Category: Taxes

Guest Contributor, Taxes, Transit

Is It Time for Free Transit?
Image of Metro’s Route 99, a free waterfront bus that ran until 2018, by Atomic Taco

By Katie Wilson

Last week, PubliCola reported a “surprising consensus” among Seattle mayoral candidates on the subject of free public transit. Jessyn Farrell, Lorena González and Andrew Grant Houston have all displayed enthusiasm for pursuing this vision, while Colleen Echohawk and Bruce Harrell have expressed more cautious interest.

During the COVID-19 pandemic, when local transit agencies stopped charging fare and implemented back-door boarding, transit riders who kept on riding got a taste of what a fare-free system might be like. No more fumbling for change, no tapping a card, just hop on the bus or the train. But even before the pandemic, free transit was having a moment.

On January 1, 2020, Intercity Transit, which serves Olympia and the rest of Thurston County, went fare-free. In the first month, ridership jumped up 20 percent. Bobby Karleton, a community organizer and daily bus rider in Olympia, noticed the change: “More people of color, elderly and disabled people and families with small children appear to be using the system,” he said. “For IT’s most impoverished riders—many who are homeless—free service means saving $1.25 every bus ride. That may not sound much, but it adds up.”

But even before the pandemic, free transit was having a moment.

Olympia wasn’t alone. In December 2019, Kansas City, Missouri became the first major U.S. city to dispense with fares. A few months earlier, Lawrence, Massachusetts began a two-year pilot. It was starting to look like a trend, but it wasn’t entirely new—in fact, the Pacific Northwest has long been something of a quiet national leader on free transit. A number of smaller cities and rural areas in Washington, Oregon and Idaho have operated fare-free systems for decades. Visiting Whidbey Island? Put away that wallet. Traveling around Mason County? Welcome aboard.

For Seattle, a city accustomed to being on the leading edge of progressive policy, this is all a little embarrassing. How could we let other parts of our own state—including some that vote Republican!—get so far out ahead? Why are many of us still paying $2.75 to stand, crammed in like sardines, on buses crawling down car-choked streets? Why do we submit to the indignity of fare inspections, with steep fines that punish poverty and disproportionately harm Black riders? In a global climate crisis, why are we still erecting barriers to choosing sustainable transportation? In short, when is fare-free transit coming to Seattle and King County?

Sadly, it’s not quite that simple — but it’s not an impossible dream, either. Let’s take a look.

The transit agencies that have recently hopped on the fare-free bandwagon all have one thing in common: They’re smaller systems, and their revenue from fares is small both absolutely and as a portion of their total budget. Kansas City had to scrape together a modest $9 million per year. In the case of Intercity Transit, fares covered less than 2 percent of operating costs, and the agency was facing an expensive upgrade to the ORCA card system. For some rural systems the calculus is even more extreme: The ancillary costs of collecting fares exceed the fare revenue itself. In both cities, fare-free just makes sense.

The notion that fare-free transit somehow pencils out without a massive infusion of new tax revenue is a pipe dream.

By contrast, in a large, dense urban system like ours, fares bring in real money. Pre-pandemic, farebox revenue covered about a quarter of the operating costs for King County Metro’s bus system. Metro’s annual haul from fares was somewhere in the neighborhood of $175 million. Sound Transit, which operates Link light rail, regional Express buses and the Sounder line, brought in another $100 million. While it’s true that collecting and enforcing fares also costs money—a 2018 audit found that Metro spent $1.7 million per year on fare enforcement, for example—the amounts simply aren’t comparable. The notion that fare-free transit somehow pencils out without a massive infusion of new tax revenue is a pipe dream.

That’s not the only challenge for fare-free transit. While it’s undeniable that the cost of fares is a hardship for many and a disincentive for many more, the bigger problem for most people—including those with low incomes—is the service itself. Public transit doesn’t come frequently enough or get people where they need to go fast enough. Buses and trains are overcrowded and don’t run at all times of the day and night. So even if the transit agencies found a quarter billion dollars on the doorstep every year, eliminating fares might not be the highest and best use of those funds—especially since people would respond to this change by riding still more, further increasing the demand for service.

