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Handing over the reins of the House Finance Committee

December 7, 2015
Rep. Ross Hunter, Carlyle and Rep. Pat Sullivan

Rep. Ross Hunter, Carlyle and Rep. Pat Sullivan

For the past three years I’ve thrown my heart and soul into serving as chair of the Finance Committee in the House of Representatives.  It’s been the most rewarding and challenging of my seven years in the Legislature.

As I hand over the reins this week to the capable Rep. Kris Lytton, I am proud of the dramatic change in our state’s approach to tax policy during that time and the role that our fiscal committee has played in this authentic transformation.  The thesis sentence of my chairmanship–announced the day I assumed the gavel–was to raise the level of analytical, intellectual and financial rigor of the tax side of the ledger.  To show a deeper respect for the taxpayers of our state by raising the bar of our analysis of state and local taxes in our 21st Century global community.

Recently I was nominated by the Democratic Party to fill the impending vacancy in the state Senate due to the election of my seat mate Sen. Jeanne-Kohl-Welles to the King County Council.  The council will make its formal selection and appointment January 7 in time for the 2016 Legislative Session.

It has been an honor to serve as the lead on tax policy for the House and as a senior budget writer.  My colleagues Rep. Ross Hunter, now head of the Department of Early Learning, and Majority Leader Pat Sullivan have been wonderful friends and partners in our work to respect taxpayers’ hard earned dollars and craft responsible state budgets.  The members of our caucus have stood with us as we’ve worked to introduce and adopt new ideas, approaches and reforms.   We’ve made big progress in closing some of the tax preferences that struggle to justify their return on investment for taxpayers, and to responsibly fund our state budget, yet much more remains.

Recently, three major editorial boards forcefully embraced the idea of transparency for our state’s many tax preferences–the signature work of my time as chair–and a reflection of the profound shift in support for full and open tax transparency.  The editorials followed a substantive article in the Seattle Times about Boeing’s tax preference based on the legislation I shepherded through the Legislature.  The Seattle Times’s editorial is here, the Walla Walla Union-Bullitin is here, and the Everett Herald is here.

I am deeply grateful to the members of the Finance Committee on both sides of the aisle who joined in this impactful work.  Rep. Terry Nealey served honorably as ranking Republican.  I am deeply appreciative of the dedication, diligence and integrity of the staff, co-led by Olympia’s finest K.D. Chapman-See and Jeffrey Mitchell.

Serving in this role does not always make a legislator popular.  The institution hungers to say ‘yes’ to interests, yet the role of Finance chair is to question, push, prod and resist the tide of acceptance of proposals that may struggle to justify their efficacy and value to the taxpayer.  The job is often to say ‘no’ when the larger system wants to take the easier path.  But it is essential work to protect the taxpayers’ interests.

We have not yet met our full constitutional duty to fully fund public education nor have we resolved other pressing issues facing our state.  But our work to elevate the dialogue about tax policy has helped our state move forward toward the 21st Century at a time when our old fashioned tax structure is struggling under the weight of our modern era.  Here are a few of the news stories and issues that I’ve tackled and helped usher through the legislative process.  And I’ve had fun with the job, too.  Indeed!

Thank you!  Thank you for the honor of your support, the learning from your criticism and the opportunity to grow personally and professionally and help make a difference in our state’s quality of life.

Your partner in service,

Reuven.

Crosscut

Fuse

Government Technology

Q13

KPLU 

TVW

Publicola

The Stranger 

Budget-boys

 

 

 

Finding room once again for a Morris Waldman

November 22, 2015

 

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Morris Waldman was 12 years old when he journeyed from Poland to the United States, looked up at the hallways of Ellis Island, and walked in a line of millions into the American Dream.  In 1924, weeks before the doors of immigration closed more tightly, his American experience began.  Within a few short years, with little education and English skills, my grandfather was the owner of a tiny corner grocery store in downtown Newark.  Those who remained in his small Polish village were ultimately lost to the anti-semitic waves rolling into World War II.  Morris’ story–Jewish immigrants from the region known as the Pale of Settlement, in his case a tiny shtetle in Poland (modern day Ukraine)–combines with hundreds of millions of others from countries around the world and shapes our national story.

