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Taxpayers more discerning than rallies let on

Post by Kim Bradford on Feb. 16, 2010 at 8:22 pm with 4 Comments »
February 17, 2010 8:04 pm

This editorial will appear in Wednesday’s print edition.

Forget head counts, or debates over whose message was purer. The only winner of Monday’s dueling rallies at the state Capitol were lawmakers of both parties who heard what they wanted to hear.

If only the state’s budget problems were as easy as declaring “no new taxes” or “no new cuts.” But governing is an art, not an accounting exercise.

Most Washingtonians – even some of the 9,000 people who thronged the Capitol steps, we suspect – want something much different from their Legislature than all-or-nothing propositions. They might be open to paying more taxes to protect crucial services, if they are convinced that state government had made commensurate sacrifices.

They will be watching the fate of bills like Senate Bill 6503. It was to be lawmakers’ response to public outrage over policies that have largely spared state workers the pain felt in the private sector.

SB 6503 originally would have saved the state $92 million by furloughing state workers. But lawmakers have added one exemption after another, whittling the savings to $50 million and raising legitimate questions about the fairness of asking a few state workers to bear the burden for the rest.

Now a Democratic lawmaker from Olympia thinks he has the poison pill. Rep. Brendan Williams has offered an amendment that requires state lawmakers to take cuts in their expense allowances equal to the hit their legislative staffers would take if furloughs were approved.

Williams notes the bill hasn’t come up since he filed his amendment. He’s either taking far too much credit – or his fellow lawmakers have been exposed.

Democrats have taken some halting steps to show they understand public sentiment. Passage of Rep. Larry Seaquist’s bill to suspend performance-based bonus pay was a welcome overture, although largely symbolic given the paltry $1.9 million it would have saved in 2009.

But the deep, systemic reforms that could help bring state government expenses in better alignment with existing revenues are too often rebuffed for a lack of time, instant gratification or political will.

The state Senate fell all over itself last week in its rush to set aside Initiative 960 and clear the way for tax increases. Voters – especially the independent types who determine the outcome of elections – want to see just as much giddy-up in the pursuit of budget savings.

Leave a comment Comments → 4
  1. SuperSteve says:

    As a former state employee who was laid off due to budget cuts, and who has former colleagues in state government whose income has been reduced due to furloughs and reduced hours, I take issue with the idea that Legislators have “largely spared state workers the pain felt in the private sector.”

    I’d also like to refute the idea that “systemic reforms… could help bring state government expenses in better alignment with existing revenues.”

    Yes, Rep. Seaquist’s idea is an appropriate measure – and there are many others being taken, including a bill that saved us millions of dollars that Democrats voted for last week but Republicans opposed.

    Anyone who claims we can balance the budget through “systematic reforms” should list those “reforms” in line-item format and demonstrate how they total $2.8 billion in savings.

    Our state DOES NOT have a spending problem. It has a long-term revenue problem, the root of which lies in trying to manage a modern 21st Century society with an antiquated, 19th Century system of revenue.

  2. “Our state DOES NOT have a spending problem.”

    I strongly disagree!! The state does have a spending problem, since state spending has been increasing at multiples of the inflation and population growth rate.

    One of the reasons for this explosive spending is government employee benefits. Both health and pension benefits costs have been increasing at multiples of the inflation and population growth rate.

    Other reasons for the explosive growth rate are a growing aging population, medical costs for the uninsured, and unemployment costs due rising taxes and the shipping of jobs to foreign countries.

    Go to this web site to see the explosion is state spending for yourself.

  3. I just looked at SB 6503. And it’s pretty clear the Democrats are not pushing very hard to cut state employee costs.

    I see they rejected Zarelli’s amendment.

  4. jvaughn50 says:

    RCW 19.275.030 Prohibits Pyramid Schemes and Yet Our Governor Operates the Largest Pyramid Scheme in the Country

