Read My Vote: No New Taxes
In the cyberfuture, all the middlemen will lose
their jobs. Or so goes the theory. Insurance agents, music label executives,
car dealers, and even university administrators will be annihilated as
consumers turn directly to the infinitely efficient Web to buy and sell goods
and services. Such "disintermediation" is supposed to transform politics, too,
as voters cashier the thousands of middlemen--senators, council members,
commissioners--who represent them. Once again, the theory is that the efficient
Web will let voters cast their ballots directly on all the issues.
Out here in Washington state, where we already run
on Internet time, the voters decided that political disintermediation via the
Web was taking too long, so they passed Initiative 695 by a 58 percent to 42
percent landslide in the Nov. 2 general election. I-695 came in two parts. The
first cuts the much-loathed annual license fee on cars from 2.2 percent of the
car's value to a flat fee of $30, putting a $750 million a year dent in state
and local revenues. (Some of the license fee goes to local government; most of
it goes to a shared transportation fund.) The second part of I-695 achieved
disintermediation: It prevents any state or local jurisdiction from raising
taxes or fees without a vote of the people.
So, if the city of
Seattle wants to so much as boost late fees on library books, it has to ask the
voters. The same goes if the University of Washington wants to add a quarter to
the price of a cheeseburger at Husky Stadium.
The government's first response to the tax revolt was … a
bunch of new taxes. The measure doesn't take effect until Jan. 1, so dozens of
towns and counties have increased service fees on water, sewer, utilities,
garbage, business, and parks. From "The Inevitability of Death and Taxes
Department" comes the news that some jurisdictions are raising the price on
cemetery plots. As a countermeasure to all the taxes, many drivers whose tags
expired after the November election are playing cat and mouse with the cops,
hoping to postpone the purchase of new tags until January, when they can pay
the $30 fee. (The savings are real: It cost me $450 to license my 1996 Honda
Accord this year.) Meanwhile, in the halls of the Capitol, the disintermediated
legislators are walking around like zombies. Stripped of the power to increase
taxes, the House and Senate have been reduced to ceremonial bodies.
The roots of the current
tax revolt go back to 1993, a recession year in which voters narrowly approved
the Republican Party sanctioned Initiative 601. I-601 placed a spending limit
on the legislature, based on inflation and population growth, but offered no
tax relief. Instead, it diverted all excess state revenues to a special, almost
untouchable reserve fund.
As Washington's economy improved, the reserve fund swelled
to today's $1 billion, creating a political opportunity for I-695 mastermind
Tim Eyman, who makes his living selling mail-order sorority wristwatches out of
his Mukilteo garage. Eyman and his compatriots collected a record-setting
500,000 signatures for I-695, arguing quite rightly that the state was flush
with cash. Every time the political establishment damned I-695 as
reckless--warning of reduced police forces, cut public health services,
dry-docked commuter ferries, abandoned bus routes, and super congested
roads--Team Eyman just pointed to the $1 billion surplus.
The state's popular
Democratic governor, Gary Locke, campaigned vigorously against I-695. But he
changed his tactics at the last minute when he saw the measure was going to
pass. Locke promised voters that the next legislature would reduce the car tax
if they voted I-695 down. This only gave I-695 additional credence. See! The
state doesn't need the money! Locke's vacillation also reinforced I-695's
ideological point that legislators can't be trusted with tax rates.
One peculiar thing about the Washington tax revolt is that
taxes are relatively mild out here. There is no state income tax, property
taxes rank 19 th (as of 1996), and the average sales tax is about 7.5
percent. So what started as a revolt against an unpopular tax turned into a
referendum on disingenuous politicians--and their allies. Microsoft, Boeing,
Weyerhaeuser, labor, and virtually every editorial page in the state opposed
I-695, portraying it in hyperbolic, apocalyptic colors. The political,
corporate, and union establishments put their money where their mouths were,
too, dropping $2.1 million to fight the measure, outspending the tax rebels by
10-to-1.
The vote cut along class
lines. Opposing I-695 were the wealthy who live in Bill Gates' waterfront
village of Medina (750-618 against). Embracing it were the working-class
residents of Tukwila and Renton, who passed it 2,065-1,378 and 7,103-5,190,
respectively. The turnout was high (57.7 percent) for an off-year election,
making the whole drama unspool like a Frank Capra movie: The little guys beat
the fat cats, only the little guys were right-wing Republicans instead of good
government liberals. The biggest applause line on election night came when
Eyman screamed, "From now on, the politicians are going to have to ask your
permission to take your money."
Most"yes" voters dismissed the predictions of doom as
exaggeration, according to polls conducted on either side of Election Day. They
suspected government of wanting to punish them for approving the measure. And
they also doubted that the political establishment--which helped pass new taxes
to build two new pro stadiums in Seattle for multimillionaire owners--would
ever ease the irksome car tax. This confluence of a bad tax, a $1 billion
reserve, a botched opposition campaign, and voters willing to call a bluff
resulted in the I-695 victory. The unintended side effect is radical, direct
democracy: In what other state do voters set the tax rates?
The inevitable legal
challenges have arrived, but they're all piecemeal, failing to address sweeping
constitutional questions. Given that the justices on Washington's Supreme Court
are elected, legal pundits say it's more likely that the court will narrow
I-695 than overturn it. Meanwhile, Locke has proposed spending about half the
reserve fund to bail out local governments--perhaps because he doesn't want to
be outflanked by the state auditor who has positioned himself as the Democrat
who can make I-695 work (the auditor wants a financial review of all state
programs). The Republicans, predictably, want to preserve the surplus, which
they call the "rainy-day fund," by outsourcing government services and cutting
budgetary "fat."
The $1 billion cushion averts the apocalypse for now. But
when the cushion is spent in a year or two, or when the next recession arrives,
the disintermediating voters will find themselves playing the roles of budget
analysts and tax wonks. What and who will they tax? Will they tax themselves to
build highways and create new bus lines? Or will they stay the course and ask
government to do more with less?
Instead of waiting for judgment day, watch-salesman
Eyman is hastening it with "Son of 695." This tax-cutting initiative, which he
is readying for the November 2000 election, will cap annual property-tax
appraisals at 2 percent and exempt vehicles from the property tax (on the long
shot that the government might start taxing cars as property). And in a final
act of disintermediation, Son of 695 retaliates against all these mayors and
council members who thought they got the drop on Eyman: It will roll back all
taxes and fees increased since July 1999, when I-695 qualified for the
ballot.