Today, as the 2016 presidential campaign grabs headlines and the tragedies of terrorism continue, our state and national dialogue once again returns to the question of whom to welcome and how wide to open the doors.

Governor Jay Inslee has recently attempted, in the spirit of former Gov. Dan Evans who welcomed Vietnamese immigrants in their hour of need, to elevate our national dialogue about immigration by reminding us of our broad national story.  Many others, who fear the real or perceived elevated risks of immigration from today’s global hotspot of Syria, prefer to hold the line on new entrants until even stronger assurances of risk reduction are possible.

Our state history calls on us to be cautious and aware of the implications of rash judgement to close our doors.  We are called on to see our own grandmothers and grandfathers, neighbors, children and friends in the faces of those who today seek the safety of our shores.  We are not obligated to avert our eyes to danger or clear threats based on evidence, but neither are we pushed to overreact to the perception of danger that may be greater than the reality.

We can never eliminate all safety risk and logistically, it seems, potential dangers associated with tourist visas pose a far greater danger than the vetting process for immigration itself.  So none of this is to suggest there is only one answer or approach, but only to say that our national dialogue about immigration is the conversation of our entire country’s history.  Today’s dialogue reminds us of yesterday’s debate with new names.

In the darkest times in our history of immigration, we sometimes allowed rage, fear and xenophobia to dominate our actions.  Today’s Syrians are yesterday’s Jews, Irish, Italians and all others who were once the “other.” Yet, somehow, for generations we managed against pressure of the day to hold true and firm to the big dreams etched at the base of Ellis Island.

In the name, spirit and memory of Morris Waldman–a hero who toiled in deep humility and did his part the minute he passed through Ellis Island to make America greater–I stand with those children who have no voice and ask us to open the door to the American Dream.  Surely we can find room for a 12-year old boy from Syria who is a Morris Waldman of tomorrow.

Your partner in service,

Reuven.

Servant leadership: The civic dignity and results of Tim Burgess

October 28, 2015

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In seven years in elective office I’ve learned the ease with which our society gravitates to the anti.  Anti-government rhetoric flows freely and consistently even when it is occasionally undeserved.  Our democracy can take it.  But today’s candidates at virtually every level of government take positions on the extreme pretending it’s without implication and it’s the new common sense.

Yet, somehow through it all, governing on the local level continues and garbage trucks arrive when promised, pot holes are filled, electricity turns on, water is safe to drink, firefighters respond to a 911 call, and teachers embrace the learning of their students in the classroom.

Today the challenge is to quietly sift the ‘anti’ from the deeper nuance of an engaged local government that respects civic society.  To me, few people represent the integrity of what local government can be when it is responsive, reflective, strategically focused on quality of life more than Tim Burgess.

Tim Burgess is more than my colleague in public life, he is the representation of what we say we want from our civic leaders.  To me, as I’ve watched him tackle major public policy issues and hear the silence as well as the noise of politics, I’ve come to believe deeply that Tim reflects the dignity and quiet integrity that is the very soul of servant leadership.

I’ve engaged in late-night phone calls with Tim about complex policy problems worth hundreds of millions of taxpayer dollars impacting both Seattle and Olympia;  I’ve listed and learned that his servant leadership is about being in favor of solutions not pretending there is an easy way out;  I’ve seen him move the agenda forward not just on the front page issues of the day but the complex, unglamorous details behind the scenes that make a city work and help real people living real lives.

My personal hero in political life was Warren G. Magnuson.  His favorite notion of politicians was that there are workhorses and show horses.  Tim Burgess is a workhorse.  But much more he’s a dignified servant leader who cares deeply about–and delivers unprecedented results on–the pressing issues of our day.

The honor of your consideration for your vote for Tim is deeply appreciated.

Your partner in service,

Reuven.

An academic prophet in our own land: Welcome Ana Mari Cauce

October 13, 2015

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The University of Washington is an educational jewel of innovation, research and development, economic activity and community engagement.  The University and our state needs and deserves world-class leadership.

The selection by the Board of Regents of Interim President Ana Mari Cauce to the permanent position of president of the University of Washington is a pitch perfect connection with the values, civic engagement and educational passions of Washington State.  She’s the right person at the right place at the right time in our state’s civic life.  So many of us were Cauce before Cauce was cool.  She understands the nuance of relationships, the depth of academic rigor and the values of students and community.

