Wednesday, May 28, 2008

Washington State Lawmakers Impose $768 Million in Fee and Tax Increases in 2008

More than $200 billion in fee and tax increases proposed

by Jason Mercier, Director, Center for Government Reform, Washington Policy Cente


Introduction

The cost of government is going up this year. During the 2008 Legislative Session, lawmakers imposed $768 million in fee and tax increases over a ten-year period. Home inspections, background checks, fingerprinting, floral services and state tuition are among those activities that will cost more as a result.

Last November voters enacted Initiative 960, The Taxpayer Protection Act. Under Initiative 960, the legislature is required to approve all agency fee increases before they can take effect. Also among the new law’s provisions is a requirement for the Office of Financial Management (OFM) to determine the ten-year cost to taxpayers of any proposed tax or fee increase and to make this information publicly available, along with the contact information of the legislator sponsoring the increase.

According to Initiative 960’s intent section for this requirement (Section 2 in-part):

“The people want a thorough, independent analysis of any proposed increase in taxes and fees . . . [and] a user-friendly method to track the progress of bills increasing taxes and fees, finding that transparency and openness leads to more public involvement and better understanding.”

As a result of this requirement, OFM conducted fiscal reviews of all bills that proposed tax and fee increases and reported the ten-year impact in the fiscal notes for those bills. OFM also created a self-subscription service for email updates on any bill that proposed tax or fee increases.


2008 Tax and Fee Proposals

During the 2008 Legislative Session, state senators proposed 46 bills (including companion bills) that would increase state taxes or fees. The initial versions of these proposals sought to raise $215.4 billion in revenue over a ten-year period. Of these proposals, the legislature adopted five, raising $13 million in fees or taxes.


State representatives proposed 36 bills (including companion bills) that initially sought to raise $98.8 billion in fees or taxes over a ten-year period. The legislature ultimately adopted nine of these bills, raising $755 million in fees or taxes.


In total the legislature enacted 14 bills raising fees and taxes by $768 million over a ten-year period.



Conclusion

Since the 2008 Legislative Session was the first one conducted under the requirements of Initiative 960, it is difficult to determine if the number of tax and fee increase proposals introduced and adopted this year is the norm. To help determine any trends in tax and fee increase proposals in the future, Washington Policy Center will update this report after each session and keep a running total of all bills that fall under the requirements of Initiative 960.

As a general rule, however, all tax and fee increases should have an expiration date (sunset). When tax and fee increases are set to expire, lawmakers will have the opportunity to look at the facts and determine if the tax and fee is serving its intended purpose. If revenue from the tax or fee is still justified, lawmakers can reauthorize it for a period of time. If the project or goal for which the tax or fee was imposed has been accomplished, citizens should be permitted to keep their money.

Friday, May 23, 2008

The General Election Debate over Health Care Reform Begins

by Grace-Marie Turner
President, The Galen Institute

Sens. Barack Obama and John McCain are gearing up for a general election battle--barring a surprise surge by Sen. Hillary Clinton--in which they will offer very different visions for health care reform.

Obama--like Clinton--sees a much larger role for government in the one-sixth of our economy represented by the health sector. Obama would mandate that all children have health insurance, would require employers to pay for insurance for their workers, would impose significant new federal regulation over health insurance, and would expand government programs like Medicaid.

McCain has a very different vision. "The key to real reform is to restore control over our health care system to the patients themselves," he said recently.

He would focus on new financing tools to help people buy health insurance that would be portable from job to job, new mechanisms for those with pre-existing conditions to get coverage, and he would emphasize prevention and better care coordination, especially for people with chronic illnesses.

Both Obama and McCain agree that the key to health reform is getting costs under control. "The reason Americans don't have health insurance isn't because they don't want it, it's because they can't afford it," Obama says. As a result, neither candidate supports a universal mandate for health insurance.

But Obama would lock in the employment based system with new mandates on employers.

McCain sees a world in which, "Americans [have] new choices beyond those offered in employment-based coverage." He believes that "Americans want a system built so wherever you go and wherever you work, your health plan goes with you."

McCain would boost options for individually-owned health insurance by making everyone eligible for a refundable tax credit to help them buy health insurance. He would allow people to purchase health insurance across state lines and would give states new incentives and resources to make sure everyone has access to coverage. He says that bringing millions of new buyers into the health care marketplace will expand competition and force insurers and providers to offer more affordable options.

