The economy has dealt us a bushel of lemons, and former Seattle City Councilwoman Phyllis Lamphere, working with a group of tax-reform and education advocates, wants to make a lemon meringue pie. Lamphere, who served on the City Council from 1968 to 1978 and is a veteran at assembling plural interests for big causes, is part of a team pushing for a tax reform package that would establish the state's first personal income tax. It would be targeted to pay for improvements in public education.
In the current legislative session, tax reform looks dead as a doornail. Legislators may ask voters to bump the sales tax up another .3 cents to help cover health care costs, but even that may be a long shot. Even before the recent anti-tax “tea parties” in Olympia and across the country, legislators were at best lukewarm on new taxes, and polling has further cooled their willingness to take a risk on tax increases.
There's a large disconnect in Olympia. Both houses have passed Engrossed Substitute House Bill 2261, which incorporates many of the reforms proposed recently by the Joint Task Force on Basic Education Finance. Virtually every one supports the idea of reforming basic ed. But no one suggests paying for it any time soon. HB 2261 proposes full funding by 2018, but unlike earlier drafts of the bill, it doesn't have any intermediate goals. It doesn't even hint at a funding mechanism. And yet, the Joint Task Force made it clear that the proposed reforms would cost an additional $7.5 billion to $10 billion per biennium.
Where will the money come from? Lamphere has an answer. She knows Washington citizens have rejected the idea of an income tax for the past 75 years, ever since the people passed one by initiative in 1932 and the state supreme court threw it out the following year. In fact, she notes that she has been around for all of the public votes against the tax. (Voters said no eight times from 1934 to 1982. Earlier legislatures, as desperate for money as recent ones, tried several times to tax personal or corporate income, but the state supreme court shot down their efforts, too.)
Lamphere she thinks people have objected primarily to the lack of clarity that has always surrounded an income tax proposal: What will it pay for? Who will have to pay how much? And, once the camel's nose is firmly under the tent, how can the Legislature be kept from expanding the uses or raising the rate?
Lamphere says there are ways to resolve all the ambiguities. Allow the money to be spent only for improving public education. Don't let the Legislature off the hook for funding basic education with other revenue. (But how would you prevent substitution?) Don't let the Legislature use it for anything else without a vote of the people. (In other words, establish the tax through a constitutional amendment.) Tax only people with high incomes. Base the calculations on federal income tax returns, so there could be no doubt about who would have to pay. (This would make the new tax predictable but would link it politically to a most unloved civic obligation.)
Most tax reformers are still wrestling with a lot of unresolved questions: Should a new tax be coupled with relief from some bad taxes, like sales tax or the B&O tax? Should the new tax be restricted to education or provide a broader form of relief? Should it try to amend the state constitution's ambiguous ban on graduated taxes, or just pass the initiative and let a court test ensue, hoping that a modern court will interpret that language more liberally? And when is the best time to act?
Lamphere herself seems to have resolved most of these to her own satisfaction. The income tax would not be revenue neutral. It would generate new money. That money would be used exclusively to improve education. And she thinks, as many other tax reformers do, that these bad times are good times for changing the tax structure. It worked in the Depression. Will it work now? Will times still be bad enough for it to work next year? Lamphere is willing to bet that it will. She talks about running an initiative in 2010. “If the Legislature's not going to do it, what is the option,” she asks.
A recent poll showed support for new taxes shaky at best. The poll “finds that more than 50 percent of Washington voters might go for a temporary sales tax increase to prevent cuts to health care,” Austin Jenkins wrote recently in Crosscut. “But support is soft and not enough to guarantee success at the polls this fall. As a result, Senate Democrats have met and decided not to move forward with a sales tax, or alternatively an income tax proposal this year.”
The augeries that seem to have scared off would-be tax reformers in the Legislature haven't scared Lamphere. “I'm not given to pessimism,” she says, relishing one more complex campaign in the public interest.
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