Recognizing these realities, over the past decade community organizers, advocates and transit riders have taken a needs-based approach to fare-free transit. Through pressure and work with elected officials and agency staff, they’ve won and expanded a suite of reduced- or no-cost transit programs serving specific populations: the Human Services Ticket program, ORCA LIFT reduced fare program, Seattle Youth ORCA program, and, as of last fall, a no-cost annual transit pass program for people below 80 percent of the federal poverty level. I have been involved in all these efforts through my work with the Transit Riders Union. Continue reading “Is It Time for Free Transit?” →

Elections, Taxes, Transit

Many Top Mayoral Candidates Support Free Transit. Here’s What Corporations Would Save.
Image by Atomic Taco, via Creative Commons

As the leading mayoral candidates establish (and sometimes alter) their positions on major campaign questions, including homelessness, growth, and transportation, a surprising consensus has emerged around an issue that wasn’t even on the table four years ago: Free public transit.

The city has slowly expanded programs subsidizing transit passes for students and low-income residents, providing free or reduced-cost passes to thousands of riders. But elected officials, as well as the leaders of Sound Transit and King County Metro, have balked at making transit free for everyone, arguing that free transit would punch a huge hole in their agencies’ budgets. About a quarter of both agencies’ budgets come from revenue collected at the farebox.

Current city council president Lorena González and former council member Bruce Harrell both said they support free fares, at least in concept, although González has been more enthusiastic in her support. At a forum sponsored by the MASS Coalition last month, González said she “would be committed to making sure that we initiate every effort we can to accomplish the goal of free public transit,” looking to US cities and cities in Europe that have made transit free, such as Talinn, Estonia, as examples.

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Jessyn Farrell, a former state legislator who directed the Transportation Choices Coalition, was more effusive, saying at the same forum that she “absolutely and with a great amount of enthusiasm” supported eliminating transit fares. “Free transit is a core component to getting us to net zero [carbon emissions],” she said. “And it is a core component to racial equity in our system and access and decriminalizing the use of our transit system.”

People who pay full price for public transit would benefit from fare-free transit, obviously. So would large and small businesses, which provide a substantial chunk of transit agencies’ revenue through free or subsidized transit passes for employees, including highly compensated tech workers who could easily afford to pay full fare. This raises potential equity questions, because free transit would shift the cost burden for these workers’ free transit from corporations like Amazon and Microsoft onto taxpayers. Continue reading “Many Top Mayoral Candidates Support Free Transit. Here’s What Corporations Would Save.” →

Courts, Elections, homelessness, legislature, Morning Crank, Police, Taxes

State Goes on Offensive to Save Capital Gains Tax, Police Oversight Group Considers Candidate Forum, and Compassion Seattle Plays Victim

1. Washington State Attorney General Bob Ferguson filed a motion Tuesday seeking to have a Douglas County judge throw out two lawsuits against the capital gains tax. Ferguson argues in his motion that the plaintiffs filed the suits for political reasons and don’t have grounds to sue because they don’t know yet if they’d be subject to the tax.

The capital gains tax bill (SB 5096) imposes a 7 percent tax on profits of $250,000 or more from the sale of intangible financial assets, such as stocks and bonds. The bill would go into effect in 2022, but the state would not collect taxes until January 2023. Roughly 7,000 Washington taxpayers would be subject to the tax, which would generate $415 million for the state in its first year.

Three days after the legislature passed the bill, the Freedom Foundation, a conservative think tank, challenged the law in court. Less than a month later, former attorney general Rob McKenna, along with the Washington Farm Bureau, filed a second lawsuit against the bill. Both suits were filed in conservative Douglas County.

The lawsuits say taxing capital gains is unconstitutional because capital gains are property, and all property must be taxed at a uniform rate in Washington because of a 1933 state Supreme Court decision.

However, Democrats have argued that the capital gains tax is an excise (sales) tax, not a property tax, because it is triggered by the sale of financial assets.

Ferguson argued that the plaintiffs have asked the court to settle a political dispute, rather than a legal one, noting that they “are suffering no legal harm from the tax they challenge and ask this Court to issue a purely advisory political opinion.” He also argued that the lawsuits are preemptive and speculative, since the plaintiffs don’t know whether they’ll even have to pay the tax when it goes into effect in 2023.

