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Thursday, November 12th, 2015

A progressive Legislature, not Eyman’s 1366, can fix Washington’s regressive tax system

Within hours of Election Night 2015, after it had become apparent that Tim Eyman’s hostage-taking I-1366 had too much of a head start in early ballots to be defeated, multiple commentators with a thirst for progressive tax reform began floating the idea of using I-1366 as a springboard to get the job started, reasoning that something good might as well come out of something bad.

First out of the gate was Don Smith, writing at Washington Liberals, who opined:

There’s a simple way to beat Tim Eyman and his initiative I-1366. At the same time we’ll help the environment, and, optionally, raise revenue to fund schools. And we can even do it in a revenue-neutral way, thereby making it palatable to Republicans… Let’s go ahead and lower the sales tax […] but at the same raise taxes on carbon, capital gains, and/or income to make up the loss.

Two days later, Jeff Reifman made a similar argument on his personal blog, though he chose to be more provocative with his call to action:

Tim Eyman may have accidentally done us all a favor.

Legislators, please listen to the voters on I-1366. It’s time to cut the state’s sales tax and collect revenue more evenly from corporations, property owners and residents. Progressives, drop the lawsuit against I-1366 — it’s time to challenge Olympia to represent residents and stop subsidizing corporate shareholder profits.

And yesterday, Danny Westneat echoed both of them, writing:

That Eyman. He has us in another pickle, doesn’t he? Maybe not. Maybe there’s a third way — one that could be “win-win-win” in that it preserves the state budget, makes taxes fairer and, most important, gives some relief to the poor and working class of the state.

Eyman’s initiative will slash the state sales-tax rate from 6.5 percent to 5.5 percent on April 15, 2016, unless the Legislature first passes a two-thirds tax-vote constitutional amendment. The intent, for him, is to coerce lawmakers to do the amendment. But there’s nothing in Eyman’s measure that says they can’t go ahead and cut the sales tax, then replace that lost revenue with something else.

While we at NPI certainly applaud the yearning to make lemonade out of one of the biggest lemons of an initiative in Washington State history, Smith, Reifman, and Westneat are all engaged in wishful thinking.

First, allowing I-1366 to go unchallenged, as Jeff Reifman has proposed, would set a terrible precedent, considering that I-1366 is an outrageous hostage-taking scheme that is beyond the scope of the initiative power. Letting I-1366 stand would invite further mischief in the future from other entities active in Washington politics. Abuse of the initiative (by Tim Eyman and by other actors) has become a serious problem in our state, and it is a problem that will get much worse if I-1366 is not struck down by the Washington State Supreme Court.

King County Superior Court Judge Dean Lum has already ruled I-1366 beyond the scope of the initiative power. I-1366 is probably also unconstitutional in its entirety in additional respects (there’s a strong case that it violates the single-subject rule, for instance). I-1366 will continue to be fought in court, as it must be.

Second, the idea that the Legislature will respond creatively to use I-1366 as a springboard for progressive tax reform (in the event the Supreme Court does not act) is totally unrealistic. This isn’t 2007. The Legislature no longer has Democratic supermajorities. Militant Republicans gained control of the Senate with Rodney Tom’s power coup in 2012 and have whittled the Democratic majority in the House down to a bare minimum of fifty, following their victory in the 30th LD.

Democrats no longer have the ability to pass bills in the House on their own unless all of their members are present, and in agreement. In the Senate, Democrats are the minority; consequently, they have have very little power.

Majorities matter in legislative bodies. When you’re in the majority, your party sets the agenda, decides when to work and schedule votes, controls the committee structure and the composition of committees, and determines what bills come to the floor and which ones do not. Right now, the Republicans have a majority of twenty-six in the Washington State Senate. They decide what happens there.

Now, this wouldn’t be an issue if Republicans were interested in progressive tax reform, as the more reasonable wing of their party was in the 1970s when Dan Evans was governor. Sadly, they’re not. The days when the Evans Republicans were in charge are long gone. The Republican Party has morphed into a rabid, radical right wing anti-public services and anti-common wealth party… a party in which Grover Norquist wannabe Tim Eyman wields tremendous influence.

Readers not familiar with the inner workings of the Washington State Legislature may not be aware that Tim Eyman has a tight relationship with many members of the Republican caucuses. Spend enough time on the grounds of the Capitol during session, and you may catch a glimpse of Eyman walking around with the likes of Don Benton, or disappearing into a conference room to chat with Republicans on a key committee. They consult with him regularly, and take cues from him.