And I’m not just saying this because my first born is a newly-minted, freshman Husky this year. Perhaps.

Mazal tov and welcome to the presidency of the University of Washington!

Your partner in service,

Reuven.

 

 

Coal & oil export projects update: Importance of civic engagement

September 12, 2015

oil train

We live in a time of radically changing economic systems in our country.  The expansion and commercialization of fracking technology has fundamentally altered the supply and thus the price of global oil, coal, natural gas and other traditional fuel sources.

Today, Washington is at the forefront of this broader systems change because we are located at the export gateway to the Pacific and Asia.  States where fracking is now commonplace are dependent upon Washington to export their low-priced commodities, even though Washington has traditionally been more of a refinery state (with five major facilities operational).  Other states know that the commodities of coal, oil, lumber and other natural resources have long been central to our state’s success, and they will continue to be for years to come.  At a broad level exporting commodities has a role in our economy so long as it done with care, objective analysis about the true costs and externalities and intentional environmental consideration.

The vital step ahead is to be intentional and educated about the proposals on the table to export coal and oil from our state.  One of my goals is to ensure that we are quantifying the externalities of costs associated with these policies, and not subsidizing environmental and economic harm.

My broader goal is to raise the level of rigor in analyzing these proposals through the lens of a modern, 21st Century community.  What type of state do we want for our children?  Is an economy of heavy commodity exports such as coal and oil the highest and best use of our infrastructure resources?

The distressing inability of the media, public, activists and even proponents to easily track the process of permitting and consideration of these proposals suggests we need a much more user-friendly approach to educating the public.  The state has categorically failed, in my view, to make the broader process understandable for most people.

Given the complexity, I thought it might be useful to provide a base-line update on the proposals under consideration in Washington.

Gateway Pacific Terminal at Cherry Point

The first and most expansive coal export proposal in the Northwest, SSA Marine–a respected Seattle company–first applied for permits in 2011. After a lengthy scoping phase, the lead agencies made the unusual decision to split the environmental review process – Whatcom County and Ecology would prepare an Environmental Impact Statement (EIS) together, and the U.S. Army Corps of Engineering would prepare its own EIS. The scope of the state and local EIS, expected to reach completion in 2016, was quite broad, considering impacts from increased rail traffic through the entire state as well as GHG emissions from downstream use of coal. This came about after more than 100,000 citizens commented in public hearings about the importance of a comprehensive review.  The Army Corps review, conversely, was to be quite narrow, looking only at impacts within Whatcom County resulting from construction and day-to-day operations of the facility. It’s easy to see why this division has occurred.

While the agencies were developing EIS documents, the Lummi Nation sent a letter to the Army Corps asserting that their treaty fishing rights would be structurally compromised by the proposed project and requesting that the environmental review be terminated. Though the federal agency has yet to respond, litigation seems imminent if the Army Corps issues a permit in spite of the Lummi’s concerns. The Lummi recently bolstered their legal team in preparation for a fight, if necessary.  They are not alone in believing that their case seems strong.

In addition, the Army Corps review is also delayed by the updated plan submitted by SSA Marine in March 2015 – involving less use of wetland area – from 2016 to 2017.

Once both draft EISs are published, there will be a public comment period prior to the issuance of final EISs. In the event that the agencies issue the necessary permits (complicated by a sentiment that a majority of Whatcom County Council appears to be uncomfortable with the plans), a lease for the aquatic land would have to be granted by the state Department of Natural Resources. If this occurs and litigation is avoided, construction could begin as early as late 2017.

Longview Millennium Bulk Terminal

This project was also proposed in 2011, when the principal proponent was Ambre Energy. Since then, Ambre has sold its interest in North American coal ventures to a venture capital firm. The project went through an extensive scoping process in 2013 in which 215,000 comments were received, and like the Gateway project, state and local agencies will conduct a broad review while the federal Army Corps will focus its review on the project area and the immediate vicinity. Draft EISs were expected to be complete by September 2015, but are now delayed until November and will likely be pushed back into early 2016. When draft environmental review documents are released, there will be a public comment period, follow by the issuance of a final EIS.

