Let's reform Washington's most regressive tax

During this past legislative session, many of my colleagues complained the Washington’s tax structure was too regressive, and pushed for new, higher taxes. The state is also under a court order to remedy the unequal manner in which public schools are funded.

The Tacoma News Tribune published this op-ed I wrote, explaining that the most regressive tax is actually the property tax, and reforming it would comport with the state’s constitutional duties.

When the Washington Supreme Court released the historic McCleary decision in 2012, it ruled the state had not only failed to provide an adequate amount of funding to public schools, but had also failed to provide an adequate method of funding.

Since the Legislature has not allocated enough money to pay for basic education, school districts are forced to rely on local property taxes for funding. The result is school budgets that increase with a community’s affluence, and student outcomes that are embarrassingly dependent on a child’s ZIP code. This is patently unfair and not in line with our values as Washingtonians.

Indeed, the Supreme Court recently fined the state $100,000 per day – not because the Legislature has failed to increase the amount of school funding, but because the method of school funding remains both unconstitutional and unconscionable. While I may disagree with the court’s procedures, it is fundamentally correct about the underlying issue.

Some of my colleagues in the Legislature have said the best way to address this inequity is to ask wealthier individuals to pay slightly more taxes in order to benefit the next generation of Washingtonians. They have a point.

The time has come to put aside politics and get serious about property tax reform. Virtually every tax structure in the world has either a flat rate (where each taxpayer pays the same percentage, like Washington’s sales tax) or progressive rates (where wealthier taxpayers pay higher percentages, like the federal income tax). Yet the property taxes funding Washington’s public schools are highly regressive.

For example, in the Bellevue School District, where the average single-family home is valued at $766,000, the annual property tax rate is $3.20 per $1,000 of assessed value. In the Seattle and Mercer Island school districts, where average home values are $488,000 and $1.12 million respectively, the annual property tax rate is just $2.50.

Meanwhile, in the four largest school districts that I represent (Auburn, Enumclaw, Sumner and White River), the average home value is about $225,000 and tax rates are double or triple – ranging from $5.40 to $7.40.

The solution is a “levy swap.” Under this proposal, school district levies would be reduced (to about $1.25) while the state levy would increase by an offsetting amount. The total tax revenue would remain roughly equal, but the bulk of the funding would be collected – and distributed – at the state level, eliminating the wide fiscal gulfs between schools districts.

This reform addresses the most politically difficult component of the McCleary mandate and will likely compel the Supreme Court to dissolve its contempt of court order against the state.

While aggregate taxation remains constant with this proposal, about 5 million Washington residents would actually see a net decrease in their property taxes. And every family will still enjoy protection under Washington’s constitution, which limits total regular property tax rates (including amounts paid to cities, counties, fire districts, etc.) to 1 percent.

My friends on the Democratic side of the aisle would never support an income tax or sales tax that charged wealthier individuals a lower rate. We should not be content with a status quo that does just that.

Yes, families who choose to purchase expensive homes will pay a higher dollar amount, just like those who opt to buy clothes at department stores pay more in sales tax than those shopping at thrift stores.

But the same rate would apply throughout the state – guaranteeing every student in Washington, from Bellevue to Buckley to Brewster, a top-notch education.

What could be fairer than that?