When voters approved Initiative 747 in 2001, a two-part understanding went into effect that became an accepted way of life for most local governments:
n Property taxes can’t be raised by more than 1 percent a year without voter approval.
n If a smaller increase is adopted, the difference can be “banked” and assessed later.
Voters didn’t approve the “banking authority” part of the paradigm. In fact, they repealed it the previous year with I-722, but that measure was thrown out by the state Supreme Court shortly before I-747 was passed, so banking authority was restored. In the past five years, the vast majority of local taxing authorities in Washington have planned and operated with the understanding that they were banking any part of the 1 percent limit they didn’t use.
That’s the scenario the Legislature should restore when it meets in a one-day special session Thursday. Beyond reinstating I-747’s cap, which was thrown out earlier this month essentially on a technicality by a 5-4 vote of the state Supreme Court, lawmakers should repeal any banking authority that existing before I-747 took effect in 2002.
In many cases, that’s a whole lot of authority — 30 percent or more. Most local government leaders wouldn’t go anywhere near that level of tax increase (they’re not fans of political suicide), but the temptation should be shot down anyway. Spare taxpayers’ already frayed nerves.
I-747 sponsor Tim Eyman and others are calling for all banked authority to be wiped out. Some Republicans say they’re OK with future banking authority under the 1 percent cap, but only if it’s first reset to zero. We think that’s unnecessarily punitive to local governments that have acted in good faith since voters approved I-747. It’s enough to wipe out taxing authority banked prior to I-747.
That’s where Thursday’s legislative action should begin and end. Other ideas, such as Gov. Chris Gregoire’s proposal to allow taxpayers under a certain income threshold to defer a portion of their property taxes, should wait for the Legislature’s regular session, which begins in January. The 1 percent cap and banking authority need to be addressed now because local governments are in the process of approving their 2008 budgets. Other tax issues may be politically attractive, but they’re not urgent.
This session was called for a specific reason: to restore I-747. Lawmakers should do that, and eliminate taxing authority banked prior to its passage, then call it a day.