Eyman's I-695 statistics don't tell the full story

by Jim Lynch Seattle Times Olympia bureau

In the future that Tim Eyman wants voters to envision, Initiative 695 would barely send a ripple through state and local government. As sponsor of the tax-reform initiative, he says it would result in a 2 percent cut in government spending for the sixth-highest-taxed state in the nation. Politicians, he says, would dip into lush reserves to fill new holes in city and county budgets, and the state would continue to thrive as taxpayers poured money back into the economy. But Eyman's premises are at best overly optimistic; at worst, dubious. A review of the data - as well as interviews with state lawmakers and economists - shows that his numbers are selective and potentially misleading. His economic and political predictions may be naive. Eyman, a Mukilteo businessman, has not run any radio or television ads promoting his Nov. 2 ballot measure, which would cut vehicle taxes to a flat $30 fee and require voter approval on any future tax or fee increase. But as creator and voice of I-695, he makes his case on a daily basis - in mass mailings, in media interviews and in debates across the state. Here is an analysis of the four central premises behind Eyman's literature and speeches: Washington is the sixth-highest-taxed state. Many studies attempt to compare tax burdens among the states. Washington's ranking varies, depending on which taxes the studies include in their calculations. Eyman highlights a study by the Tax Foundation, a nonprofit anti-tax group that includes federal income taxes in its formula. Washington ranks sixth in that study, in part, because of its booming economy, which resulted in higher incomes and bigger income-tax payments to the federal government last year. Eyman says the Tax Foundation rankings are the best gauge because "they look at overall taxes. They don't look at just pieces of the puzzle." Washington often ranks as a heavily taxed state - somewhere between eighth and 17th - because of its high sales taxes, high car taxes and moderately high property taxes. Because it is one of eight states without a state personal income tax, some studies portray Washington as a low tax state for residents. For example, a May 1999 report by the Utah State Tax Commission concluded that Washington households pay the lowest amount of state and local taxes of seven Western states: Arizona, California, Colorado, Idaho, Oregon, Utah and Washington. However, the same report also said that because of the state's business-and-occupation tax, businesses here pay more taxes than their Western counterparts. A 1998 report by the city of Washington, D.C., ranked Seattle's average household tax burden 44th in a survey of 51 cities - the largest cities in every state, and Washington, D.C. Money magazine reached a similar finding in its 1995 report that ranked Washington as the eighth-best "tax heaven" in the country for households making $80,000 a year. Just 2 percent of the budget. In Eyman's effort to minimize the significance of car-tax revenues to state and local governments, he calls it just 2 percent of government spending. "It's a drop in the bucket," he says. "It's two pennies in the glass." But Eyman isn't talking about 2 percent of the state operating budget, or 2 percent of the total state budget, which includes capital, transportation and federal funds. He's talking about 2 percent of the total amount of public money spent in Washington, including all city and county budgets. Eyman argues that all public money comes from taxpayers, and so all of it needs to be considered when evaluating potential budget cuts. His 2 percent figure is based on a dollar estimate of total government revenues by the Department of Revenue: $35.7 billion a year. Legislators say the 2 percent figure is misleading because it lumps a variety of public money together. To them, it's an unusual way to look at state spending and the potential impact of Initiative 695. "Why doesn't he just divide it by the federal budget and get it down to about a tenth of a percent?" asked state Rep. Tom Huff, R-Gig Harbor, co-chairman of the House Appropriations Committee. Huff is a prominent anti-tax lawmaker who says he supports the spirit of I-695 but not Eyman's assertions. "I don't know where he's getting his facts and figures," Huff said. Eyman also routinely understates how much money the car tax generates. His mailings say it brings in $500 million a year. He's off by more than 50 percent. The car tax, not including licensing fees, brought in $775 million last year. It's not part of the state's general operating budget. But for comparison's sake, the car-tax fund is equal to 7.5 percent of that budget, or put another way, 3.4 percent of the total state budget. The surplus question. Eyman says he is certain the Legislature will dig deep into the state's $1 billion budget surplus to help fill the holes I-695 would leave in local transit, police and health budgets. "It would be political suicide" for lawmakers not to come to their constituents' rescue in an election year, Eyman said. Senate Ways and Means Chairwoman Valoria Loveland, D-Pasco, predicts the opposite. "It would be political suicide for us" to spend the reserves "after voters just told us to cut taxes and spending," she said. The obstacles to spending much of the budget surplus are formidable. Of the $1 billion surplus, the Legislature could use about $400 million with a majority vote. But if it wants to go deeper into the surplus, a two-thirds vote would be required by both the House and Senate - a daunting prospect considering the House is evenly split between 49 Republicans and 49 Democrats. Some lawmakers think they would need a two-thirds vote - regardless of how much surplus money they might use - because they would inevitably exceed the spending cap imposed by Initiative 601 six years ago. Lawmakers have already committed to spend close to the cap in the 1999-2001 budget. Huff, the House Republican budget chief, says the Legislature would be forced to cut spending in some areas, but that he can't imagine lawmakers would agree to raid the surplus for temporary fixes. "We do have close to a billion dollars, but over half of that is in the rainy-day fund," he said. "And once you've spent the rest of the reserve, it's gone." Economic surge. Eyman says in a recent mailing that I-695 would result in a "huge boost" to the economy by encouraging more consumer spending. The average two-car household that now spends about $290 a year on car taxes will be able to spend the same money buying cars, computers, clothes and other goods, he says, creating new jobs and sales-tax revenues for the state. But the state's chief economist, Chang Mook Sohn, says passage of I-695 would have no noticeable effect on Washington's overall economy. Car sales might briefly spike upward, but state tax revenues would not ultimately change, he said. The bulk of government spending pays salaries. So I-695 would shift cash from government workers' pockets to general taxpayers, Sohn said. Eyman dismisses Sohn as a government employee with a vested interest in protecting state revenues. Sohn has a doctorate in economics from New York State University. He has been an economist for four different states, and for Washington the past 15 years. Eyman, who minored in economics at Washington State University, said he doesn't have a study or an economist to back up his prediction about increased consumer spending and tax revenues. "We're having to rely on people's common sense to make the connection," he said. Two private economists, one in Seattle and one in Portland, support Sohn's assessment that I-695 would have little or no impact on Washington's economy.