If permits are issued by the lead agencies, project proponents will still need to secure aquatic leases from DNR. Local environmental groups, represented by Earthjustice, are poised to challenge the project on legal groups in the event that it is allowed to move forward after the EIS process.

Tesoro-Savage Terminal in Vancouver

This proposal would be the largest crude-by-rail facility in the country, receiving 360,000 barrels (4 complete unit trains) per day. Unlike the coal export projects, oil export facility permits are largely reviewed by Energy Facility Site Evaluation Council (EFSEC), which makes recommendations to the Governor who can then greenlight or nix the project. Prior to EFSEC review, however, project proponents secured a lease for the facility site from the Port of Vancouver, under controversial circumstances that angered opponents.

EFSEC review is required to be completed within 12 months, though in practice that has never happened. Still, now that 2 years have elapsed since the project was originally proposed, proponents are getting frustrated with the delays and the lack of any definite timeline. EFSEC has stated that draft review documents could be released for public comment as early as November 2015.

Westway/Imperium Terminal Expansion

This project involves the conversion and expansion of existing facilities to handle crude oil delivered by rail. Grays Harbor County and Ecology are the SEPA lead agencies, and they issued draft EISs for the project on August 31, 2015. The public comment period for these documents will run through October 29th, 2015. A final EIS could be issued as early as spring 2016, and the first phase of the project could be completed by early 2017.

NuStar Vancouver

This existing facility proposes to convert and expand to handle 22,000 barrels of crude oil per day. The project was proposed one day before Vancouver issued a moratorium on crude oil facilities. The city announced that it would require a full EIS process in April 2015. The scoping period ended in May, and agencies are working on a draft EIS with no timeline announced.

Public officials statewide have a responsibility to be better informed about these projects and to help educate our community about the economic, social, environmental and political implications on all sides.

I’m trying to do my small part.

Your partner in service,

Reuven.

Early Learning’s New Champ: Ross Hunter

August 31, 2015

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I applaud Gov. Jay Inslee’s decision to appoint my treasured friend and budget-writing colleague Rep. Ross Hunter as director of the Department of Early Learning.

Hunter, chair of the House Appropriations Committee, will resign his seat representing the 48th Legislative District to assume the new role.

There are few people in public life today with more resolve, ability and conviction to transform the lives of young children through high quality early learning programs.  Washington is leading this education revolution in large part because of Ross’ unrelenting work over the past decade to invest in real kids living real lives. Ross and Rep. Ruth Kagi have been at the forefront of educating fellow legislators and our state that highly targeted investments in early learning provide a financial and moral return on investment that is simply unmatched.  Now, after 13 years as a legislator, Ross will harness that passion for improving the lives of young children in the central hands-on management and leadership role in the executive branch.

In his service as a state representative, Ross has helped transform our approach to public education from early learning through K-12 and higher education, finance, budgeting, health care and much more.  He has been a premier thought leader on how to modernize our out-dated system of funding schools.  He will be missed as an indefatigable and respected member of the Legislature but his service to the seven million people of Washington continues without missing a beat.

Onward!

Your partner in service,

Reuven.

A repost of Rep. Ross Hunter’s McCleary response & 19 senators’ detour

August 23, 2015

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My friend and education funding champion Rep. Ross Hunter posted a thoughtful response to 19 senators’  assault on the state Supreme Court for their recent implementation of a $100,000 per day fine for the Legislature’s ongoing failure to meet the paramount duty of education funding.

It’s a worthwhile read.

The missing link in this journey is the public.

Here you go:  Constitutional Crisis? Not so much..

Your partner in service,

Reuven.

New political disease: Addiction to marijuana taxes

May 27, 2015

The legalization of recreational marijuana led by Washington and Colorado is on the march nationally.  Our experience is being watched in cities, states and nations around the world and has global implications.

When the people of Washington legalized recreational marijuana they did so under the hope and expectation of a well regulated and appropriately taxed system. They were, it seems to me, simply tired of a failed war on drugs that did not increase public safety, severely punished relatively modest recreational drug use and did so at a staggering cost to taxpayers.  It was simply time for a new approach.

The troubling part of the experiment that I initially anticipated but did not fully grasp is a reckless, uncontrollable political addiction to marijuana taxes.

