By SUSANNA RAY and WARREN CORNWALL
Herald Writers
Your vote next week could affect the size of your pocketbook and the services you get from the government.
From estate taxes to property taxes to Social Security, lawmakers in Olympia and Washington, D.C., will have taxpayers’ wallets on their minds in the coming years.
On Page 4A you’ll find a list of state and federal candidates who want to represent Snohomish and Island counties, and how they stand on some of the pocketbook issues.
Every day through Saturday The Herald will run a grid with the candidates’ opinions on a variety of topics, such as health, transportation and campaign finance. The issues were derived following an informal community survey this summer by reporters who asked residents what was most important to them.
Here are some of the issues people say they care about this election season:
Property taxes have been at the top of the tax-cut list for both Republicans and Democrats in Olympia. But disagreements over how to achieve the cuts have led to an impasse and put the issue at the forefront of the coming election.
The state Republican Party this year has called for phasing out the state’s portion of the property tax.
With spending caps already imposed by Initiative 601, the state’s general fund is overflowing with tax dollars and can easily afford going without the tax, said Sen. Don Benton, R-Vancouver, the state party’s chairman.
"All the projections show that the reserve would continue to grow even with the gradual phase out of the property tax," Benton said.
Democrats have generally promoted smaller cuts, often targeted toward particular taxpayers such as seniors or first-time home buyers.
Rep. Frank Chopp, D-Seattle, the co-speaker of the House, faulted Benton’s plan for not offering such immediate cuts, and for understating the impact of canceling the state property tax altogether. It would take away money for school construction and other important needs, Chopp said.
"Don Benton’s numbers don’t add up," he said.
Initiative 722 could trump any of these legislative plans. The measure is promoted by Tim Eyman, the author of I-695, the 1999 initiative that canceled the state’s car tax and replaced it with a $30 annual fee.
I-722 would limit increases in property tax collections to 2 percent per year, and put the same limit on tax increases as people’s assessed valuation rises.
Eyman touts it as a way to hold down overall property taxes, and protect people in areas with skyrocketing property values.
Parts of the measure, however, have raised concerns even among people traditionally friendly toward tax cuts, mainly because it can lead to unfair treatment of different property owners.
The "marriage penalty" in the federal income tax has always been a controversial issue, said Eric Toder, a senior fellow with the Urban Institute, a nonpartisan think tank in Washington, D.C.
The country’s tax history has been a swinging pendulum that favors either singles or couples.
Currently, marriage either cuts or raises taxes for a couple, depending on the difference between spouses’ incomes. But as women’s salaries rise, more married couples are being penalized, he said, which has led to the current proposals to change the system.
The proposals would either increase the standard deduction for married couples or tax more of their income at a lower rate, Toder said. "But they would not make the system marriage-neutral. They would eliminate marriage penalties and increase single penalties."
That could cause the pendulum to swing back further down the road, he added, as single adults complain about the inequity.
The federal estate tax is another hot-button money issue.
The law allows the federal government to tax up to 55 percent of inherited estates that are worth more than $675,000.
That can be "a pretty steep wack," Toder said, and opponents believe the "death tax" is nothing more than unfair income redistribution.
"Taxing the act of death is principally wrong, morally wrong," said Damon Ansell with Americans for Tax Reform, a taxpayer advocacy group in Washington, D.C.
The estate tax is against people who are asset-rich but cash-poor, Ansell said, such as farmers who may own a good parcel of land and some expensive heavy machinery, but don’t have a lot of money to throw around.
Opponents also say it’s unfair because the money is already taxed when the person earned it and when they invested it, so it’s not some huge pot of sheltered money that the government has a right to dip into.
Every candidate seems to be talking about Social Security these days.
People are living longer, but not staying in the workforce longer, which means fewer workers are supporting more retirees. And a huge number of Baby Boomers are set to begin retiring in 2008.
To make Social Security solvent, Toder said, the government will either have to cut benefits, raise taxes or increase the age of retirement. None of those proposals are very popular.
Republican George W. Bush’s plan would allow people to divert a small portion of the money from the trust fund to private mutual fund accounts that could earn a higher rate of return. Critics say the problem with the idea is that current money paid in to the fund supports current retirees, which means if the money is taken out, so is the support.
Democrat Al Gore has advocated using the surplus to pay down the national debt, and then putting the interest savings into the Social Security fund. Critics say his plan would just take money from one government pot and put it in another without solving the problem.
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