Muni News
VOLUME 90, ISSUE 6  - Fall 2000

What's Wrong With I-722?

By Elizabeth Pierini, Pres., League of Women Voters of WA, Tom Albro, Chair, Municipal League of King County, Gene Lux, Pres., People for Fair Taxes

Reprinted courtesy of The News Tribune, Oct. 15 , 2000 edition.

No one likes to pay taxes, and most of us agree that our system could use some reform. However, simplistic attempts at reform just make the system worse, and I-722 is no exception. What’s wrong?

The Repeal and Repay Provision:

• I-722 requires governments to repeal tax and fee increases enacted between July 2 (when I-695 petition signatures were submitted) and Dec. 31,1999 (when I-695 became effective as law), and return the fees to taxpayers. Initiative proponents argue this will “teach them (our elected officials) a lesson.” Proponents say officials should have treated I-695 as law when the signatures were submitted to the State in July 1999. But no initiative petition has the force of law just because signatures are submitted. It is arrogant and foolish to try to punish elected officials for continuing to perform their functions under existing law until an initiative has been approved by the voters and become effective in accordance with its terms and the Constitution.
• Repayment is costly, unconstitutional, and unworkable. In the case of many taxes and fees, it’s impossible to know who made the increased payments. If we don’t know who paid the tax or fee, how can it be refunded? Even if possible, the costs of returning small fee increases would almost certainly exceed the amount of money returned. The State Supreme Court has ruled that our constitution prohibits refund of a lawfully collected tax. I-722 will generate needless litigation, wasting more taxpayer money.
• Initiative proponents state erroneously in the Voters Pamphlet that increasing taxes and fees during late 1999 was “an obvious attempt to get around I-695’s voter-approval-for-tax increases requirement (which started January 2000).” In reality, local governments always adopt budgets in the fall of each year or biennium. Numerous fee and tax increases were considered before I-695 was submitted, many products of long-term financial planning. Seattle, for instance, had been gradually increasing its water rates for years to fund capital improvements to its aged water system. It is false to assert that this was “getting around” I-695.
• Financial impacts of Repeal and Repay would seriously hurt capital projects. I-722 is likely to bring lowered bond ratings, higher interest rates and possible default, thus increasing taxpayers’ costs for capital improvements.

I-722’s provisions limiting increases in property taxes are deeply flawed, especially sections, which provide windfalls for new construction and “exempt” annual increases in taxable valuation, which exceed the lesser of 2% or inflation.

• Like a backwards Robin Hood, I-722 takes from the poor and gives to the rich. I-722’s valuation limits would destroy the historic uniformity and equity of the property tax reliance on fair market value. Why? Tax cuts for some shift the burden to others. Property taxes in Washington are collected in a “closed” system, like toothpaste in a lidded tube. When you squeeze one end, the toothpaste moves elsewhere but doesn’t go away--regardless of the tube’s size. I-722 reduces the taxes for properties with rapidly increasing value by increasing the taxes for properties with stable or decreasing value. I-722 gives major tax breaks to new skyscrapers in Seattle and Bellevue and homes in affluent Puget Sound neighborhoods, forcing properties with slow-growing value to make up the difference. I-722’s inequity is particularly harmful for rural areas. Proponents may deny these impacts but I-722 simply cannot override basic mathematics and our State Constitution!
• I-722’s treatment of new construction creates glaring inequity. Assessor data shows a new skyscraper built in 2009 at a cost of $300 million, under I-722 “may be valued at a cost of 10 years prior, possibly at $150 million or less.” That’s a huge windfall for expensive new development. This provision won’t reduce the total property tax but will shift the burden to less affluent property owners. I-722’s windfall for new construction will attract added commercial development to growth hotspots, further depriving slow-growth areas.
• I-722 could actually result in higher taxes for senior and handicapped citizens of modest means enrolled in state tax relief programs. Don’t believe us? Ask your financial advisor or County Assessor.
• I-722 reduces tax revenue in years when inflation tops 2 percent. Results: fire districts, public health providers and others must cut critical services, due to I-722’s inflexible levy lid and repeal of existing legislation protecting future levy capacity.

I-722 is Bad for Taxpayers. It's Repeal and Repay provision is administratively complex and therefore expensive. It increases costs of capital improvements through lowered bond ratings. It is Constitutionally suspect, and will only add to the costs of lawsuits that taxpayers already have to pay. I-722’s tax “limitations” are patently unfair, giving major tax breaks to high-end properties while increasing taxes on others by undercutting fair, market-based valuations. Those using the initiative process to “send a message” should find a cheaper way to express themselves.