The state Supreme Court is also hearing arguments for a lawsuit against the state’s 2019 bank business and occupation tax (HB 2167), which was also filed by McKenna. Washington State Solicitor General Noah Purcell argued at the court on May 25 that state law prohibits lawsuits against taxes until they have gone into effect. If the court sides with Purcell, the lawsuits against the capital gains tax might have to wait until state residents actually pay the tax, which wouldn’t be until 2023 at the earliest.

State Sen. Jamie Pedersen (D-43, Seattle) said that if the court dismisses the lawsuits, it will only delay the inevitable: having the state Supreme Court reviewing the law. Democrats want the court to review the tax because they believe the court would overturn the previous ruling declaring income a form of property, which would blow the doors open for an income tax.

The next hearing for the cases is set for July 13 at 10am, with Douglas County Superior Court Judge Brian Huber presiding.

2. The future of the Seattle Police Department is front-and-center in the upcoming elections, but some members of Seattle’s Community Police Commission (CPC)—the branch of the city’s police oversight system tasked with gathering community input on police reforms—are wary of wading into electoral politics.

Reverend Harriet Walden, the commission’s longest-serving member, also opposed the candidate forum. “It’s not part of our mission,” she said.

During the CPC meeting Wednesday, CPC communications director Jesse Franz described plans that are already underway for a general election forum that the CPC plans to co-host alongside a community organization involved in criminal justice reform, such as Choose 180 or Community Passageways.

But some prominent members of the commission pushed back on the plan. Suzette Dickerson, who will represent the CPC during contract negotiations with the Seattle Police Officers Guild next year, argued that hosting a candidate forum was outside the scope of the CPC’s responsibilities. From her perspective, the commission’s role is to be a sounding board for Seattle residents’ opinions on reforms to SPD; “stepping into the political arena,” she argued, would undermine public trust in the commission.

Reverend Harriet Walden, the commission’s longest-serving member, also opposed the candidate forum. “It’s not part of our mission,” she said, adding that she isn’t confident that the CPC would allow community groups opposed to downsizing SPD to have a voice in the forum. “I think that we’re headed down a path to help social engineer the defunding the police department,” she said.

The commission’s current leaders, however, supported the idea. “To me, holding a candidate forum seems within the scope of ensuring that the community is informed about what accountability may or may not look like, in particular candidates minds,” said CPC co-chair LaRond Baker.

Though the CPC can’t endorse candidates, the commission is not a neutral player in the police oversight sphere: It recommends reforms to SPD and Seattle’s police oversight system. Recent CPC recommendations have included a ban on tear gas and removing limits on the number of civilian investigators in the Office of Police Accountability. The success of those recommendations depends on the support of the mayor, the council, and the police chief, which gives the CPC a clear stake in the outcome of the election.

“Opponents have been using increasingly violent tactics against our signature collection teams,” the solicitation for funds claims. “We must persevere, and we need your help to ensure we reach 33,060 signatures by June 25.”

3. In a fundraising email Tuesday, the Compassion Seattle campaign, which is gathering signatures to get its charter amendment on homelessness on the November ballot, claimed that several of its paid signature gatherers have been attacked by people who oppose the initiative.

“Opponents have been using increasingly violent tactics against our signature collection teams,” the solicitation for funds claims. “We must persevere, and we need your help to ensure we reach 33,060 signatures by June 25.” Continue reading “State Goes on Offensive to Save Capital Gains Tax, Police Oversight Group Considers Candidate Forum, and Compassion Seattle Plays Victim” →

legislature, State of Washington, Taxes, Transit, Transportation

Advocates Say It’s Time to Ditch the Old Transportation Funding Process
Anna Zivarts, Disability Rights Washington

by Leo Brine

Transportation advocates were actually pleased when lawmakers ended the most recent legislative session without passing a new transportation package.

After the transportation committees released their proposed revenue packages late in the session, transportation accessibility groups and environmentalists were disappointed by the outdated investment priorities. Wanting a more equitable transportation package, advocates repeated a line of critique they’ve been making for years: The state needs to find new transportation revenue sources and free up revenue that is otherwise restricted to highway spending.

However, and perhaps because their recommendations have gone unheeded for a decade, a new, more sweeping critique emerged in 2021: It’s time to dump the whole politicized “transportation package” model and create a new framework that assesses and prioritizes the state’s actual transportation needs.

