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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Is Governor a tax raiser or tax cutter?

September 16, 2008 in Blog

Last week we highlighted an Olympian blog post that quotes Governor Gregoire on whether or not she's raised taxes. Among the statements made by the Governor:

"Did I raise your sales tax? No. Did I raise property taxes? No. In fact, I brought the Legislature in to cap the property tax with a special session last fall. Did I raise B&O tax? No. What’s the truth? The truth is we cut those taxes almost by $900 million since I came into office."

I asked the Office of Financial Management (OFM) for additional details on these tax cuts. OFM provided the following table in response (Dollars in Millions):

Tax Cuts

2005-07B

2007-09B

Total

General Fund - State

(77.9)

(288.0)

(365.9)

Unemployment Insurance Trust Fund

(31.8)

(141.5)

(173.3)

Workers Compensation Trust Funds

(22.2)

(309.5)

(331.7)

Other Funds

0.0

(9.7)

(9.7)

Total Tax Cuts

(131.9)

(748.7)

(880.6)

WPC's Small Business Director Carl Gipson takes a closer look at the Workers' Compensation numbers in his blog post today.

In light of the $400 million in tax INCREASES during the 2005 Session, I'm following up with OFM to learn if its table accounts for these increases and for additional details on the General Fund tax cuts reported. I'll update this post once I have the answer.

What qualifies as a tax increase?

September 11, 2008 in Blog

The Olympian today has an interesting blog post quoting Governor Gregoire about whether or not she's raised taxes (excluding gas-taxes). Here is what the Governor said (in-part):

"Did I raise your sales tax? No. Did I raise property taxes? No. In fact, I brought the Legislature in to cap the property tax with a special session last fall. Did I raise B&O tax? No. What’s the truth? The truth is we cut those taxes almost by $900 million since I came into office. So the money that we used to do what we’ve done has been because our economy has been humming. And that’s why I’ve tried always to get new employers in here and to make sure we have the skilled work force, because when the economy hums, we can pay for education, we can pay for health care, we can pay for community safety. When the economy slumps, then we can’t." "So he [Rossi] then!
says, ‘she is going to raise taxes,’ Well I didn’t raise taxes to get out of the $2.2 billion deficit he gave me. On what basis does he say that? … (H)e wants you to be afraid. He wants you to be afraid. I just think this ought to be a straight-up election."

Based on this quote one is left to wonder just what the Governor believes qualifies as a tax increase. For example, in 2005, the Governor signed into law approximately $400 million in tax increases made possible by suspending the 2/3 vote requirement from I-601. The largest of these tax increases were:

  • Cigarettes – $175 million
  • Death-tax – $139 million
  • Liquor – $47 million
  • Extended warranties for product repairs or replacements –  $37 million

These tax increases were the subject of a court challenge for violating I-601 but were ultimately upheld by the State Supreme Court last year (this is a separate lawsuit than the one heard by the Court this week).

If these aren't tax increases, what exactly are they and why did the Governor and Legislature feel the need to suspend the 2/3 vote requirement in 2005 to adopt them?

If I was a betting man . . .

September 9, 2008 in Blog

. . . I'd put money on the State Supreme Court dismissing Senator Lisa Brown's tax lawsuit on procedural grounds. At today's Court hearing on the constitutionality of I-601, the Justices spent most of their time questioning whether the way Brown filed her lawsuit is something they can rule on. In particular, Justice Barbara Madsen expressed concern with the Senator's attempt to have the Court inject itself in the legislative process of passing a bill.

If the Court does ultimately pass on deciding the constitutionality of a 2/3 vote requirement for tax increases, the clearest way to resolve this issue once and for all is for the Legislature to put on the ballot a constitutional amendment and allow the voters to decide.

UW spending $175 per hour to lobby for new stadium

September 4, 2008 in Blog

While reviewing state personal service contracts back in July, a $50,000 lobbying contract for the University of Washington (UW) caught my attention. Unfortunately, the information listed on the Office of Financial Management's website didn't disclose what the lobbying was for so I asked the UW for a copy of the contract. Nearly two months from my first request, I finally received a copy of the contract today.

Turns out the $50,000 contract is for a consultant "to provide legislative drafting and fiscal analysis related to the 2008 request for state financial assistance to remodel Husky stadium." The contract was originally to expire March 31, 2008, but its terms have been extended until June 30, 2009.

The contract further notes the "consultant will be paid $175 per hour for his services, and receive reimbursement for associated reasonable expenses, including travel costs."

Here is a copy of the contract.

In a strange coincidence, the Spokesman Review this week highlighted the bad blood east of the Cascades for efforts to use taxpayer dollars to remodel Husky stadium.

Although Husky stadium may need renovations, rather than paying a lobbyist $175 per hour to secure taxpayer funding, why not use some of the UW's $2.7 billion endowment or asking for alumni help?

Gregoire/Rossi on tax increases

September 3, 2008 in Blog

On September 9, 2008, the State Supreme Court will consider Senate Majority Leader Lisa Brown's lawsuit seeking to have the 2/3 vote requirement for tax increases ruled unconstitutional to make it easier for state officials to raise taxes.