After the Public Disclosure Commission released the findings of its investigation into Eyman’s financial machinations during the I-517 and I-1185 campaigns in 2012, Eyman turned to his friends in the House and Senate Republican caucuses to sub for him on the campaign trail. He deployed Ed Orcutt, Doug Ericksen, and Pam Roach as surrogates to make appearances or sign ghostwritten op-eds, and announced endorsements from still more Republican lawmakers.

The following Republicans are all known supporters of Tim Eyman’s I-1366:

Matt Shea, Ed Orcutt, Chad Magendanz, Jeff Holy, Bob McCaslin, Matt Manweller, Elizabeth Scott, Pam Roach, Don Benton, Michael Baumgartner, Brian Dansel, Doug Ericksen

It is important to understand that Eyman developed I-1366 to give militant Republican legislators like these more power. I-1366 is not aimed at the Legislature as a whole. I-1366 is aimed specifically at Democratic legislators. It is intended to put them in a bind, giving Republicans leverage to push through an amendment to require a two-thirds vote to raise or recover revenue forever.

The notion that Eyman’s elected Republican co-conspirators would voluntarily give up their leverage so that Washington State can have progressive tax reform is ludicrous. These are not reasonable people. They’re militant extremists who are totally opposed to progressive tax reform. Progressive tax reform would reduce the appeal for Eyman initiatives in the future, result in the Republicans’ wealthy benefactors having to pay more in dues to the state, and possibly also increase public confidence in state government. That’s about the last thing they want.

Their endgame is to sabotage our state Constitution, which requires a majority vote to pass bills. Republicans, again taking their cues from Eyman, want to mess with Article II, Section 22 (the majority vote provision) to require their consent for any revenue bills to pass. They intend to achieve this by requiring a two-thirds vote for all such bills, in violation of the principles our state was founded upon.

Keep in mind that when a two-thirds supermajority is required, it means a submajority is in charge of the outcome. The inverse of two-thirds is one-third. Normally, as stipulated by Article II, Section 22, it takes fifty votes in the House to pass a bill, and twenty-five in the Senate. When the threshold is two-thirds, the number changes to sixty-seven in the House and thirty-three in the Senate. As few as seventeen senators or thirty-three representatives can block majorities in both houses from taking action when a two-thirds vote is required.

Don't mess with our Constitution

Click on the pictogram above to understand how our founders intended for our Legislature to work.

Republicans figure they’ll always have at least seventeen seats in the Senate, and/or thirty-three in the House (which has historically been the case). Passage of the amendment they’re demanding would give them the ability to forever veto any revenue bill they didn’t like. They’re very hungry to have that kind of power.

But, ironically, any proposal to change how our plan of government works needs to get a two-thirds vote to pass. Our founders wisely believed in majority rule for passage of legislation while obtaining minority consent for any changes to our plan of government. Or, to put it more simply: Majority rule with minority rights.

It would take a two-thirds vote to impose a two-thirds vote threshold and sabotage Article II, Section 22. Eyman and the Republicans do not have the votes to do this. So Eyman developed I-1366 to coerce Democratic lawmakers into voting against their values, and their will, by a certain date (April 15th, 2016).

Judging by his emails, it is Eyman’s expectation that Democrats will capitulate and give him what he wants. After all, they have in the past. Gary Locke and Democratic legislators agreed to reinstate I-695 in 2000 after the Supreme Court struck it down. Chris Gregoire and Democratic legislators likewise reinstated I-747 in 2007, in a one-day special session, after the Supreme Court struck it down, even though we warned them that doing so was a terrible, awful, no good idea.

But what Eyman does not seem to realize is that times have changed. Elected Democrats nowadays feel the same way about him that the party’s grassroots base does. Long-serving Democrats have gained an appreciation of just how destructive his initiatives are, having spent many, many years trying to mitigate their harm, while Democrats elected more recently simply think of Eyman’s initiative factory as a cancer on the state that needs to be fought, no matter what.

If both houses of the Legislature were controlled by progressive Democrats, comprehensive tax reform would have been on the table last session. All of Jay Inslee’s bold ideas from last December would have gotten at least a fair hearing, and many of them might have become law. But Democrats failed to win the Senate in 2014 and lost crucial seats in the House. It was a bad midterm.

Elections have consequences, as the saying goes. The 2014 elections produced divided government. A consequence of those elections is that Republicans can kill Democratic policy proposals with relative ease in the Senate.

And they have been doing just that.