Anna Zivarts, Director of the Disability Mobility Initiative for Disability Rights Washington, said the current system is a “pork model,” where legislators pick projects for their districts rather than investing in projects that make the whole state transportation system function better.

“A transportation system has to work across the state,” she said. “If you have everyone competing, that’s not going to create the best system overall.”

Advocates say lawmakers have too much power over which projects get funded and have political incentivizes to fund major highway expansion projects rather than expand transit services or improve pedestrian infrastructure. Featuring friction over projects, funding, regionalism, mode split, and maintenance versus new construction, the legislative ritual, akin to passing a kidney stone, played out in 2003, 2005, and 2015.

A new, more sweeping critique emerged in 2021: It’s time to dump the whole politicized “transportation package” model and create a new framework that assesses and prioritizes the state’s actual transportation needs.

In April, during the last weeks of the session, the House and Senate transportation committee chairs, Rep. Jake Fey (D-27, Tacoma) and Sen. Steve Hobbs (D-44, Lake Stevens), shared their transportation revenue proposals. The House proposal would have spent $22 billion over 16 years, earmarking the majority of the dollars for highway projects, with about 20 percent going to multimodal projects. The Senate’s proposal would have spent $18 billion over the same period, with less than 10 percent going to multimodal projects.

Leah Missik, transportation policy manager for Climate Solutions, said lawmakers’ proposed investments in multimodal projects were a major step up from previous packages, but “continuously investing in road expansions is certainly not the way we want to go.”

In order to fix the state’s transportation system, Paulo Nunes-Ueno of Front and Centered, a BIPOC environmental group, said, “this package process needs to go.”  Transportation packages never meet people’s needs and are a hodgepodge of project ideas from legislators, he said. Instead, Nunes-Ueno says lawmakers should establish climate, infrastructure, and safety goals, and allocate funding to state and local agencies that would decide how to allocate funding on projects.

Hester Serebrin, policy director for the Transportation Choices Coalition, said politics play too great a role when lawmakers craft transportation packages. She said lawmakers are more likely to invest in large projects, like highway expansions or major road repairs, because they garner more attention than smaller multimodal projects. “This process doesn’t incentivize … projects that help people travel between places,” Serebrin said. “Instead it incentivizes larger, geographically isolated projects.”

Other advocates agree that politics should play less of a role in the state’s transportation system. Vlad Gutman, Climate Solutions’ Washington director, like Nunes-Ueno, wants legislators to devise a set of goals and values for Washington’s transportation infrastructure and allocate funding to state agencies who can come up with projects and programs to accomplish the goals.

In order to fix the state’s transportation system, Paulo Nunes-Ueno said, “this package process needs to go.”  Instead, Nunes-Ueno wants lawmakers to set climate, infrastructure, and safety goals and allocate funding to state and local agencies.

“We need to be selecting projects and investing and designing our transportation system in a sort of objective, metric-based way that also recognizes and inputs the needs of communities and people who are impacted and stakeholders of transportation,” he said.

To do so, he argued, the Washington State Department of Transportation (WSDOT) should study the needs of the state and select projects based on those needs, “instead of [lawmakers] sort of piecemealing it by selecting projects one at a time,” Gutman said.

This participatory approach to transportation planning doesn’t make sense to Senate Transportation Chair Hobbs. “We’re in a democracy and legislators have a right to say how their districts should be supported by government,” he said.

Continue reading “Advocates Say It’s Time to Ditch the Old Transportation Funding Process” →

legislature, Taxes

After Supposedly Historic Session, Progressive Tax Reform Advocates Say Democrats Need to Do Much More
Washington State Capitol (Creative Commons)

by Leo Brine

After a year of dire revenue predictions and a pandemic that exposed class fault lines, 2021 looked like the year for tax reform. Firmly in control of both houses, Democratic lawmakers proposed multiple tax bills to reverse Washington’s regressive tax structure. However, at the end of the 105-day session, lawmakers only passed two new progressive taxes: the capital gains tax (SB 5096) and the working families tax exemption (HB 1297).

The capital gains bill imposes a 7 percent tax on profits, or capital gains, of more than $250,000 on the sale of intangible financial assets, like stocks and bonds; about 7,000 taxpayers are expected to pay the tax. The revenue will fund childcare and public schools. The Working Families Tax Exemption will give low-income residents and families in Washington a tax rebate of up to $1,200 a year.

