Hell, yeah! Let's lower the sales tax 1% — and raise taxes on carbon, capital gains and/or income

There’s a simple way to beat Tim Eyman and his initiative I-1366.  At the same time we’ll lower taxes on most people, help the environment, and, optionally, raise revenue to fund schools. We can even do it in a revenue-neutral way, thereby making it palatable to some Republicans.

In short,  Let’s use I-732 (revenue-neutral carbon tax swap) or something similar to beat I-1366 (Eyman’s 2/3 super-majority blackmail).

By way of background, recall that if I-1366 passes — and early returns suggest that it will — one of three things must happen.

1. The legislature must put before Washington State voters a constitutional amendment requiring a 2/3 super-majority of legislators in both the state House and the state Senate (or a majority of voters) to approve any tax increase or reduction in tax breaks; or
2. The state sales tax must be lowered from 6.5% to 5.5%; or
3. The state Supreme Court will have to rule that I-1366 is unconstitutional.

But I say there’s a simple solution to this problem, even if the State Supreme Court fails to rule I-1366 to be unconstitutional.

Let’s go ahead and lower the sales tax 1% but at the same raise taxes on carbon, capital gains, and/or income to make up the loss.

The tax on carbon will be similar to the effect of I-732 being (successfully) pushed by CarbonWA. One difference is that I-732’s tax would be revenue-neutral, whereas the current proposal allows, but doesn’t necessitate, revenue neutrality.

Because I-732 apparently has enough signatures to succeed, and because I-732 is an initiative to the legislature, the legislature will need to decide next year whether to impose a revenue-neutral tax on carbon. If they fail to act, a measure will appear on the ballot in 2016 to raise tax on carbon and lower the sales tax and the B&O tax in a revenue-neutral way.  My point is:  the legislature can use a bill similar to I-732 to neutralize I-1366.

But in addition to raising tax on carbon, we should raise taxes on capital gains and/or on income (with the first, say, $50,000 of income exempt from tax).  These taxes would make Washington State’s tax system more fair and progressive.  They’d lower tax on most people.  After all, our state is said to have the most regressive tax system in the nation.

And we mustn’t forget all the special-interest tax breaks that should be eliminated as well.

The voters are correct to be angry about high taxes! Most people are over-paying. What most people don’t understand is the reason their taxes are too high: because our tax system is regressive.

The net result of this proposal is that we’d satisfy the words of I-1366 — we’d lower the sales tax by 1%.   But what’s great is that we’d also lower taxes on most people, help save the environment, and make our tax system more progressive.

Even if the tax shift is revenue-neutral — and that would be easier to pass in the legislature — the change will be a big win.

So, there should be no need to be afraid of I-1366 — if the legislature has the guts to do the right thing and if the people of Washington can be educated about what’s in their own self-interest.

The key is just that: educating the public.  Will our political leaders show some leadership and help educate the citizens?  And will we activists build an effective movement to help this happen? Until we educate the public on this issue, we will continue losing elections and initiatives.

I admit that Republicans in the legislature are unlikely to be reasonable about raising an income tax or capital gains tax. Most of them would be OK with public education failing and with homeless and sick people languishing on the streets. Conservatives will argue that the legislature mustn’t dare go against the will of the voters, who say by their votes that they do not want additional revenue. I have two answers to this.

First, if we make the change revenue-neutral, then the Republicans may agree. As CarbonWA has shown, many conservatives will agree to a revenue-neutral tax shift (for example, More and more conservative thinkers want to tax carbon. Will politicians and activists follow? and Why We Support a Revenue-Neutral Carbon Tax). In fact, many lefty groups are opposed to I-732 because of its revenue-neutrality and because it was designed in consultation with people from the conservative Washington Policy Center. (See Alliance for Jobs and Clean Energy, Carbon-tax initiative divides environmentalists, and Why I decline to sign I-732.)

Second, the voters are voting against their own self-interest and need to be educated as to why the current tax system is unfair and inadequate.

But we can beat I-1366 without raising revenue.