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Originally published Wednesday, October 14, 2009 at 12:30 AM

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Danny Westneat

I-1033 a windfall for the rich

Tim Eyman says, right there in the text of his initiative, that the main point is to lower property taxes for "struggling working families" and "fixed income senior citizens."

Seattle Times staff columnist

How Initiative 1033 would work

I-1033 would limit revenue increases for state and local governments to the rate of inflation and population growth. Any tax revenue collected in excess of that limit would be used to reduce property taxes the following year.

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Tim Eyman says, right there in the text of his initiative, that the main point is to lower property taxes for "struggling working families" and "fixed income senior citizens."

By all accounts, it would probably do that. But based on economic forecasts, here is what Initiative 1033 would also likely do, not spelled out in the measure or in any public statements:

• Eventually give the richest man in the world, Bill Gates, up to a $571,000 break on the $1 million in annual property taxes he pays on his Medina mansion.

• Slash the taxes on billionaire Paul Allen's waterfront home, on Mercer Island, by up to $150,000.

• Over time eliminate $1.7 million of the annual property taxes that Bellevue mogul Kemper Freeman pays on just one of his malls, Bellevue Square.

That's due to a growing sense among tax experts that Eyman's measure, if approved in November and then left as is by courts and lawmakers, would over time drive the state's property tax and many county and city property taxes all the way down to zero.

Yep, zero. As in: Property tax for those entities, over the next decade or so, would cease to exist.

(Eyman's initiative doesn't apply to school, fire, park and library districts, which could continue to levy property taxes as always.)

In August, the state Office of Financial Management estimated that in 2015, Eyman's initiative would force the state to refund $1.8 billion in property taxes. What the fiscal note didn't say — and which got no mention that I could find anywhere — is that the state only collects $1.8 billion in property taxes.

It all goes to public schools. In Olympia they call it the "state school levy." What this means is that state economic forecasters have predicted Eyman's initiative would eliminate most if not all of the state school levy in five, maybe six years. That would be 25 percent of state school funding — gone.

On Monday, budget forecasters for the city of Seattle predicted roughly the same thing: They say Eyman's initiative would drive the city's property tax to zero within 12 to 15 years.

The reason is that I-1033 puts a spending cap on these governments. Then any taxes collected over their spending limits must be returned to property owners.

As the economy and sales- tax receipts eventually rebounded, property taxes would be driven steadily lower. Within a number of years, fiscal analysts are predicting that property taxes for many jurisdictions would go to zero.

If you own property, you can look at your own tax bill to see how much I-1033 would eventually save you. The bills are itemized by how much you pay to the state, the city and elsewhere.

That's how I calculated the figures for our local gazillionaires. I got their tax records from the King County Treasurer and then totted up just the state, county and city portions.

Gates, for his 50,000-square-foot, $150 million mansion, is paying $294,000 into the state's school fund this year. He pays $165,000 to King County and $112,000 to the city of Medina. All or most of that would eventually stay in his pockets if I-1033 were enacted.

That's a nearly 60 percent property-tax cut for Gates. Same for Allen. For Freeman's Bellevue Square Mall, the estimated tax break is $1.7 million, annually. This doesn't include his Bellevue Place or Lincoln Square malls across the street, because I got weary adding up the enormous net worth of his shopping boutiques.

Eyman has said if the tax cuts turn out to be too steep, then voters could always choose to raise taxes again later.

OK. But even if we accept that government needs to restrain its spending — as I do — why do it by pouring huge amounts of money back into the pockets of billionaires? Are we hoping for trickle down?

It's true the struggling folks Eyman talks about would see relief as well (if they own property.) But the net effect would be to make schools and other government services here even more dependent on a different tax. The one on sales.

You pay sales tax when you buy practically anything, other than food. You pay it, for instance, if you're homeless and you buy a pair of pants. It is the tax that hits the poor the hardest. We're already more reliant on the sales tax than any state in the nation.

Eyman's measure would make that worse. He could have targeted his tax relief, to help those who most need it. But he didn't. This is the rotten core of his initiative.

Forget all the caterwauling about spending cuts. At its heart this is a massive giveaway to the rich that does little to nothing for the poor.

To their credit, both Gates and Allen appear to know this. They are trying to defeat Eyman's initiative (Gates with a $100,000 donation, Allen through his company, Vulcan.) Even though it would mean huge tax windfalls to them if it passes.

I have a feeling it's because they actually believe that quote Gates repeats so much: "To whom much is given, much is expected."

Kemper Freeman? Not so much. He gave Eyman $25,000 for this, Eyman's 16th stab at an initiative. As near as I can tell, it's the one of all Eyman's schemes that benefits rich land owners like Freeman the most.

Twenty-five grand for a shot at $1.7 million a year. You gotta hand it to Freeman — if this passes, that's one helluva return on his investment.

Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.

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About Danny Westneat

Danny Westneat takes an opinionated look at the Puget Sound region's news, people and politics. Send tips or comments to dwestneat@seattletimes.com. His column runs Wednesday and Sunday.
dwestneat@seattletimes.com | 206-464-2086

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