Saturday, November 27, 2010

Tax and Spending - What did the voters vote for?

A mere few weeks ago, Washington's voters voted anti-tax on three major initiatives. They overwhelmingly voted down an income tax on upper income taxpayers dedicated to education and health care. They overwhelmingly voted for an initiative that required a 2/3 vote of the legislature on new taxes and they overwhelmingly voted to rescind the pop and candy tax the legislature imposed last session. The sum result of all these measures is a clear signal to policy-makers that they would rather see budget cuts than tax increases.

But were voters aware of what the consequences would be? Good question. The slow growing economy has stifled state revenues by as much as 20% for the next three years and making up that deficit through budget cuts alone is going to result in devastating cuts for state programs that have already been slashed each year for past three years.

For one, I'm not sure a large percentage of the voters knew what programs will end up being cut. The problem is there are not a lot of choices. About 60% of the state budget is already off limits due constitutional protection of most of the education budget as well as federal requirements on big programs like Medicaid.

What's left is basically all of higher education and social service programs like the Basic Health Plan which provides insurance for low income working families, the Security Lifeline Program which provides income supports and medical care for disabled and mentally ill clients and much of the TANF program that provides income support and child care to primarily working mothers. These social service programs are the safety net for those who have been hit the hardest by the deep recession. Programs like the community college Worker Retraining Program that provides funding for unemployed workers who have lost their jobs in declining industries to train for the jobs of future are also likely to be on the chopping block.

Many people believe that in reality we could cut spare these programs and cut the salaries and benefits of state workers more severely. The problem is, that these cuts simply don't add up to much money. Raising state workers co-pays by 20% only save a hundred million dollar or so and adding an extra 10-20 furlough days, less. The problem is that the recession's hit on the state budget is so severe and so much of the budget is off limits, that draconian cuts have to occur to virtually every area of the budget that's left.

The impact of the Eyman initiative requiring a 2/3 vote is exaggerated. While there is little chance 2/3 of the legislators will ever agree on a tax increase, the initiative still allows the legislature to send voters a choice. The legislature could clearly send the voters a referendum that would impose a tax to support key selected programs.

Initiative 1098 did not clearly offer voters a choice between taxes and program cuts. The initiative, which taxed upper income tax and dedicated the money to education and health care was very loosely crafted. Voters believed, and rightly so, that there was no requirement that the state limit revenues to those specific areas (they could cut funding from other sources).

I think it is sheer speculation to try and guess as to whether or not voters would choose between a tax increase and the destruction of the safety net. Over the past three years a lot of polling what done on this very question and the results were a toss-up. But I think it would be irresponsible to take the option off the table. The voters should have choices that they can clearly understand.

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