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Daily Tax Report: State

Activist’s $4 Billion State Tax-Cut Drive Unites Business on ‘No’ (1)

Aug. 1, 2019, 8:46 AMUpdated: Aug. 1, 2019, 7:59 PM

Boeing Co., Microsoft Corp. and other top businesses in Washington state are galvanizing against a ballot measure that would slash the state’s budget by an estimated $4.24 billion over six years.

Initiative 976—sponsored by anti-tax activist Tim Eyman—would cut the budget in part by repealing the 0.3% sales tax on vehicle purchases and dropping weight fees for cars and light-duty trucks to a flat $30. It also would lower electric vehicle and snowmobile fees and reduce the motor vehicle excise tax provisions of public transportation agency Sound Transit, which is in the midst of a $54 billion expansion of light rail in metropolitan Seattle.

It’s opposed by the Washington Roundtable—the policy voice of the biggest employers in the state, whose members include Boeing and Microsoft was well as Alaska Air Group Inc., Paccar Inc., Starbucks Corp., and Weyerhauser Co. The Washington State Labor Council, AFL-CIO, is also urging rejection.

Eyman has had success in the past. Twenty years ago, he sponsored I-695, to replace what he called the “dishonest” state motor vehicle excise tax with “a flat, fair, and reasonable $30 annual fee.”

“Business and labor teamed up and spent $2.2 million on a no campaign,” Eyman said in an interview. “Every editorial board slamming the hell out of it. Every news story monstrously slanted in favor of the government’s perspective. It was a full-throated, non-stop, sky-will-fall-if-you-vote-for-the-initiative, but it passed overwhelmingly despite being radically outspent by the opposition.”

Initiative 695 was ultimately invalidated by the courts. But the Legislature, under political pressure, still adopted $30 vehicle registration tabs anyway. In doing so, it left in place language that Eyman said could have been construed as allowing a portion of the former state motor vehicle excise tax to be re-imposed. Eyman responded by sponsoring Initiative 776 to ensure the MVET did not get resurrected and to “get rid of local taxes and fees on vehicles in excess of $30,” he said Aug. 1.

Initiative 776 also won at the polls and was upheld by the Supreme Court. But it remanded a question to the trial court as to whether the initiative would illegally impair Sound Transit’s collection of revenue to pay off bonds. In 2006, the case came back to the Supreme Court, which held that Sound Transit could continue collecting additional car tab taxes to cover the cost of outstanding bonds.

“In recent years, you’ve got state and local governments and Sound Transit jacking up the taxes and fees again,” Eyman said.

Business To Do Battle

The measure on this November’s ballot “would have significantly detrimental impacts on our ability to move goods and services and for people to get where they are trying to go,” Roundtable President Steve Mullin, said in an interview.

Mullin is co-chair of an entity sponsoring a political action committee opposing I 976. The opposition campaign hasn’t even started, and the PAC, Keep WA Rolling, has already collected $280,000 in donations, according to Washington Public Disclosure Commission records.

Here’s a glimpse of what’s at stake, according to the state Office of Financial Management:

  • Funding for Washington State Patrol traffic and commercial vehicle enforcement and related criminal investigations;
  • County road and bridge construction and improvement funds;
  • Cuts to the state’s main funding account for highway construction and maintenance;
  • Ferry funding;
  • State funding of public transportation, rail and bicycle/pedestrian projects;
  • The loss of vehicle fees imposed by 62 municipalities across the state for road repair and maintenance; and
  • Funding for transit systems and sidewalks.

The initiative would also reduce Sound Transit motor vehicle excise tax rates from 0.8% to 0 .2%, resulting in an annual reduction of $328 million in revenue when and if the agency can end its obligation for outstanding bonds that have been issued against the tax.

“Our board feels very strongly that inadequate transportation infrastructure is one of the most critical challenges facing the state,” Mullin said. “That’s why they voted unanimously to oppose I-976.”

The roundtable—which Mullin calls “the voice for the common interests of the state’s large private employers on state policy"—was one of the primary advocates for a major statewide transportation investment package in 2015. Mullin agrees with the characterization of the the board vote as “a no-brainer.”

“I 976 would take billions out of the package we worked hard to pass, and thus there would have to be significant cuts to road and highway infrastructure,” Mullin said. “There would be significant cuts to regional transit. And there would be significant cuts to road maintenance.”

Legal Troubles

Meanwhile, Eyman is tangling with the state over alleged campaign finance wrongdoing. He noted that I 776, the car-fee measure, qualified and passed in 2002 despite revelations at the time that he had secretly been profiting from the campaign, an accusation that ultimately led to his paying $50,000 to settle state charges of campaign finance disclosure violations.

Attorney General Bob Ferguson (D) sued Eyman in 2017, alleging “improper personal use of more than $300,000 in contributions made to political committees, concealment of more than $490,000 in contributions and misleading reporting.”

The case is not going well for Eyman. He was found in contempt of court for discovery violations for the second time July 26. In addition to facing $1.8 million in penalties, plus $308,000 in reimbursement, Ferguson is asking the court to ban him for life from participating in or directing financial transactions for any political committees.

(Adds quote from Tim Eyman in eighth paragraph. An earlier version corrected the litigation history of Initiative 776.)

To contact the reporter on this story: Paul Shukovsky in Seattle at pshukovsky@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Nora Macaluso at nmacaluso@bloomberglaw.com

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