Stateline Story

Anti Car-Tax Sentiment To Be Tested In Washington State

  • October 06, 1999
  • By Joseph Giordono

Since Republican James S. Gilmore rode an anti car-tax pledge to the Virginia governor's mansion in 1998, the unpopular levy has become a political target in many states.

Even though Washington's car-tax generates only 2.2 percent of the state's tax revenue, some officials predict dire consequences if the measure is passed. That's because Initiative 695 abruptly halts all car-tax collections on January 1, 2000 whereas other states are phasing out their taxes over several years.

Gilmore's plan eliminates the car-tax on approximately 90 percent of all Virginia vehicles over a five-year period. Last year the state refunded 12.5 percent of each taxpayer's car tax bill, with rebates going up to 27.5 percent this year, 47.5 percent in 2000, 70 percent in 2001 and 100 percent the year after.

Washington officials say they will be left grasping for funding for such essential public services as highway repairs, ferry systems, law enforcement budgets and pollution monitoring if I-695 passes. The state Office of Financial Management estimates that the passage of I-695 would cost the state $1.1 billion over the next two years and $1.7 billion over the following two.

Washington's Democratic Governor Gary Locke has waffled on the referendum, but the state Republican party recently voted to endorse the measure. The grassroots "Yes On I-695" campaign to abolish the car-tax is being led by Tim Eyman, an independent businessman who raised a campaign war chest of nearly $150,000, mostly from individual contributions of $50 each.

Opponents of the referendum have amassed $850,000 and the endorsement of such Washington heavyweights as Boeing, Boise Cascade, Weyerhaeuser and the state chapter of the American Association of Retired Persons.

"This is a scud missile. We don't know where it's going to come down and we don't know exactly what the effects are going to be," said Mark Funk, spokesperson for "No On I-695."

Under Washington's tax system, car-tax revenues go into a separate account from other tax revenues, and almost half the money is given to local governments to pay for police, fire, health and mass transit services.

The other half is divided up by state agencies. The biggest dent would be felt in the state Department of Transportation, which could lose as much as one-third of its operating budget. After voters approved a referendum last year to sanction $1.9 billion in transportation bonds, the Legislature called for hundreds of construction projects.

"Most of those projects won't happen any time soon if I-695 passes, because the car-tax it eliminates was supposed to pay back loans needed to do the work," said Secretary of Transportation Sid Morrison.

Proponents of I-695 say that citizens deserve a tax break and that state and local governments can respond by dipping into the state's billion dollar reserve, shrinking government or reshuffling existing money.

"All of this speculation is simple scare tactics by our opponents. If transportation is considered a priority, it will continue to be one, whether I-695 passes or not. The only things we are swinging at are the outrageously ridiculous fees," said Tim Eyman, I-695's sponsor.

Eyman said the initiative is in response to an overwhelming public groundswell to ditch the state's sliding scale tax in favor of a $30 flat fee and voter control of future tax or fee increases. Eyman also argues that reducing the fees will deliver more sales tax revenue as consumers are left with more disposable income.

But State Economist Chang Mook Sohn says Eyman is wrong. Sohn says the initiative would not trigger additional spending because it simply shifts the same amount of money from government workers' salaries to general taxpayers. Consumer spending will stay the same no matter happens with I-695, he said.

Car-tax foes in other states are also trying to arrange its demise. Some South Carolina lawmakers are pushing for voter approval of state-regulated video poker, arguing that this would more than offset car-tax relief.

The video poker proposal will be decided by South Carolina voters on November 2. A year later, the voters will decide the fate of a constitutional amendment that would eliminate car-taxes over a six year period.

Opponents say there is no way the state can make up for the $54 million needed for the first year of the cut because it would require cutting long-term funding from programs already approved by the House Ways and Means Committee. And they are skeptical that revenues from video poker taxes would make up for the car-tax.

Another plan considered in Kansas this year would have exempted vehicles valued at $20,000 or less from property taxes. Sponsor Dale Swenson said this would provide the most relief for middle and low-income car owners, but the proposal was not adopted.

Nationally, personal property taxes on motor vehicles bring in only an average 2.9 percent of the states' tax revenue. According to the National Conference of State Legislatures, only five states depend on motor vehicles taxes for more than 5 percent of their revenue: Iowa (5.6 percent), New Hampshire (6.2 percent), Oklahoma (10.8 percent), Oregon (6.7 percent) and Wyoming (6.7 percent).