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Suddenly Tax Increases Get a Whole Lot Easier – Supreme Court Overturns Popular ‘Two-Thirds for Taxes’ Rule

Senate Majority Will Seek Constitutional Amendment – House Dem Leaders Say Nothing Doing

The Temple of Justice, home to Washington's Supreme Court.

The Temple of Justice, home to Washington’s Supreme Court.

See also: As Supreme Court Bounces Popular Two-Thirds Rule, Everyone Has Something to Say

OLYMPIA, Feb. 28.—In the most anxiously awaited court ruling in recent memory, the state Supreme Court Thursday overturned Washington state’s wildly popular “two-thirds for taxes” rule and suddenly made it a whole lot easier for the Legislature to pass tax increases.

The watershed decision allows lawmakers to ignore a sentiment expressed by the voters of Washington state five times over the last 20 years, by increasingly resounding margins – that any tax increase ought to require Democratic and Republican votes. The court decision is unlikely to change the course of this year’s session to any great degree. That’s because the Senate now is controlled by a Republican-leaning coalition that is none too keen on tax hikes. But the ruling will have much deeper effects in the future, as the currents of power inevitably shift and the state inevitably finds itself in another budget crisis. The rule has required a two-thirds vote of the House and Senate for any tax increase, and it is the single biggest reason the Washington Legislature avoided raising taxes during the depths of recession, in four of the last five sessions. It also has been the driving force behind efforts to reform state government and make it more efficient. Now, suddenly, the handcuffs are gone – and if lawmakers demonstrate any restraint it will have to come from within themselves.

While Democrats whooped as if the prison doors had finally been opened, business-community leaders groaned and Republicans vowed an effort to pass a constitutional amendment that would set the rule in stone. Not that their chances are good – Democratic leaders in the House say they have no plans to permit a vote on the floor. But the effort could force many Democrats in the Senate to take a rather uncomfortable vote – some 44 of the state’s 49 legislative districts favored the rule in the last election. It is the harbinger of more uncomfortable votes to come as the court decision eliminates cover for Democrats who themselves managed to avoid taking tough votes for taxes.

State Reps. Laurie Jinkins and Jaime Pedersen, who led the colloquoy on the House floor that launched the lawsuit, take turns reading from the Supreme Court ruling.

State Reps. Laurie Jinkins and Jamie Pedersen, who led the colloquoy on the House floor that launched the lawsuit, take turns reading from the Supreme Court ruling.

For now Democrats are cautious about their message: They’re not saying it’s going to lead to tax increases. But they say it is going to lead to “a conversation” about the state’s tax structure that has been stifled during a large portion of the last two decades – essentially code for the same thing. Said Rep. Jamie Pedersen, D-Seattle, one of a dozen Democratic lawmakers who filed the suit in 2011, “We haven’t been able to go through the normal process of representative democracy because the people who oppose any taxes have known that with 17 senators on their side, they can block any new revenue in our state.”

They say the ruling prevents the “tyranny of the minority.” But it might be more proper to say the decision has reduced the ability of the voters to dictate to the Legislature. They’re the ones who made the two-thirds rule possible.

Vote of No Confidence

Initiative promoter Tim Eyman speaks with reporters at one of the day's many news conferences.

Initiative promoter Tim Eyman speaks with reporters at one of the day’s many news conferences.

Over the last 20 years Washington voters have sent a decidedly mixed message to Olympia. While they keep electing Democratic governors and largely Democratic legislatures that generally take an expansive view of government, they also keep passing initiatives that force Democrats to negotiate with Republicans on taxes. Meaning, for the most part, no action on taxes at all. The first such measure came in 1993, with Initiative 601, which immediately followed a large tax increase that year. And Washington has passed the rule four times since, by ever-increasing margins. Last November Initiative 1185 was favored by a whopping 64-36 margin, practically a supermajority of the Washington electorate all by itself. The rule keeps coming up because lawmakers keep ditching it – after two years it becomes possible for lawmakers to suspend or repeal an initiative with a simple majority vote.

Since 2007 initiative promoter Tim Eyman has sponsored three variations, the last two with strong financial backing from the Association of Washington Business and other business-community players. Eyman notes that voter support skyrocketed after the Legislature suspended Initiative 960 in 2010 and promptly raised billions in taxes during the worst of the recession. Take it as a vote of no confidence, he says: “The more fiscally responsible the Legislature is, the less appetite the voters have for anything we are doing. I’ve heard this argument many times – you can’t create emotion, you can only tap into it.”

For the interests that depend on state spending – the education lobby, the public employee unions and social-service advocates – trying to defeat the measures at the ballot box has become a lost cause. Which explains why they turned to the courts. The fourth in a series of lawsuits, this one finally rang the bell.

Reasoning is Simple

State Rep. Laurie Jinkins, D-Tacoma, leads the scripted colloquoy on the House floor in 2011 that queued up the challenge.

State Rep. Laurie Jinkins, D-Tacoma, leads the scripted colloquoy on the House floor in 2011 that queued up the challenge.

Thursday’s ruling was based on a stage-managed vote on a bill in the waning days of the 2011 session. Democrats in the House lined up a measure that would have ended a tax exemption for out-of-state banks and earmarked the proceeds for class-size reductions. It got 52 votes – a bare majority – but with every Republican voting no, it failed to receive the two-thirds majority that was required for passage. And in a scripted “colloquoy” on the floor, House Speaker Frank Chopp, D-Seattle, went on at length to explain that he could not declare the bill passed without committing malfeasance. Worth noting is the fact that those same 52 members of the House could have taken another vote at that point to overrule the speaker, but they failed to do so. Last year the Legislature passed another bill with a two-thirds vote that eliminated the tax exemption – proving that the rule was not an absolute obstacle.