    The last time our country experienced a true recession was the period between 1972-1974. It was here that the country got its first real post-World War II economic slowdown, accompanied by a bear market in stocks. Gross Domestic Product growth slowed tremendously, unemployment rose, incomes fell, and considerable discomfort was felt by all. It was also during this period that America first opened her borders to free trade with other nations, and we became officially an “open” economy.
    As bad as the recession of 1972-74 was, America still had her industrial base to support her throughout. When the recession cleared, we were able to go immediately back to business as usual in the U.S. without too much trouble, thanks to our strong manufacturing economy. Today, however, our industrial support is gone and we are no longer an industrial economy. Industry today thrives mainly in Third World countries where cheap labor is abundant. What remaining agricultural support base we had is being lost, as well. In short, all that remains are services.
    What we face is an economic recession as a post-industrial economy. It remains to be seen how a post-industrial, service-based economy such as ours will carry through during such a time. Services, after all, depend largely on discretionary incomes and relative prosperity. This is not true of manufacturing which is needed at all times (though in varying degrees).
    When the U.S. economy turns down, how will most service industries make money when discretionary income has largely vanished? The only persons who seem to have comprehended the enormity of our plight are the members of the Federal Reserve, who have cut interest rates. But will their efforts are not enough.
    Ask yourself what happens when the economic stimulus money is spent and we have not created long term employment for our citizens that will allow us to repay our debt to China, Brazil, etc. We cannot expect them to lend us more money. As a result, the dollar will be devalued and we will see hyperinflation. It could result, in foreign countries refusing to trade with us. No money – No oil – we are back to horse and buggy days. This will not be the Great Depression, but the Greatest Depression. In addition, there will less tax money at the Federal Level which means less money will filter down to our state.
    Our state budget is plunging into a sea of red ink. Unlike the federal government, we are required by our state constitution to have a balanced budget. Surpluses for “rainy-day” reserve funds are gone. The fiscal monsoon has hit. As a result, we can cut programs and/or raise taxes or do nothing.
    We do not support raising taxes. We need to run our government like a business and remove the waste. We also need to hold government agencies accountable to provide transparent expenditures and accurate reporting. We accomplish that by implementing quality control mechanisms through out all levels of government. In this fiscal economy, we are not asking government to do more with less. We ask government to prioritize expenditures and do less with less. Reduce government, the same fashion as every other business operates in the state.
    No Free Rides. Given the national debt, we cannot afford to let someone sit at home and draw a paycheck. In 1956, 60% of the federal budget was spent on defense and 22% on Social Security/Payment to Individuals. In 2006, with Iraq War everything has reversed. 20% of our Federal Budget was spent on defense and 60% was spent on Social Security/ Payments to individuals. We need everyone to go to work, pay taxes and help us get out of debt. However, for everyone to go to work, we need to provide jobs. Which leads me to the B&O Tax. This tax is not only unfair to the business community; it is unfair to the consumer. When an individual buys an item and pays sales tax, they do not see the amount of tax that they are being charged. The Gross Receipt Tax is not transparent and violates the democratic principal that a tax should be transparent to the consumer.
    The B&O Tax is politically popular because the tax is embedded in the cost of the product at each step and so is almost entirely hidden from consumers. This may be politically convenient for law makers but it also violates a key democratic principal: that a tax system should be transparent so tax payers can see the cost of government.

    Business and Occupation Tax (B&O): Otherwise know as a Gross Receipt Tax (GRT)
    • GRT is a tax on all gross revenues incurred by a business not just the profits.
    • GRT is a stealth tax which is hidden from the consumer.
    • GRT is a tax on a business whether they make a profit or not.
    • GRT is imposed on each stage of the service or product and creates a pyramid effect which is in turn passed on to the consumer. (Note: our state government has outlawed pyramid schemes and yet is operating the biggest pyramid scheme in the country.)

    How does the pyramid of GRT affect the consumer?
    • You visit a Mexican restaurant and buy a burrito. Let’s explore the taxes on this product with a gross tax receipt in place.
    • Company A makes tortillas and pays a B&O Tax.
    • Company B is a trucking firm that delivers the tortillas to a wholesaler and pays a B&O Tax.
    • Company C is the wholesaler and pays a B&O Tax.
    • Company D is a trucking firm that delivers the tortillas to the restaurant and pays a B&O Tax.
    • Company E is the restaurant that also pays a B&O Tax.
    • The same is true for the meat, cheese, lettuce, beans and other ingredients in the Burrito.
    • This is true for all products and don’t forget the sales tax. Everyone pays!!! There are estimates as much as 20% of our purchases are related to the B&O Tax. This is your/our personal income tax. Think about the pyramid effect on companies that manufacture an airplanes or other complex pieces of equipment.

    Bottom Line Solution: is to tax business a flat rate based upon profits. For example, if Company A owes the government $100K for quarterly taxes, they could buy a piece of equipment for $50K that would make them money and save them $50K in taxes. However, when Company A buys the equipment, they must hire someone to install equipment, operate and maintain it. Since this equipment does not create a product from mid air, the company must buy supplies or raw materials to create an end product. Hence, more jobs by creating a tax structure to encourage capital investment.

    Governor Gregoire has been aware of this for years. In July of 2005 Christine Gregoire stated during a meeting with the Clark County High-Tech Council that she was looking for ways to reform the B&O tax to make it less onerous on business and four years later in February of 2009 in speech to the Association of Washington Business, Governor Gregoire stated that she would like to overhaul the business and occupation tax, calling the tax, “ill-conceived” and harmful to small businesses. Eight months later, in October of 2009, she came out with 23 revenue alternatives two of which are aimed at increasing the B&O Tax which earlier in the year she said was “ill-conceived” and harmful to small businesses.

    It is time for the state government to tighten its belt and reduce the tax burden on the citizens of Washington, particularly business in order for the private sector to recover and create jobs.

    Support Citizens for Economic Stimulus
    Jim Vaughn

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