Obama believes that government should require insurers to accept all applicants and would force insurers to charge basically the same premium for everyone, regardless of age, gender, occupation, or pre-existing conditions. A healthy young person would pay about the same as a 62-year-old with heart disease and diabetes.

Obama wants a national "pay or play" mandate, forcing employers to cover a preset percentage of their workers' health insurance or pay a fine. Some businesses would be partially subsidized, but that would mean significant federal oversight of all employer health spending.

He would expand Medicaid and the State Children's Health Insurance Program (SCHIP) and would create a new program modeled on Medicare. That would force private health plans to compete with a taxpayer-supported public insurance program which has federal policing authority and the ability to impose price controls--hardly a level playing field.

Congress will wrestle with the intricacies of reform, but in this election year, the vision is the key, and the contrast between the visions that Obama and McCain offer is stark. The bottom line question will be whether individuals or government will be in control of health care in the future.

Grace-Marie Turner is president of the Galen Institute, a Washington D.C.-based non-profit research organization focusing on free-market solutions to health reform. For more information visit www.galen.org.

Friday, May 9, 2008

Washington State: It's Time to Get Off the Budget Rollercoaster

by John Barnes
Communications Director, Washington Policy Center

Some people like the thrill of rollercoasters. Our lawmakers must love it becaue the biggest rollercoaster in Washington is owned and operated by the state. It's called the budget.

Lawmakers and the governor have grown state spending by 33% in the last two budgets. Now the Senate Ways & Means Committee is projecting a $2.5 billion deficit next year and a $5.3 billion shortfall for the 2011-13 biennium. Taxpayers are getting nauseas.

As a rule of thumb, the state budget is the opposite of gravity. Gravity pulls things down, while all of the spending pressure on the state budget is upwards. That's right--the swarms of lobbyists roaming the halls of the state capitol are not there asking lawmakers to spend less money. It should come as no surprise, then, that state spending growth tends to outpace population growth and inflation.

Thanks to a strong economy, revenue has grown well beyond inflation for the past few years. Even amidst the talk of a revenue decline, it's only a cut in the rate of increase--revenue is still projected to grow beyond inflation. State lawmakers do not have a revenue problem. They have a spending problem.

Let's say I buy a lottery ticket today and win $500. Does it make sense for me to then buy a car with a $500-per-month payment? That's what lawmakers in Olympia have done in the last few years. They've used one-time revenues during boom years to make the down payments on new spending programs, with no way to make the long-term payments.

It's basic math: the bigger the budget this year, the more it costs to maintain next year. Adding to the budget only compounds that problem.

We hear a lot about a "revenue problem" (usually code talk for "we need an income tax"). But is that really the issue? The natural tendency is for government spending to grow, not shrink, and history has shown that no matter how flush with cash state coffers are, lawmakers will always push to spend more. Their appetite for spending appears insatiable, so more revenue will only lead to more spending.

Not content with a 33% increase in state spending over four years, some lawmakers and special interest groups have proposed the state spend more in the face of projected deficits caused by overspending.

Still others argue that speeding up government spending on rebuilding infrastructure will provide jobs now and help keep the economy strong. But this is an absurd argument. It's like saying burning down my neighbor's house is good for the economy because it will keep local builders in business. The only way the government can "create" a job is by taking money away from someone else.

These proposals might make for good election-year politics but they're bad policy that will only make matters worse in the long run.

House Speaker Frank Chopp has admitted that tax increases may be necessary to balance next year's state budget, which is projected to run a $2.5 billion deficit thanks to recent spending increases. Senate Majority Leader Lisa Brown is suing to overturn I-601, which was approved by voters in 1993 and requires a two-thirds vote of the legislature to raise taxes. Legislative leaders can't be any clearer that they plan to resort to tax increases to bail out their overspending.

The sound approach to the state's budget woes is a meaningful constitutional spending limit. The state's I-601 spending limit is so riddled with holes that it's now meaningless. Clearly a statutory restraint is not enough. The state needs a meaningful spending limit that makes allowances for genuine emergencies, much like the rainy day amendment that voters approved in November, but cannot be gamed and sidestepped by fund transfers and off-budget spending, as lawmakers have done over the last few years.

The real problem is on the spending side of the state's ledger, not the revenue side. Lawmakers must learn to prioritize expenditures, realizing that not every project or program (no matter how attractive) can be a priority. That's how people budget in the real world.

Unless lawmakers change the way they budget taxpayer dollars, the fundamental problem will remain and the rollercoaster ride will continue.

John Barnes is Communications Director for Washington Policy Center, a non-partisan public policy research organization in Seattle and Olympia.