Nevertheless, that vote was sufficient to create what the court, in its 6-3 decision, called a “justiciable controversy” – something no previous court challenge had done. The 12 House Democrats and a bevy of education and labor groups filed the case: They argued the state constitution establishes that a majority vote is all that is required to pass a bill in the Legislature. The state attorney general’s office, defending the initiative, argued that the constitution sets a floor, not a ceiling, and that voters are entitled to place additional requirements on the Legislature if they choose.

Writing for the majority, Justice Susan Owens opined, “this dispute raises constitutional concerns [about] the very form and function of the state’s government. The language and history of the constitution envince a principle favoring a simple majority vote for legislation.”

The court’s reasoning was simple: The constitution establishes specific cases where a supermajority vote of the Legislature is required, such as the passage of bonding measures or the expulsion of a member. “Thus the framers were aware of the significance that a supermajority vote entailed and consciously limited it to special circumstances; the passage of ordinary legislation is not one of those.”

Ruling Called Reversal

Supreme Court hears arguments in the case last September.

Supreme Court hears arguments in the case last September.

A blistering dissenting opinion from Justice Charles Johnson makes clear that the ruling was a reversal, and suggests that the decision had more to do with a more liberal makeup of the court than with any new issues raised by the case. The court has traditionally declined to intervene in the workings of the Legislature, most recently in a 2009 ruling on a very similar lawsuit presented by then-Senate Majority Leader Lisa Brown, D-Spokane. As long as lawmakers had options – like overruling the speaker – the court maintained Brown was asking the court to make a decision politicians were unwilling to make for themselves. Johnson charged that the court abandoned “any semblance of judicial restraint” without offering any reason for ditching years of precedent. “Evidently something has changed, though the majority does not tell us what, to cause it to abandon these limiting principles and chart a new course for the court to more actively engage in the political process. This change is both unwise and unprecedented.”

Nothing is different, he said: The Legislature still had plenty of options. “Any disgruntled legislator can pursue a legislative remedy.” And he said the fact that the core component of the bill eventually passed – elimination of the tax exemption – should have rendered it moot. It should be noted that there was one difference between the earlier lawsuits and this one – plaintiffs sought a “declaratory judgement” rather than a “writ of mandamus,” a court order requiring a public official to take action. Johnson argued it didn’t make a whit of difference. A separate dissenting opinion, just as vehement, was filed by Justice James Johnson. What neither the majority nor minority opinions mentioned is that something indeed has changed: In another case, the so-called McCleary decision, the court has ordered the state to ramp up spending for K-12 education, likely a $1 billion or more expense during the current session and more in the future. Democrats argue the Legislature can’t raise the money without a tax increase, and by ditching the two-thirds rule an activist court could be pointing the way to the solution it favors.

But as state Sen. Janea Holmquist Newbry, R-Moses Lake, pointed out at a news conference later in the day, “We have no control over the Supreme Court. That is done.”

Will Seek Constitutional Amendment

State Sen. Don Benton, R-Vancouver, appears at a news conference alongside Sen. Pam Roach, R-Auburn.

State Sen. Don Benton, R-Vancouver, appears at a news conference alongside Sen. Pam Roach, R-Auburn.

In the Senate, controlled by a coalition of 23 Republicans and two Democrats, lawmakers will soon take a floor vote on a constitutional amendment that could put the matter beyond the reach of the court. “I-1185 got more votes than President Obama got in Washington state,” declared Sen. Don Benton, R-Vancouver. “I would say that’s a pretty clear mandate from the citizens in our state that they want a check on tax increases. They want to make darn sure that it is absolutely the last resort, and the way they made sure it was the last resort is by requiring two-thirds of their legislators to vote for tax increases.”

The majority coalition voted unanimously Thursday to force the issue to the floor – but the end result likely will be an inconclusive vote that will figure mainly in future campaign brochures. It takes a two-thirds vote of both chambers of the Legislature to send a constitutional amendment to the ballot, and even if eight additional Democratic votes can be found in the Senate, SJR 8205 still must go through the House. There Majority Leader Pat Sullivan, D-Covington, says Democrats do not plan a vote on the floor – it’s not clear if the proposal will even get a hearing. Explained Pedersen, “No one in their right mind would ever adopt a constitutional amendment that looks like this one. Why would you ever say that a tax exemption could be put in by a simple majority and not be repealed except by a two-thirds majority? That makes no sense at all.”

Business Fears Consequences

During news conferences Thursday morning, Democrats said they hoped the lifting of the restriction would enable discussion of tax reform. That’s legislative shorthand for an argument that has raged for years – that the state’s tax structure hasn’t kept pace with changes an economy increasingly dependent on services. Most state revenue now comes from sales taxes, property taxes and the gross-receipts tax on business known as the business and occupations tax. Receipts haven’t kept pace with growth in personal income – though whether that is relevant is a matter of never-ending debate, and it has much to do with political perspective. Republicans and many in the business community argue that the real problem is that the Legislature finds it hard to say no.

The key thing is that if big changes in taxation occur, business will probably take the hit, says Don Brunell of the Association of Washington Business. The state is unlikely ever to adopt an income tax, he says, given the fact that such proposals generally find support from only about 30 to 40 percent of the state’s voters. And because the B&O tax makes no allowance for profitability, he says business taxes already are relatively high by comparison with other states. “Any tax increase we think will be disproportionately a burden on the business community and employers as opposed to individuals, because that is the way our system is set up, and there is not much we are going to do about that.”

That’s why AWB and the business community as a whole have been such strong supporters of the two-thirds rule, and why there was such dismay in business ranks Thursday. Brunell says he suspects the next move might be an effort to extend the sales tax to professional services. Elimination of the two-thirds rule, he said, means “one less hurdle the Legislature will have to go over in order to raise taxes.”

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