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Damn Gub'ment, Damn Taxes 

Why we should kill sales tax and consolidate government services

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In “What are the Chances…” (1/7/10), Nicholas Deshais and Daniel Walters spoke to some informed citizens and asked their opinions about the likelihood of some community developments.

While emphasizing that Spokane could use another tall building downtown — but for residential use only, not for more unneeded office space — developer Rob Brewster went on to criticize Washington’s tax structure, especially as it affects construction. “The difference between doing business in Portland and doing business in Washington is phenomenal,” he said. He was referring to the Washington state sales tax — which, when aggregated with city and county taxes, ties for the second-highest rate in the nation (with Louisiana and behind California). “That [tax] usually comes off the outside of the building,” Brewster said. “That’s why Seattle’s buildings are that corrugated metal crap, and there are no new buildings in Spokane.”

Boy, is he right about all that “corrugated metal crap” in Seattle. It completely destroyed the charm of Belltown, the area of the city that was supposed to benefit from all the new construction that has taken place over the past 15 years or so. Alas.

His criticism leads me to two recommendations.

First, as the tax reform committee headed by Bill Gates Sr. recommended a few years back, Washington state should reconsider a flat or mildly progressive income tax which would be linked to abolishing or severely limiting the sales tax and state property tax. The number crunchers could work out all the details; the end result would need to be revenue-neutral at worst. Business, we know, would be stimulated. And the working poor (disproportionately represented in Spokane) would pay a lower percentage on taxes of every kind.

Gates’ longtime interest in tax reform extends to the federal estate tax, which he believes is not nearly as strong as it should be. Presently the federal estate tax affects only about 1 percent of families. Gates believes that this is far too low, resulting in the default use of higher regressive taxes. To those who object — after all, they say, they accumulated their wealth fair and square — Gates has a response:

We must acknowledge that the person who accumulates wealth in this country was not able to do that independently. The simple fact of living in America, a country with stable markets and unparalleled opportunity fueled in part by government investment in technology and research (something my family has plenty of firsthand experience of), provides an irreplaceable foundation for success and has created a society which makes it possible for some men, women and their children to live an elegant life.

Tax reform has never done well in Washington state. Not even our state’s most popular governor ever, Dan Evans, could get it passed. And proposals to lower the estate tax threshold, we know, are always being caricatured by the radical right as a “death tax.”

Ironically, progressive tax reform recommendations haven’t been defeated by the upper middle class nor by those in the Gates tax bracket; those who stand to pay more are most likely to vote for reform. Rather, tax reform is the favorite target of those who vote for Tim Eyman’s initiatives — which are designed to cripple government and, if approved, always adversely impact the very same people who would most directly benefit from progressive tax reform.

Brewster might also have pointed out that the sales tax is perhaps the most regressive tax ever invented.

The second prediction in “What Are the Chances…” that caught my eye was County Commissioner Todd Mielke’s speculation that city-county consolidation might start happening in a couple of years, at least in piecemeal fashion.

Because of Washington’s archaic annexation laws, which favor the annexee rather than the annexer, the city of Spokane hasn’t moved a foot east since about 1915. Small annexations have come to the south and, more recently to the west and north.

So the city’s not going to expand much, and consolidation is a more likely path toward growth. But even that modest idea has rejected by voters. And now that we have that freeway-exit excuse for a city, Spokane Valley, our chances of a metro-government have sunk even lower. So, assuming that we still want police, fire, garbage, streets, snow plowing and parks at the lowest possible cost, perhaps we should make a run at a function-by-function consolidation.

What we do know is that the city of Spokane, the generator of most economic development in the area as well as the provider of almost all civic amenities and the preferred state dumping ground for regional social problems, faces what Spokane City CFO Gavin Cooley has correctly termed a “structural deficit.” By this he means that Spokane’s expenses are rising faster then our income. You can only move the shells around so many times in the game.

In conclusion, I suggest that functional consolidation combined with tax reform would help reduce this structural deficit. That way, developers could avoid covering their new buildings with “cheap corrugated crap.”

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