Public Interest Transit Forum - http://www.bettertransport.info/pitf
People for Fair Taxes in Washington
P.O. Box 1823
Olympia, Washington 98501
May 15, 1996
Honorable Bob Drewel, Chair
Regional Transit Authority
821 Second Ave., M.S. 151
Seattle, WA 98104-1598
Dear Mr. Drewel:
People for Fair Taxes is a coalition of statewide groups and individuals that has, for almost twenty years, been a watchdog for tax equity. We work to ensure that taxes are considerate of the financial ability of those who are asked to pay for government programs.
The RTA, in its draft Ten-Year Regional Transit System Plan (March 29, 1996), has proposed that the local sales tax be increased by 4/10 of one percent and the local motor vehicle excise tax be increased by 3/10 of one percent.
Under the RTAs funding proposal, one tax source, the retail sales tax, would provide 77 percent of the funds ($1.527 billion) raised from local taxes over the ten-year implementation period. The MVET would provide 23 percent of local tax funds. The RTA does not propose to use the employee (commuter) tax.
We note that state law allows the RTA to ask voter approval of up to 9/10 of one percent sales tax, 8/10 of one percent motor vehicle excise tax, and an employer excise tax of $2 per employee. We also note that state law (RCW 81.104.140) requires that funding sources should satisfy a number of criteria. One of these is equity. In reviewing the plan, we find no mention of tax equity.
As you know, the sales tax in Washington State is currently a major source of state and local government revenues. At the state level in 1995, the retail sales and use tax generated 46 percent of all state tax revenues. The local sales tax accounts for a smaller yet significant portion of total county and city tax collections. And, of course, it provides almost half of all revenues used by public transportation systems.
The sales tax is widely understood to be a burdensome tax for many citizens -- especially those who fall into the category of the working poor and others, who because of disability or family circumstance, must survive on public assistance that is often considerably below the designated poverty levels. Although food and some health care items have been exempted, the sales tax is collected on many basic needs such as clothing, furniture, and other essential household items.
Because of its high dependence on the sales tax, Washington States tax system has been ranked very low in state-by-state comparisons of tax equity, where equity is determined by how well a tax system is designed to fit the ability of all citizens to pay their share of government costs. Ability is usually measured by personal income.
The RTA proposal, if adopted, would raise the sales tax to 8.6 percent for a majority of citizens in the RTA district. This would place us third from the top in a recent (January 1994) nationwide ranking of combined state and local sales tax rates.
People for Fair Taxes is concerned that the RTA has not considered the tax equity implications of its funding proposal. Tax sources that take into account the ability to pay standard and that are more directly related to the problem the RTA presumably wants to solve, namely too many single-occupant vehicles clogging roads during peak periods, would seem to have been overlooked. These would include the motor fuel tax, the commuter tax, and a higher level of the MVET.
We strongly encourage the RTA Board to consider other tax sources that would provide a greater amount of tax equity. Specifically, we ask that the Board provide, for public review and comment, an equity analysis of potential alternative funding programs before a final decision is made to submit a regional transportation proposal to the voters.
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Last modified: February 07, 2011