Questions and answers
Looking ahead
 

	Q & A Who pays the most and least — and why Sales taxes Property taxes Business tax Other taxes and fees Looking ahead

The tax system is hardly static: Legislative decisions and ballot measures continually reshape it, in large ways and small.

How do this month's election results change the tax-and-fee picture?

The Seattle monorail plan, which is hanging on by a thread, would impose a new 1.4 percent annual tax on vehicles registered to Seattle addresses: $140 on a $10,000 car. New cars would be exempt for the first year — you'd pay the tax when you renewed your license tabs. In 2004, its first full year, the tax would raise an estimated $69.4 million.

Other motor-vehicle taxes may not be on your license-tab bill, thanks to I-776. The measure, designed to make license tabs a flat $30, cut the licensing fee for light trucks and repealed a 0.3 percent tax that helps support Sound Transit, as well as a $15-a-vehicle surcharge imposed by King, Pierce, Snohomish and Douglas counties. (On Friday, state Attorney General Christine Gregoire said Sound Transit and King County could continue collecting their car-tab charges because the revenue goes to pay off bonds that already have been sold.)

Referendum 51, the statewide transportation plan, would have raised the gas tax by 9 cents, added an extra 1 percent sales tax on vehicles and imposed higher registration fees on trucks. But the measure was resoundingly defeated, so all those taxes and fees stay where they are — leaving state legislators in a bit of a quandary.

Are any other tax changes coming?

That is largely up to the 2003 Legislature. Besides trying to decide what, if any, new transportation plan to approve and how to fund it, lawmakers will also be grappling with an estimated $2 billion gap in the 2003-05 budget. The gap represents the difference between what the state expects to take in and the estimated cost of maintaining current services.

Then there's the committee, chaired by prominent Seattle lawyer William H. Gates Sr., that's spent much of the past year studying the state's tax system. Looking mostly at long-term issues — who pays Washington's taxes, how stable the taxes are, what impact they have on the overall business climate — the committee is recommending creating a state income tax. The new tax would be used to lower the sales tax and eliminate the state portion of the property tax.

The panel also favors replacing the B&O with a Canadian-style value-added tax, or VAT; reviewing special-interest tax breaks every 10 years; and revamping the state's rainy-day fund with stricter rules for setting aside and withdrawing money. Its final report will be released early next month.

However, any ambitious reform proposals face rough sledding.

Political wrangling is sure to erupt over the budget shortfall and transportation spending. Washingtonians dislike the income tax even more than property taxes. And tax alternatives like the VAT are confusing even to economists.