Anyone who thinks their attitude will be any different next year needs a reality check. Republicans do not care that the Supreme Court is fed up with the Legislature’s reluctance to speedily comply with its January 2012 McCleary decision requiring the state to fully fund K-12 education.

They have nothing but contempt for the Court right now. Consider their rhetoric.

When the Supreme Court began fining the Legislature for not complying with its orders back in August, the response of many Republicans was to once again attack the Court. State Representative and I-1366 backer Matt Manweller, for instance, declared it was time to start drafting articles of impeachment against the justices.

(And no, I’m not making this up… follow the link above.)

So, again… the notion that I-1366 can be salvaged to produce a “win-win-win” is wishful thinking. I-1366 was conceived to enable militant Republicans in the Legislature to push through an amendment giving them permanent veto power over revenue bills. These militant Republicans campaigned with Eyman to pass I-1366; they are the intended beneficiaries of the blackmail scheme it contains. They are not going to give up their leverage so we can all have progressive tax reform.

We can certainly dispense with the idea that the Legislature can use CarbonWA’s Initiative 732 to avert the consequences of Scenario 1 of Tim Eyman’s I-1366. Smith, Reifman, and Westneat all made this suggestion in their respective commentaries. Here is how Westneat laid it out in his column:

OK then, how about this: A group of climate activists called Carbon Washington has more than 300,000 signatures for their measure that, by cosmic coincidence, would cut the sales tax by the exact amount as Eyman does. Except it would replace that cut with a carbon tax. The purpose of Initiative 732 is to curb greenhouse gases while being revenue neutral.

By a fluke, the Eyman initiative and this climate change initiative are complementary. The Legislature must deal with both, this spring. There are timing issues to be worked out, but if lawmakers embraced the spirit of both they could combat climate change, make the tax code smarter and solve the Eyman problem, all in one fell swoop.

The nice-sounding outcome Westneat describes above is utterly implausible.

To begin with, I-1366 and I-732 are not complementary initiatives. As I’ve already explained in this post, I-1366 is a malicious hostage-taking scheme conceived by Tim Eyman to help militant Republicans in the Legislature push through a constitutional amendment giving them veto power over revenue bills forever. It is narrowly passing now and due to become law next month.

If the Supreme Court this winter rules that I-1366 is beyond the scope, or unconstitutional, or both, I-1366 will become unenforceable (null and void), and the Legislature will not need to deal with it in the spring.

I-732, meanwhile, is a well meaning but fatally flawed initiative to the Legislature to tax pollution and use the proceeds to lower existing taxes like the sales tax. I-732 is supposed to be revenue neutral, but we’re not convinced that it actually is. Our assessment is that it is poorly written.

Contrary to what Danny Westneat says above, the Legislature doesn’t necessarily have to deal with I-732 in the spring either. The Legislature can simply ignore I-732 if it chooses, and it will proceed to the November ballot for voters’ consideration. This is what happened with I-594, I-591, I-517, and I-522.

The Washington State Constitution is very explicit about what the Legislature may do with both initiatives to the Legislature (following qualification) and initiatives to the people (following passage). Initiatives to the Legislature may be adopted as-is, passed on to the people, or passed on to the people with an alternative. Those are the only options. Initiatives to the Legislature can’t be amended by the Legislature.

Initiatives passed by the people, meanwhile, cannot be amended or suspended by the Legislature within two years of adoption — except by a two-thirds vote. Until and unless the Supreme Court does its job and strikes down I-1366, I-1366 will thus enjoy protection from the very Constitution it seeks to undermine.

For the scenario proposed above by Westneat to work, the Legislature would need to amend I-732 to remove the language in I-732 that lowers the state sales tax. Otherwise, the sales tax would get lowered twice: Once by I-1366, starting April 15th, 2016 and then again starting July 1st, 2017 by Section 14 of I-732. The initiative’s other effective dates, meanwhile, would need to be moved up.

But, as I just explained, the Legislature can’t amend initiatives to the Legislature. The Constitution doesn’t allow it. I-732 could only be adopted by the House and Senate as written. Otherwise, it goes to the ballot… with or without an alternative.

To suggest that the Legislature could use I-732 to get around I-1366, as Don, Jeff, and Danny have, demonstrates a lack of understanding of how initiatives work in Washington State, and how the legislative process works.

Now, we saw a few months ago that, despite their anti-tax rhetoric, not all Republicans are not opposed to raising revenue in all circumstances. A number of the Republicans in both houses voted to raise the gas tax as well as vehicle fees to pay for highway projects that some of them wanted.

Our schools remain underfunded, but nothing is too good for our cars, it seems.

