Monday, May 20, 2013

Why Washington State PTA supports revenue

Note: The following letter was sent to all legislators.

TAKE ACTION: Stop Delaying on Basic Education (Armchair advocacy! Just click, send and share)
Charting the decline: Washington ranks 28th in per pupil spending, but 46th when measured as spending per personal income, meaning working- and middle-class families contribute more as a percentage of their income. In 1991, the range was more equitable. Washington ranked 17th in per pupil spending nationwide and 24th when measured by personal income.
Skills reality check: In the field of STEM: There are 2.1 jobs for every unemployed person. In non-STEM, there are 3.7 unemployed people for every job.

Dear legislators,

Within Washington State PTA, the conversation about “revenue” is not just about raising more money; it’s about a stable and equitable tax structure that supports the state’s needs, and especially our children’s education and the programs they rely on.

The recession has taken its toll on our youth. For the second year in a row, more children live in low-income households. Nearly four out of 10 children live in families that struggle to afford food, health care, housing and child care. Nearly half – 46 percent -- of public school children in Washington are in the Free and Reduced Price Lunch program. Four years ago that percentage was 40 percent. Eight years ago it was 36 percent. In the late 1990s, the figure was 30 percent.

Investing in public education fights poverty and promotes economic growth. And yet since the 1990s we have disinvested in education, when measured by personal income. Today, the legislature is under court order to make steady, real and measurable progress to fully fund K-12 public education by 2018. Now more than ever, revenue needs to be looked at – and not just in the sense of “do we have enough,” but, rather, how do we make sure our tax system is both adequate and equitable, and how do we make sure it reflects a 21st century economy?

The type of tax matters

Washington has an unusual tax structure that focuses on tangibles and not on information and services. It was last updated in the 1930s and is considered the most regressive tax system in the nation. It hits the middle class hard:
  • We rely twice as much on the sales tax; we’re one of only seven that does not have a personal or corporate tax.
  • Washington’s super majority (the 60 percent in the middle to poor range) pay more than the national average, when measured as a percentage of income, while Washington’s wealthiest 5 percent fall well under the national average.
  • The state B&O tax is measured on the value of products, gross proceeds of sale, or gross income of the business. There are no deductions for labor, materials, taxes, or other costs of doing business.

The upshot:
  • We raise less revenue, per capita, than the national average.
  • New and expanding businesses can struggle.
  • Our schools are short-changed, and too many of our youth are graduating unable to transition into career or college. Remediation rates in 2-year colleges are high (50 percent for math) and good jobs are going to more qualified candidates from out of state and out of country. Most of today’s jobs require ongoing study or training, but as a state, we fund for a high school experience that gets kids through 10th grade learning expectations. For instance, until recently we only required and expected two years of math in high school; we now require three, but colleges recommend kids take math every year so they don’t lose their skills. The state does not fund for four years of math. It does not fund for the recommended 3 years of science, or 2 years of arts. Access to an enriching, rigorous, comprehensive high school experience relies on local wealth and excess levies that need to be renewed every few years.

We need to invest in our children while relieving pressure on working- and middle-class families. And we need to make sure the way we approach revenue doesn’t exacerbate the problem.

Washington State PTA supports evidence-based reforms to improve the academic, social and emotional learning of all children. We support the basic education funding reform put into place with passage of HB 2261 in 2009, and especially its broader definition of basic education. We support the accountability reforms started in 2010. We ask that the state adhere to the constitution and fund education first and foremost in the budgeting process.

But we also recognize that the required additional funding for K-12 is significant and the need in schools immediate. We support new revenue as necessary to pay for education and to protect programs that children rely on. Here is where Washington State PTA falls on revenue topics:

1. Tax loopholes

(A term used when “tax preferences” and “tax breaks” no longer serve their original purpose but are still on the books. Can imply an outdated preference or one that is used in a manner not originally intended.)

