Saturday, October 10, 2015

Initiative 1366

Politics is mostly a waste of time unless you are unimaginably wealthy. If you are lucky enough to be one of those people, you can invest in politicians to help make you even more wealthy. It's how companies like Halliburton - if you lean left and want to pick on the right - can charge $45 for a box of soda* or - if you lean right and want to pick on the left - how hospitals can charge $9,000 to bandage a finger.**

Contractors routinely "overcharge" the government and the government doesn't care because the taxpayer pays for it. Sure, the government has all kinds of auditors meant to stop this sort of thing but that three trillion dollars the Federal government collected last year has to go somewhere. And that's on top of the hundreds of billions the government borrows because that's not enough. And it will never be enough because voters have a hard time saying no to government initiatives and programs designed to support our troops or provide better access to health care.

On the ballot this November for Washington State is Initiative 1366 which will reduce the sales tax from 6.5% to 5.5% unless the legislature amends the state constitution to require a 2/3rds majority to raise taxes (as opposed to the simple majority required now).

As Washington does not have a state income tax, sales tax is a main source of revenue so this implies a 15.4% reduction. This would bring taxes per person, inflation adjusted, to 1997 levels.

State and Local Government Revenues Per Capita

Source: Washington State Office of Financial Management

In reality, because local jurisdictions have their own sales taxes, the reduction is even smaller. But that doesn't stop the CEO of Neighborcare Health from writing the Seattle Times to say how this will negatively affect health care. Neither does it stop the newspaper editors from complaining about how this I-1366 will hurt education even though spending has been skyrocketing in the US and results are stagnant***

Even though the graph below from a Huffington Post article attempts to color in states with high spending and high rankings and states with low spending and low rankings to bias the reader, you can see there is an extremely weak correlation between spending and ranking overall. If anything, it's the states like Iowa, Kansas, and Texas which should be the model.

Huffington Post Graph of Spending versus Ranking in State School Systems

The second part, the 2/3rds majority requirement is apparently a common thing among states, not that it matters. A state income tax is also very common and I would not want one introduced to Washington! Interestingly, that's how Tim Eyman is pitching I-1366 which makes sense since the voters have approved multiple initiatives previously that would have restricted the imposition of an income tax only to have their vote overturned by the courts. So there's a good chance this will happen despite the ever more careful wording of these things.

Even so, if I decide to vote this coming November, it will only be to select YES on I-1366. After all, I voted to end the state-run liquor monopoly and to decriminalize marijuana use and both measures passed. I don't smoke or drink and neither was ideal from a libertarian standpoint since both initiatives came with the introduction of or an increase in product related taxes. But I-1366, if it actually survives the courts, will be a strict win-win.

A Word About I-1183

Costco was behind ending the liquor monopoly and actually did a bit if jiu-jitsu against opponents on the I-1183 try. A similar attempt to end the state monopoly was defeated previously because of concerns that hard liquor would be sold at convenience stores and so the new initiative included language restricting the sale to only very large stores e.g. Costco.

However, contrary to what you would expect with privatization, Washington liquor prices have largely stayed the same with increased prices in smaller stores. This is a direct artifact of the introduction of the highest tax rate for liquor in the country. Costco advertises its liquor prices as a base price + the additional tax just so people know why they aren't saving all that much. Perhaps this is a kind of conditioning prelude to another initiative to lower liquor taxes although Costco could easily just sell top grade liquors under its Kirkland house brand for less.

The huge taxes that came with the initiative were placed there in order to make it palatable for voters concerned about so-called funding shortfalls. An appeal to a funding shortfall is even lazier than the appeal to childrenthe troops, or the sick and/or elderly because it could refer to any of the things for which a voter wants taxes used. In the case of Federal budget talks, this means closing down things that people like and that aren't used by the ultra wealthy to make more money, things like the National Park system but not things like billion dollar bombers and $9,000 bandages. And so the debt every American must pay back continues to grow.



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