I have been unrelentingly critical of the 2015 Senate budget that is predicated on an extraordinary level of marijuana revenues. Unfortunately, thanks in part to a quirk of timing, the non partisan Economic & Revenue Forecast Council is projecting marijuana tax collections that are astronomical and, in my view, based on faulty assumptions. This, in effect, implies that the state Senate’s heavy reliance on marijuana taxes is reasonable.

But it is not. It’s a mistake we will most likely regret for years. My concern as Finance chair is that we have created a broad public expectation that marijuana revenues are manna from Heaven without implication or consequence.  It is the ultimate “tax the guy behind the tree” temptation that too many elected officials already cannot resist.

Washington has the most unfair and economically inefficient tax system in the nation. Adding marijuana revenues as a shaky new pillar is unwise, risky and a poor substitute for meaningful tax improvements.

But it’s not just financially reckless it’s philosophically irresponsible.  It is hardly an expected move from conservatives, especially given the Republican Party’s formal opposition to I-502.  Regardless of the past, marijuana revenues are too new, too uncertain and too unpredictable to be a responsible basis of an education budget.

While it’s always uncomfortable to be in a position of questioning the technical accuracy of our state’s respected forecast infrastructure, their new revenue estimates are, in my view, based on a deeply flawed policy and financial assumptions that are unlikely to be realized. The consequences of basing a two-year operating budget on these assumptions means we are likely to face another major shortfall once again when the next budget is due in 2017.

First, the state is projecting a total of $1.12 billion in marijuana revenues from 2015 through 2019, with $374 million expected in the next two years.  Think about that:  We are anticipating raising approximately the same amount in new marijuana taxes within a few years that we currently collect in traditional cigarette taxes.  Washington’s combined effective tax rate under the Senate plan is 47% for recreational and medical with no distinction between the two.  Since legalization in July of 2014, the state has collected a total of just under $50 million in total marijuana revenues.

Colorado by comparison—a state with an existing regulated medical marijuana market structure in contrast to our unregulated system– is projecting a total of $179.8 million over the next two years.  Washington’s estimates are 65% higher than Colorado’s forecast.  Our tax rate is 51% higher than Colorado’s.  Colorado effectively taxes medical marijuana at 6.5% while Washington taxes medical marijuana, under the Senate plan and projections, at 37%.

Regardless of tax rates, here’s the bottom line of total consumption:  Washington forecasters are anticipating our 7 million residents will consume a total of 6.2 million ounces per year.  Colorado forecasters are anticipating that their 5 million residents will consume 1.4 million ounces in that same year.  As I understand it, both state forecasters used the same core data and operating assumptions, metrics and customized studies provided by the respected Rand Corporation.

Here’s the difference:  Colorado legislators conservatively slashed the projections in half, delayed recognizing any revenue on their books for a year, and even then revised their estimates down substantially after actual revenue collections came in at less than 40% of projections in order to avoid the uncertainty.  Legislators rejected the initial estimates as too large.  Our Senate is pushing to do the opposite with the same basic data:  Recognize and book every penny of the initial estimates without questioning the common sense of it all.

Second, our state forecast does not take into consideration the legalization of marijuana in Oregon, a development that will take effect soon and is unpredictable at best. Under the Senate plan the difference between the tax rate in Oregon and Washington will be 37% given that Oregon’s tax is a mere 10% while ours is an effective rate of 47%.  The likelihood of Washingtonians along the border area finding ways to shop for recreational marijuana in Oregon does not seem trivial.

Third, the forecast assumes widespread availability of recreational marijuana to meet demand from at least 50% of the current medical marijuana market, yet dozens of cities and counties in Washington have instituted recreational bans and moratoria. Right now, there are an estimated 99 medical dispensaries in the city of Seattle alone, but only 138 I-502 retail stores operating across the entire state. The bans and moratoria make the prospect of achieving the long term projected sales of 52% of all marijuana activities seem remote.  How can legal marijuana reasonably expect to compete with the illegal market when availability is severely limited throughout the state?

Fourth, the reluctance of the Senate to share meaningful revenues with local governments–which face real impacts on the ground and under the current system receive no revenue share from Olympia–may further damage successful revenue collections and the willingness of cities and counties to invest in their own prevention, enforcement and public safety programs.