Both of the bills had been in the works for more than a decade, and tax reform advocates say they’re a good start, but that the state needs to do much more done. According to a 2018 study from the Institute of Taxation and Economic Policy, sales and property taxes siphon away roughly 18 percent of low-income residents’ annual incomes, and this year’s tax reform bills did little to improve that statistic.

The state’s sales tax, which is regressive because it costs lower-income people far more as a percentage of their income than higher-income residents, supplies more than half of the state’s general fund—roughly $22.5 billion during the 2017-2019 biennium. Because it’s such a major contributor to state revenues, cutting it would lead to a major deficit and the state would need to pass additional taxes to neutralize the revenue loss. “It would be logistically difficult to pull off in Washington state,” Andy Nicholas, policy director for the progressive Washington State Budget and Policy Center, said. Nicholas has suggested imposing higher sales taxes on luxury goods than on basic necessities.

Nicholas says broader reforms are likely to come “in a couple years.” In the meantime, he hopes legislators pass more rebates to ease the impact the current tax system has on the state’s lowest-earning residents. He says a tax rebate for renters could offset the cost renters pay for property taxes, which landlords generally pass along to tenants as part of their rent. Nicholas said Rep. Kristen Harris-Talley (D-37, Seattle) could attach the rebate to her anti-displacement property tax exemption (HB, 1494) which she proposed earlier this year. The House Finance Committee passed her bill, but it died in the Appropriations Committee.

Because of some of these policies, she says, “BIPOC communities and low-income communities haven’t been able to have the same benefits.” —Treasure Mackley, Executive Director Invest in Washington Now

Discriminatory private- and public-sector policies have prevented BIPOC communities from gaining social mobility, Treasure Mackey, Executive Director of Invest in Washington Now, told PubliCola. For example, Washington state allows judges to issue fines against criminal defendants, and they charge higher fines, on average, to people of color. In the private sector, discriminatory hiring practices kept workers of color out of high paying jobs and redlining confined people of color, particularly Black home buyers, to certain parts of cities like Seattle. Without the ability to generate lasting wealth, communities are stuck in a position where they have to spend a fifth of their income on regressive taxes.

“We need to not only modernize our tax systems to catch up with the economy that we have, but we also need to rebalance our tax code in a way that is fairer and more just and creates a level playing field for everybody,” Mackley said.

Democrats discussed a number of potential new taxes this year, including the wealth tax (HB 1406), which would have imposed a 1 percent tax on the worldwide wealth of the wealthiest Washingtonians. They also discussed a payroll tax similar to one Seattle implemented in 2020. The city imposes a tax of 0.7 to 2.4 percent on the payroll expenses of its largest employers; the larger the employer and the higher an employee’s pay, the higher the tax.

In future sessions, lawmakers will likely craft new tax policy based on the findings of the Tax Structure Work Group, which includes legislators from both parties, officials from the governor’s office and Department of Revenue and members of the Washington Associations of Counties and Cities. The legislature formed the group in 2019 to research replacements for Washington’s most regressive taxes, including like the sales tax and the business and occupation tax; however, legislation is still years away.

The group’s 2020 report recommends a value added tax (VAT) and a corporate income/net receipts tax to replace the B&O tax. VAT taxes a product at every stage of production, but consumers ultimately pay the final cost of the tax, whereas businesses that pay VAT can receive tax rebates. The corporate income tax would be levied on businesses that pay the federal corporate income tax, with exemptions for the smallest businesses. Unlike the B&O tax, the corporate income tax would allow companies to file for deductions on most of their operating expenses.

The work group also suggested instituting a progressive income tax to offset cuts to the sales tax. The obvious problem with this is that, according to a 1933 state supreme court ruling, income is property subject to a constitutional prohibition on graduated taxes. Passing an income tax would mean defending the tax in court and hoping the modern supreme court overturns the nearly 80-year-old decision.

Ostrom said if the court decides they want to protect the most regressive tax structure in the country, “that’s egg on the supreme court’s face.”