Last week I asked spokespeople for both Governor Gregoire and Senator Rossi if they support a 2/3 vote requirement for tax increases and if yes, would they support placing them in the Constitution like was done with the rainy day reserve from I-601.

Here are the official responses:

Gregoire* - “I think it’s a moot issue because I think it [tax increases] ought to go to a vote of the people.”

Rossi spokesperson - "Dino believes in upholding the will of the people and does support I-601’s 2/3 vote requirement. He would be supportive of a constitutional amendment to require a 2/3 vote for tax increases."

Based on these responses, it appears that both Governor Gregoire and Senator Rossi support WPC's recommendation to amend the Constitution to require either a 2/3 vote of the legislature or voter approval for tax increases.


*These comments were made on 8/27 during a KIRO 710 radio interview. On 8/29 a spokesperson for Gregoire said to refer to this interview in response to my question for an official position.

Contrast in pay raises

September 2, 2008 in Blog

While Bellevue teachers engage in an illegal strike over pay raises, Governor Gregoire last week sent a memo to agency directors informing them of her plans to cancel their pay raises. According to the Governor's memo:

"After much thought and in light of our nation's economic struggles, I have decided the cost of living raise, which you were scheduled to receive on September 1, 2008, is not appropriate at this time. My decision affects all agency directors under my control in addition to the Senior Staff of the Governor's Office . . . I take this step because I believe you and I should make a clear statement to the people of Washington: we understand that many families are not rece!
iving pay raises while coping with high food and fuel prices, and other financial challenges."

So what "statement" are Bellevue teachers sending taxpayers and students by breaking the law?

Constitutional Protections Needed for Taxpayers

September 2, 2008 in Publications

Washington’s voters have consistently voiced a desire to restrict the ability of government officials to unduly raise their tax burden. Initiative 601, passed by voters in 1993, required not only a strict spending limit, a two-thirds vote of the legislature to raise taxes, but also voter approval of any tax increase in excess of the state spending limit.

Could the Celtic Tiger strike again?

August 28, 2008 in Blog

An interesting tid-bit from the Financial Times yesterday. Apparently, one of Europe's largest investment managers, Henderson Group, is considering moving its corporate headquarters, and tax base, to Ireland. Why? Taxation policy.

Ireland's corporate tax rate is 12.5%, compared to the UK's 28%. That is a substantial difference.

According to the Tax Foundation, if Henderson Group relocates to the Celtic Tiger, it will join pharmaceutical firm Shire and a large media firm, United Business International, among others, to make the jump across the Irish Sea to a more business-friendly environment.

Interestingly enough, three years ago the Henderson Group issued a statement to shareholders saying in regards to tax planning that they would "...[perform] the delicate balancing act of paying neither too much nor too little tax to serve shareholders' interests while also demonstrating broader social responsibility."

Assuming the Henderson Group still has the goal of "broader social responsibility" in mind perhaps UK policymakers should take a look at the nation's corporate tax policies because apparently the cost of doing business is outweighing the social benefit from paying such high taxes.

Oh, and the United States' combined federal-state corporate tax rate? A robust 39.3%. Good thing Ireland is more than just a stones throw away.

Gregoire on 2/3 vote requirement for tax increases

August 27, 2008 in Blog

Earlier this week I asked spokespeople for both Governor Gregoire and Senator Rossi if they support a 2/3 vote requirement for tax increases and if yes, would they support placing them in the constitution like was done with the rainy day reserve from I-601.

Though I haven't received an official response yet from the candidates, Governor Gregoire was on the Dori Monson show today (KIRO 710) and was asked the same question.

Here was the tail end of their exchange on this issue:

Dori: "Yes or no, do you support the 2/3 legislative majority for tax increases?"

Gregoire: “I think it’s a moot issue because I think it [tax increases] ought to go to a vote of the people.” 

The full interview is worth listening to. Discussion about the budget deficit starts at 12:50 of the interview (audio here). The exchange on the 2/3 requirement for tax increases starts at 21:22 on the audio link.

I'll post the official responses from Governor Gregoire and Senator Rossi once I receive them. 

Debt performance audit receives kudos

August 27, 2008 in Blog

The State Auditor's recent performance audit of state debt collection practices received numerous kudos today at a public hearing. Along with receiving congratulations from legislative members of the Joint Legislative Audit and Review Committee, the Director of the Office of Financial Management also thanked the auditors for their work.

The audit found:

". . . eight programs that need to improve their collection practices. If the eight programs reduce their delinquent account balances by a modest 5 percent, the state will collect approximately $15.6 million more per year. If they reduce delinquent account balances by 50 percent, they can collect an additional $159.7 million."

Rep. Gary Alexander and Sen. Phil Rockefeller encouraged the State Auditor's Office to expand this effort to review the practices of the state's higher education schools. The auditors agreed to look in that direction.

The Department of Revenue (DOR) received special recognition for not have any findings in the audit. It looks like DOR is really on the ball. Last year it received its 15th straight clean state audit.