In partnership with many colleagues and stakeholders, I have attempted to improve the structure through House Bill 2136 an omnibus regulation and taxation framework.

But no bill can regulate elected officials’ inability to avoid the easy political temptation of marijuana tax revenues.  I have strenuously objected to overly optimistic revenue projections from day one.  The wave been difficult to stop.

As a parent of four children I am wildly unenthusiastic about the extensive availability of marijuana among our youth. We have rapidly socialized marijuana without prevention investments and programmatic support and we are seeing negative impacts in high schools across the state. While I don’t necessarily regret Initiative 502 passing given the importance of a new approach in our country, I very much regret the ineffective and unwieldy policy implementation that has been a disservice to the people of our state in both the recreational and medical markets.

The public was promised a well regulated and appropriately taxed system.  We have neither.  Now, the Senate is pushing the Legislature to book the political and tax benefits of legalization without recognizing the true financial costs to the community.  We are even fighting to protect pennies on the dollar of investments into prevention.

Most of all, as chair of the tax-writing Finance Committee and a budget writer, I regret that instead of meaningful tax policy–creating a modern tax system with low rates, broadly applied with few exemptions–we are conveniently retreating to a dangerous over reliance on marijuana tax revenues to prop up our state budget and meet our fiduciary obligations to fund public education.

I find it ironic that on the issue of marijuana taxation it is Democrats–who generally supported I-502– who are more cautious and fiscally conservative and Republicans–who generally opposed I-502– who are acting more like big spending addicts.

The world is watching.

Your partner in service,

Reuven.

Washington Accepts Justice Kennedy’s Invitation: On-line sales taxes

May 23, 2015

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The most effective state tax system would be low rates, broadly applied with few carve outs and exemptions.  As Finance chair that continues to be the policy framework through which I evaluate legislation, issues and ideas. Unfortunately, as we all know, Washington has the categorical opposite on every front.

With a reliance on sales tax and a gross business tax created 83 years ago as a temporary measure, we rely upon the whims of consumer spending to fund public education and other vital services.  Add to the mix 650 tax preferences for virtually every major industry and you are left with a economically inefficient patchwork of unfairness.

While big picture tax reform is elusive, we can improve the clunky system we have today, broaden the base and make it more fair and efficient.

A prime example is on line sales taxes.

Every year we lose hundreds of millions in uncollected revenue on consumer purchases that remain untaxed due to the unwillingness of Congress to pass the Marketplace Fairness Act, a bill that would update our nation’s tax code to essentially include–get ready for it–the Internet. It says that ‘a sales is a sale’ regardless of where it’s purchased or the vendor selling it.

Chances are a large percentage of your shopping these days is done online, at home or the office, on your computer, tablet or phone.

For many of those transactions you pay a sales tax at the same rate you would at any brick-and-mortar store in Walla Walla or Bellingham or Seattle. But because of a U.S. Supreme Court ruling from 1992 — when the Internet was hardly a whisper to most people — transactions with some online retail giants go untaxed.

That hurts Washington to the tune of hundreds of millions in lost revenue, and it hurts local companies in the state that do pay their taxes.  The politics are ugly as companies jockey and lobby to protect their interests.

The responsible answer is to level the playing field and make sales taxes apply to all equally.

And, whether you like or hate our reliance on the sales tax, we can all agree that if we have to do it we should at least do it right.  This is one of the reasons I serve on the Streamlined Sales Tax Governing Board, a national group of states and industries working together to coordinate complex sales tax policy.

And that’s why this year, I’ve introduced the Washington State Marketplace Fairness Act to establish nexus with online retailers, level the playing field for traditional brick-and-mortar businesses and collect critical revenue from existing sales.

Few realize that for every item you buy online that you don’t pay sales tax on, you technically are responsible for paying an equivalent use tax to the state of Washington. But every year, only 1 percent of residents who owe use taxes put it in an envelope and send it to the Department of Revenue for obvious reasons.

We could simplify the system and make it more fair simply by collecting our regular sales tax for all online sales.  A sale is a sale.

So what’s the problem?

In 1992, the U.S. Supreme Court ruled in Quill Corp. v. North Dakota that a state may collect sales and use taxes from a retailer only if the retailer has a physical presence such as a formal office or distributor in the state. This decision set a clunky precedent that online retailers could sell to customers in a state that collects sales taxes without charging sales tax.

