have a dumb question. It came to me when I realized last year's tax increases by coincidence almost equal this year's draconian cuts.

Why not use that money to solve this "crisis?" Why not, at the least, cancel those ridiculous foot ferries?

They are the old Mosquito Fleet walk-on ferries, between Kirkland, Renton and Seattle on Lake Washington. And Shilshole to downtown Seattle on the Sound. The council raised property taxes to reincarnate them last November.

None of these cities are on islands — a large part of why the last such ferry petered out in 1939. Each run today will carry maybe 300 riders. Yet we're steaming ahead with it. Even as we cut 59 cops. And call it all "a recipe for disaster."

The sheriff liked my dumb question.

"We can't tax people for all these special projects and then allow core functions of government, like public safety, to go down and down," she said . . .

On my way out, I ran into Scott Noble, the county tax assessor. I said this seems like no way to run a government. You have no idea, he said.

"There are 160 taxing districts in this county, all overlapping and competing," he said. "In tough times, you're going to see every one hard after the same buck. Something's got to give, but nothing's giving. So many are responsible that no one is accountable.

"I predict intergovernmental cannibalism."

He said that last part like he was looking forward to it.

It looks like now more than ever policymakers need to agree to a set of guiding principles of taxation to help keep taxpayers from being at risk of intergovernmental tax cannibalism.

Principles of Taxation for Elected Officials

October 21, 2008 in Blog

With Washington facing a projected $3.2 billion budget deficit (the difference between growing revenues and even faster projected spending growth), the temptation exists for elected officials to close the budget gap with tax increases. Already policymakers are being encouraged to enact a “temporary” sales tax increase. Before any conversation about raising taxes can occur, however, state officials should first agree to a set of guiding principles on taxation.

The proper function of taxation is to raise money for core functions of government, not to direct the behavior of citizens or close budget gaps created by overspending. This is true regardless of whether government is big or small, and this is true for lawmakers at all levels of government. Many lawmakers think of the tax code as a way to penalize “bad” behaviors and reward “good” ones. They have sought incessantly to guide, micromanage and steer the economy by manipulating the tax laws.

Taxation will always impose some damage on an economy’s performance, but that harm can be minimized if policymakers resist the temptation to use the tax code for social engineering, class warfare and other extraneous purposes. A simple and fair tax system is an ideal way for advancing Washington’s economic interests and promoting prosperity for its residents.

Recommendations for tax reform:

  • Adopt guiding principles based on equity and economic neutrality to shape changes in Washington’s tax system, so the tax system is focused on raising needed revenue for core functions of government, not directing the choices and behavior of citizens. Basic to the concept of a fair tax system is that the state should take no more from citizens than it needs to pay for the core functions of government. This consideration goes beyond the need to balance the budget; it is a matter of fundamental respect and trust between citizens and their government.
  • Policymakers should seek to lower the overall tax burden to promote prosperity and opportunity in the economy for the benefit of all citizens. Washingtonians require and expect basic government services, and taxes must be collected to pay for these services, but government revenue should be limited to real public needs, so the tax system itself does not become one of the major problems of life. A fair and efficient tax system is a matter of having respect for the citizens of our state.
  • Embrace tax transparency by creating an online searchable database of all state and local tax rates. Policymakers should build on the state’s transparency reforms and help citizens learn more about what government decisions mean to their pocket books.

The people of Washington work hard for what they earn. Money paid in taxes is by definition not available to meet other needs. As a matter of respect to citizens, policymakers should work to keep the overall level of taxation to the absolute minimum needed to pay for the core functions of government while being transparent about the total tax burden being imposed.

Principles of Taxation for Elected Officials

Cutting the Effective Corporate Tax Rate

October 17, 2008 in Blog

A new report out by the Cato Institute shows that the effect of cutting the United States' corporate tax income would have a significant effect on GDP. This policy recommendation should be seriously considered given everything that is happening in the world credit markets.

Just today it was announced that new housing construction is at its lowest level in decades and that consumer confidence took a historic hit in the last month. So it should be incumbent upon policymakers to ramp up GDP growth through incentives such as lowering the corporate income tax.

Of course, this will run against canards that businesses in the United States don't pay taxes, which is nonsense. First of all, businesses pay taxes (or should anyway) on their profits and the last couple of years have seen wild swings in various industries -- particularly industries with low profit margins. Secondly, the government continues to collect more tax revenue every year than the previous year.

The Cato piece, written by Dr. Jack Mintz, demonstrates that every percentage point the U.S. cuts its tax rate on capital will result in increased direct foreign investment by about 0.1% GDP. A 10 percent rate cut? A resulting 2% growth in GDP -- or about $300 billion. That's real money.

Mintz also addresses concerns that cutting the tax rate too much will result in further budget deficits by pointing out that statistical analysis shows that cutting the rate by 10% will actually bring in more revenue to the federal government. He says that the revenue-maximizing corporate rate is about a 28% effective tax rate (or about a 25% corporate tax rate).

The trick is finding the bread-and-butter rate for encouraging investment and economic growth while capturing increased tax revenue. It turns out that the current 39% combined U.S. federal and state rate is too high -- particularly since it is the third highest combined rate in the world.

UW banking on "liberal" Legislature

October 17, 2008 in Blog

It appears the University of Washington is hoping a "liberal" Legislature will be sympathetic to its quest to receive tax revenue to renovate Husky Stadium. The Seattle PI reports (UW votes to advance stadium work):

The nation's slumping economy and the state's budget woes won't stop the University of Washington from pressing forward with plans to overhaul crumbling and badly outdated Husky Stadium.

University regents voted Thursday to authorize negotiations with a contractor for the stadium, moving a giant and potentially expensive step toward the project's design phase. But regents acknowledged that it could be a risky move for the university, since funding for half of the project has yet to be obtained.

The UW wants to finance half of the $300 million project through private funding and the rest through public tourist tax revenue -- the same revenue that funded Qwest and Safeco fields. But the Legislature shut the tourism-tax idea down earlier this year, and it's not yet clear if lawmakers will be more receptive to the proposal in 2009 when they'll be staring at a projected $3.2 billion spending shortfall . . .

"It is a tough sell, but the Legislature is pretty liberal, and I'm preaching Keynesian economics now," Woodward said, referring to the theory that the state can stimulate economic growth by means of -- among a long list of other things -- government spending.

Earlier this week, however, the UW announced it was facing a $10 million budget cut. UW's state relations director, Randy Hodgins, explains in his blog:

Conversations with staff in the Governor’s budget office today indicate that the UW’s share of these reductions is $9.6 million, which represents about two percent of our total FY 2009 state funds appropriation. It’s important to note that this is not an “automatic” budget reduction, but will be included in the Governor’s budget recommendations t!
o the Legislature. Ultimately, it will be up to the state legislature to decide whether these reductions are implemented and how much will be cut from each agency’s current biennial budget.

So will what the UW calls a "liberal" Legislature slow the growth of the UW's budget while approving a tax increase for its stadium renovation? Talk about mixed signals.

Seattle Leaders Choose to Pay for Core Public Amenities with Special Levies, But Will It Work in a Tough Economy?

October 17, 2008 in Publications

This November, people in Seattle are being asked to vote for three new tax increases. Two are proposed by Seattle’s leaders, who are again urging people to accept higher taxes to pay for core public amenities. These are property tax increases for the Pike Place Market ($75 million) and the Parks Department ($145 million). These special levies are presented as limited to six years each, though homeowners know that “temporary” levies for core services have a way of becoming permanent.