In fact, Democrats have set up this very possibility. The benefit (and possibly the purpose) of passing the capital gains tax may have been to force a court showdown; Sen. Jamie Pedersen told PubliCola last week he was excited that conservatives immediately sued. By getting the court to hear a legal challenge to the Democrats’ capital gains tax (which opponents argue is an income tax), the court will have the opportunity to overturn their previous ruling, opening the door to a progressive income tax. Alternately, the court could interpret the bill as an excise tax, which Democrats argue it is, without completely overturning their previous decision. Or the court could simply find that capital gains are also property and strike down the bill.

Aaron Ostrom, the executive director of the progressive statewide organization Fuse Washington, thinks it’s unlikely the court will rule against the tax, but if they did ,Democrats “would probably have to go back to the drawing board.” Ostrom said if the court decides they want to protect the most regressive tax structure in the country, “that’s egg on the supreme court’s face.”

A court ruling will surely influence the next moves for tax reform advocates and lawmakers, Ostrom said. But they will still have the same goal: “We’re all pretty committed to not having Washington have the most regressive tax code in country. It’s not good for the people of Washington, it’s not good for the economy,” he said. “We have to go back and find some strategies that work to shift the tax load off of the folks making the least.”

Affordability, Courts, Density, housing, Morning Fizz, Renters, State of Washington, Taxes

Olympia Fizz: More Calls for Inslee to Reject Weakened ADU Bill; State Rejects Eyman’s Anti-Capital Gains Tax Efforts

1. A pro-renter outcry against watered-down state legislation emerged this week when two dozen organizations and businesses signed on to a letter, originally drafted by the progressive Sightline think tank; the Sightline letter, which we reported on last week, asks Gov. Jay Inslee to issue a partial veto of accessory dwelling unit legislation that state representatives amended with anti-renter provisions.

Joining Sightline in a mini-rebellion against the House Democrats’ changes? The AARP of Washington, Climate Solutions, 350 Seattle, Amazon, the Washington State Labor Council, SEIU 775, and the Sierra Club, among others.

As we reported, the initial proposal, by state Sen. Marko Liias (D-21, Edmonds), would have banned owner-occupancy for secondary units, such as backyard cottages, allowing renters to live in both single-family houses and their accessory units—opening up exclusive single-family neighborhoods to more people. However, state Rep. Gerry Pollet (D-46, North Seattle) kicked off a House process that led to a radical rewrite, allowing owner occupancy mandates and imposing new restrictions designed to prevent homeowners from renting out their secondary units as Airbnbs.

Joining Sightline in a mini-rebellion against the House Democrats’ changes? 350 Seattle, AARP Washington, Climate Solutions, the Washington State Labor Council, and the Sierra Club, among many others.

“ADUs alone will not solve the state’s housing shortage,” the letter says. “But they are the gentlest way communities can add relatively affordable homes that offer lower income families more choices and allow seniors to age in place.”

2. Coming off yet another major legal loss, anti-tax activist Tim Eyman has stumbled again. The Republican Washington Secretary of State’s office threw out all four of Eyman’s anti-capital gains tax (SB 5096) referendum proposals.

The capital gains tax bill, which passed this year, would impose a 7 percent tax on capital gains of $250,000 or more, but conservatives are already champing at the bit to stop it from taking effect. Earlier this week, two conservative groups filed lawsuits against the bill, arguing that it constitutes an unconstitutional income tax.

Rejecting the measures, Washington State Director of Elections Lori Augino cited the bill’s necessity clause, an amendment added by Rep. Noel Frame (D-36, Seattle), which says that the tax is “is necessary for the support of the state government and its existing public institutions.” This places it outside the scope of citizens’ referendum power, Augino wrote.

Eyman’s referendum method would have been the safest option for conservatives to stop the bill. The other options are a lawsuit or a voter initiative, which requires twice as many signatures—about 325,000, or 8 percent of the votes cast in the last gubernatorial election.

While the lawsuits could also upend the Democrats’ plans, they may also backfire on the conservatives. The Washington State Supreme Court could uphold the tax by ruling that it’s an excise tax, not an income tax. Or they could overturn a 1933 decision that defined income as property, which, under the state constitution, must be taxed at a 1 percent uniform tax rate. If the court overturns that ruling, Democratic lawmakers would finally have the opportunity to pass a graduated income tax in the state.