But this year in an even rarer precedent, Justice Anthony Kennedy — who concurred with the 1992 decision — invited the states to petition the Supreme Court to overrule Quill and allow states to collect sales and use taxes from online retailers regardless of whether they have a building, office, distributor or physical presence in that individual state. To do that, we have to take a stand as a sales tax state and push the boundaries of the Court’s pre-Internet decision, and to do that we have to expand how we define nexus in state law.

Under our proposal, nexus would allow our state to collect sales and use taxes from online sales based on a retailer’s economic connection to Washington state, not just geographical offices. It would say, in effect, that a sale is a sale.  This proposal establishes new standards for nexus for out-of-state retail businesses by using a five-tiered approach which considers the seller, in-state affiliates, a retailers’ physical presence, and payment methods. For instance, PayPal has offices in Washington, so if PayPal is used for payment the seller will need to collect and send in sales tax. We can make it easy to administer for new sellers because we already to it today.

The Washington State Marketplace Fairness Act is about more than revenue — it’s about establishing fairness for Washington businesses. If you were given a choice at checkout whether or not to pay sales tax, you’d likely choose the latter. But when a competitor can offer the same product without charging sales tax, that puts our local neighborhood businesses at a competitive disadvantage. In his unprecedented invitation to the states, Justice Kennedy even acknowledged the “extreme harm and unfairness” the Quill decision has caused on states like Washington.

How will this affect you as a consumer? Probably not that much. Many online shoppers don’t notice a difference between buying something at Amazon and buying something on Etsy — but you’ve already paid sales taxes on every item you’ve ever purchased from Amazon. The Washington State Marketplace Fairness Act would simply extend our existing system to sales to handful of other retail websites like Etsy, Overstock and eBay.

By passing the Washington State Marketplace Fairness Act, we can conservatively collect more than $240 million by the end of 2019 from sales into Washington by out-of-state businesses. That would be a large piece to the puzzle of fully funding basic education, mental health care and other critical investments. In addition, local governments would collect substantial new revenue from sales and use taxes.

I have the great honor of representing the legislative district that is home to Amazon and, as a technology entrepreneur in the wireless and software industries, I want to ensure that our state’s policies are aggressively technology neutral.  Our polices must be fair so that all on line sellers play by the same rules.

Amazon as a global company is extremely nervous that individual states will begin implementing their own sales tax collection policies, but in an era when Congress is both incompetent and irresponsible, states must lead.  Nothing can hide the fact that physical presence as a standard to collect taxes is outdated, inefficient and unfair.  As a leading sales tax state, our responsibility is to act decisively on this important national issue.

My plan is not a broad-based tax increase, it’s a smart change in our state’s tax collection approach that levels the playing field so everyone plays by the same rules regardless of politics.

In 1992 most folks didn’t yet know what the Internet was. Some universities, companies and agencies had email and tinkered with the coming wave.  It’s past time we updated our tax policies for the 21st Century.

We’ve been invited to challenge the Court’s old ruling and establish marketplace fairness for states like Washington that rely on the sales tax to survive, and we plan on accepting that gracious invitation.

Your partner in service,

Reuven.

 

Transportation 2015: Growing beyond our fears

March 8, 2015

trollyseattle

For four years the battle has raged in Olympia about how to pass a comprehensive transportation package that invests in our state’s public infrastructure, enables our global economy and meets the needs of rural towns, suburban communities and big cities.  For four years the dialogue has been framed more by anti-tax rhetoric and proprietary regional interests than aspirational ideas of long-term statewide growth.  For four years the debate has become smaller and smaller, more defensive, less courageous and strategic.  For the first time in an era of divided government, a convoluted bill to raise the gas tax stumbled from the Republican-controlled Senate to the House with a meek but bipartisan 27-22 vote.

The business community, Seattle Times and other proponents are–understandably–so relieved to see any progress on a transportation package that it becomes easy to brush past the lack of intellectual rigor of the plan itself.