Giving businesses a tax break to grow jobs is a laudable goal, but it is a diversion of revenue. Our question for each of the hundreds of exemptions on the books: Do the savings for private interests outweigh the investment in public education? Is the state coming out ahead? How about those kids in Aberdeen?

Money spent on early learning can return upwards from $8 for every dollar invested (more if you fund both pre-school and full-day kindergarten, and way more for high-risk kids). Which tax breaks top that?

Youth who graduate from high school earning dual credit (that is, classes that satisfy high school requirements and earn college credit) reign in their college costs AND are more likely to graduate from a 2- or 4-year college or training program. In a world where most new jobs require some sort of post-high school training or study, that is important to the economy. But schools that serve the kids who most need the boost are usually least able to afford the range of classes. Which tax breaks trump investing in a teen’s potential?

Our K-12 system needs an additional $3.5 billion to $4 billion to fully implement its basic education plan, as defined by the legislature. Savings from ending individual tax breaks can range from around $10 million to well over $100 million. Reigning in loopholes won’t foot the bill, but being smart about them can help.
 Social support spending and tax preferences are two sides of the same coin. Both aim to help individuals in our communities. Washington State PTA asks legislators to consider:
  • Given that amply providing for the education of all children in Washington is the state’s paramount duty, which of these tax preferences support education?
  • Given that Washington ranks 30th in 9th-grade to college transition and completion rates, will eliminating a particular tax preference hurt or help completion rates for higher education?  (See Education System Outcomes, especially slide 16)
  • Given the legal priorities set forth in the constitution, which preferences can the state afford, after the state FIRST pays for K-12 basic education?


2. Capital gains

(Proposed legislation did not move in the general session, but Washington State PTA would support a capital gains tax as needed to cover education and protect programs that keep kids safe, healthy and fed.)

Forty two states have a capital gains tax. Should the state choose to keep social support spending and tax preferences at current levels, a capital gains tax could raise revenue without exacerbating our regressive tax system. A 5 percent excise tax with exemptions of $10,000 for singles and $20,000 for couples would generate about $700 million. (Source: EOI; 2011 figures) With these exemption levels, the vast majority of the tax would be paid by the highest income individuals with large investment portfolios.


3. Income tax

(Washington State PTA supports tax policies that are fair, equitable, and provide stable, adequate revenues for public education and for programs that benefit children and youth. Washington State PTA supported the last income tax initiative, and our association led an effort for the first income tax initiative – passed in the 1930s with 70 percent of the vote, but later overturned by the courts.)

A 5 percent tax on income over $1 million would generate about $1.29 billion annually (Source: EOI; 2008 figures)

Forty-three states have an income tax, including states known for fiscal conservatism. Not having an income tax affects not only the amount of money collected, but who it is collected from. For instance, Washington’s moderate earners pay more of their income on state and local taxes than other states and our wealthiest pay less. And in Washington, businesses aren’t taxed on profit (income) but on gross receipts. If your business has high expenses, you don’t get to deduct them before paying up.

The income tax is not a popular topic in Washington State, but it is a more equitable way to raise funds and share the costs of building strong communities. It also raises the amount of money needed to build a solid K-12 system, maintain social services, and invest in higher education – while also allowing relief from high business and occupation taxes.

Looking ahead

For Washington State PTA, the question of revenue is not just about more money. It’s about creating a stable, fair and sustainable finance system that works for both Yakima – where 8 out of 10 kids get free or reduced price lunches – and Kirkland, where 1 in 10 do. It’s about investing in Aberdeen and Anacortes. And really, it’s about raising the capital needed to invest in all of our children while supporting other community needs.

We need a budget that charts an incline in education spending and that addresses the skills gap in today’s economy. And we need an equitable tax system to support it.


Ramona Hattendorf
Government relations coordinator
Washington State PTA
 Our work. Their potential.
Invest and commit to public schools and a million-plus kids. WSPTA priorities  

1 comment:

  1. Awesome Ramona! Thank you for including comments on an income tax. It's the only real solution.