Copyright ) 1999 The Seattle Times Company

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Before you start whining about "the liberal media," check out some of the other articles written by this guy - you'll see he is surprisingly objective and blasted the 695 opponents two weeks ago. Sounds to

-- Diana (washingtonian@hotmail.com), October 20, 1999

Answers

Baloney - You don't get hired at the Times unless you are a true blue (er, red) liberal. Cut it all, cut it deep and cut it now. Government at this level is a threat to freedom in this country. Besides, as far as whining goes, it is all the liberal whining about problems, most of which hardly exist, that has brought us to this point.

-- Brian (tigger@mashell.com), October 20, 1999.

Brian--

I gotta disagree. I've no idea where she is politically, but I'm pretty certain Michelle Malkin (FWIW, she's back in the paper as of yesterday. . .hip, hip, hooray and all that) is pretty far away from liberal.

-- Brad (knotwell@my-deja.com), October 20, 1999.

Actually, the Times editorial staff tends to push a NEO-liberal agenda rather than a true "liberal" agenda. The difference between the two is MUCH more than semantic. Read Noam Chomsky's "Profit Over People" (published earlier this year) to get a sense of what Neo-liberalism is (Chomsky's book is NOT exactly a puff piece!); you'll recognise it in the Times editorial section easily after reading the book.

Smells Like Corporate Welfare!

-- Jeff Stevens (chez@u.washington.edu), October 20, 1999.

Chomsky? Oh my God. Are there people in this world who consider this guy anything but a whacko? Chomsky? I gotta laugh. Also, I thought the corporate black helecopters would have gotten him by now. Remember the vast right wing conspiracy that was spreading lies about Bill's infidelity? Chomsky sees that sort of thing everywhere. LOL. Liberal, NEO liberal, whatever. Socialist is what they are and the #1 threat to freedom and democracy the world over. The #2 threat is lazy Americans who are not working hard enough to stop them, but I digress.

-- Brian (tigger@mashell.com), October 21, 1999.

Tigger,

I would LOVE to see you in a one-on-one debate with Chomsky. Minds would be blown, egos would be shattered, yes indeed. Chomsky's PhD and hundred-odd books versus your Limbaugh-itis. Let's go!

"Whatever"

Al "Bob Dole" Gore, explaining his Agenda for America, 1996

-- The Phantom "Whatever" Menace (chez@u.washington.edu), October 21, 1999.

See? You ignore the negative impacts, or claim they will just not happen. It is still poorly written. Bad law. Vote NO.

-- dbvz (dbvz@wa.freei.net), October 21, 1999.