Most in Olympia are committed to a bold, modern 21st Century transportation investment plan.  Yet the Senate’s transportation package is inadequate not merely because of the gaping holes in the integrity of the bill itself (the numbers don’t balance–there’s hundreds of millions of spending on projects that aren’t actually funded) but because of the smallness of the approach.

Washington’s public infrastructure and transportation network is at a crossroad between mediocrity and greatness.  We will attract hundreds of thousands of new residents in the coming years.  We will continue to grow.  Our cities will continue to struggle with density, our suburbs will continue to struggle to mix job opportunities with affordable housing, our rural communities will continue to struggle with limited economic opportunities.

On the spending side, the ragged idea that gasoline taxes are exclusively for roads, highways and concrete and not meaningful investment in transit is so impotent it’s embarrassing for us as a state.  State dollars exclusively for highways and concrete and local dollars exclusively for transit brings all sides down to the common denominator of self-serving, narrow interests.  The lack of transportation connectedness–integrated transportation network of rural, suburban, city, industrial needs–is where the lack of imagination is weak.

On the revenue side, the idea that gasoline taxes continue to be the best form of taxation is itself so outdated it’s hard to imagine a less creative approach. The plan proposes $15 billion in road, bridge, construction and maintenance investments spread strategically across the state to garner votes.  The full range of transit requests add another $15 billion or so–virtually every penny from regressive and economically inefficient tax sources.

So let’s ask:  If you had the opportunity to invest $30 billion in taxpayer dollars to build a modern, 21st Century transportation system to meet the needs of our growing state is this how you would raise it and invest it?

Not a chance.

The existing philosophical construct perpetuates the ridiculous notion that transit investments are separate–the responsibility of local taxpayers to fund on top of their gas taxes by a vote of the people.  Sound Transit 3, a vital link to the future, is granted $11 billion in incremental taxing authority in a cobbled construct of sales, property and motor vehicle taxes.  Kitsap County is asking for authority to raise their sales tax by 0.3% to construct a passenger-only ferry to cut the commute time from Bremerton to Seattle to 35 minutes (talk about economic development).  Snohomish County requests the opportunity to add 0.3% sales tax to fund their Community Transit for buses.

Yes, I’m a regionalist, urbanist, modernist, density-supporting advocate to the core, but I’m no less committed to a strategic framework that works for all statewide on the revenue and spending side of the equation.

The package ignores the painfully obvious:  Our transportation revenue sources are dying and it’s time to build a more responsible way to fund our entire transportation system.  The weakest link in the current transportation package isn’t poison pills, it is the lack of imagination in how to pay for transportation for the next generation of our state.  The lack of transparency and oversight of how transportation dollars are spent is also a legitimate concern from all sides.  That means everything from the deep-bore tunnel to the massive 167 project and other mega-projects on the table. The public has a right to be skeptical on all sides, and the Legislature’s package must rebuild trust not detract from it.

Let’s invest in the Metropolitan Revolution for our urban region and authentic economic development for our rural communities by building a stronger network of interconnectedness.  Silos of road projects dolled out by legislative district is hardly a visionary strategy.

To pay for it, we should seriously consider in this package some new financing approaches that are more economically efficient.  Let’s include the idea of a well crafted vehicle miles travelled program (not GPS-based but rather total annual mileage reporting). We should seriously consider a more comprehensive, regional network of tolls to pay for maintenance and operations of our roads.  We should seriously consider an incremental Puget Sound-regional gasoline tax that’s free of the 18th Amendment constraints to help fund trains, buses and other transit options.  We should consider the idea of strong public and private sector partnerships.  We should seriously consider a payroll tax on large employers to help fund targeted investments in transit so the companies’ own employees can get to and from work more efficiently–with the investments supported by business.  And we should seriously consider the idea of a carbon-pricing program where polluters pay–or at least receive less of a subsidy from taxpayers– to help fund our statewide transportation system into the next generation.

A transportation package that perpetuates status quo design of transportation financing and spending serves no one effectively.  Without an integrated investment approach that tackles rural, suburban and urban needs–and a creative approach to new, market-oriented and user-based ways of financing transportation–it’s just a glorified list of pork projects with the middle class getting handed the bill.  That may garner a handful of votes in the Legislature but it’s unlikely to work well for seven million people of Washington.

We are so much more as a state than what we’ve become.

Your partner in service,

Reuven.

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