(Ironically, one of these Republicans was I-1366 booster Michael Baumgartner, who could easily contend for the title of the Legislature’s biggest hypocrite.)

However, when Governor Jay Inslee proposed levying a capital gains tax and instituting a cap and trade system — both ideas that Washington voters support, as documented by NPI research from two months ago — Republicans reacted with scorn and derision. They wouldn’t give either idea a fair hearing in the Senate.

For Smith, Reifman, and Westneat’s dream of 1366-catalyzed progressive tax reform to come true, Senate Republican leadership would need to do an an abrupt about-face in 2016 and agree to put a capital gains tax, as well as a cap and trade system, on the Senate floor for a vote. We just don’t see that happening.

Why capital gains and cap and trade, you might ask? Because those are the most feasible options for replacing billions in lost sales tax revenue. Capital gains alone would not generate enough funding to address I-1366 and McCleary.

Both ideas already have the support of Governor Jay Inslee and most House Democrats. House Democrats could probably move the necessary legislation through the Legislature’s lower chamber if Senate Republicans would agree to allow the legislation through committee and on the floor of the upper chamber for a vote, where Democrats would supply the bulk of the votes needed for passage, and Republicans would provide the rest.

The capital gains tax would need to go into effect very quickly, so it could start offsetting hundreds of millions of dollars in lost sales tax revenue in 2016. Cap and trade would need to kick in not long after.

America’s supposed to be a free country and Washington is supposed to be a free state, so any progressives who would like to are welcome to mount a grassroots lobbying effort to try and persuade Senate Majority Leader Mark Schoesler and his deputies John Braun, Ann Rivers, Linda Evans Parlette, Joe Fain, and Jim Honeyford to get on board. We rather doubt that any of them will respond favorably.

The few Republicans in the Legislature who are not in Eyman’s pocket will probably be praying that the Supreme Court strikes down I-1366 very soon, so they don’t have to get into a game of chicken over the budget with Democrats.

Failing that, if Democrats refuse to capitulate to Eyman and the Republicans, and Republicans refuse to give up their leverage, the sales tax will be cut by default in a matter of months, and the fallout will be disastrous. Every community everywhere in the state will feel the pain of devastating cuts to public services.

The best outcome would be for the Supreme Court to do its job and temporarily restore the status quo by striking down Tim Eyman’s I-1366.

The Alliance for Jobs and Clean Energy, to which NPI belongs, is preparing an initiative to the people for 2016 to create a cap and trade system. Assuming that initiative is successful, it will solve one piece of the puzzle. To address the rest, Washington voters will need to elect a progressive Legislature prepared to work cooperatively with Governor Inslee to fully fund public education.

There is no organization in this state that wants to see progressive tax reform happen more than NPI. It’s been the focus of our advocacy since NPI’s inception. But to get anywhere in the Legislature, we need progressive majorities in both houses. And the soonest we could have such majorities is January 2017.

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One Comment

  1. Good analysis about the differences between initiatives to the people and initiatives to the legislature!

    The text of I-732 says “There is levied and collected a tax equal to six and five-tenths percent, decreasing to six percent beginning July 1, 2017, and to five and five-tenths percent beginning July 1, 2018,”

    If the legislature approves this initiative I-732, which sales tax would take precedence? I-732 or I-1366?

    Perhaps I-1366 would apply from April 16, 2016 til I-732 takes effect on July 1, 2017.

    But the two initiatives directly contradict each other on what and when sales taxes will apply. So maybe the courts would have to decide.

    But the legislature could, effectively, co-opt both initiatives by passing its own bill that lowers the sales tax by 1% (thus satisfying I-1366) and making up for the lost revenue by raising tax on carbon, capital gains, and/or income. You are correct that Republicans are unlikely to go along with taxes on capital gains or income. They might agree on a revenue-neutral tax swap between sales and carbon. But could that go into effect by April 16, 2016? Maybe somewhat later.

    You are apparently correct that the legislature can’t directly use I-732 to counteract I-1366, because the starting dates don’t match. But because of the conflict in starting dates and sales tax amounts, the courts could decide.

    As you say, the best solution now is for the State Supreme Court to rule that I-1366 is unconstitutional. If it fails to do that, or if the U.S. Supreme Court over-rules the State Supreme Court, then is our only alternative to wait til we have a progressive legislature? That won’t happen for 13 months at the earliest.

    Some sort of swap between sales tax and, say, carbon still seems feasible, if politically difficult.

    # by Donald A. Smith :: November 12th, 2015 at 7:55 PM