Report Issued: September 1999
Ballot Title: “Shall voter approval be required for any tax increase, license tab fee be $30 per year for motor vehicles, and existing vehicle taxes be repealed?”
Summary of Initiative 695
- Establishes a flat state vehicle license fee of $30 per year, regardless of the year, the make, or the model of the vehicle, effective 30 days after the November General Election.
- Repeals all existing taxes and fees relating to motor vehicles.
- Requires voter approval for any new tax or tax increase enacted by the state or any city, county, or special district. “Tax increase” is broadly defined and includes, but is not limited to, sales and use taxes, property taxes, B&O taxes, excise taxes, fuel taxes, impact fees, permit fees and any other charges made by government.
- Exempts increases in higher education tuition fees and any emergency measure from the requirement for voter approval if passed by a two-thirds majority voter of each house of the state legislature. In
order to be exempt, the emergency measure must expire within twelve months of the effective emergency legislation date.
- Repeals a state law that exempts vehicles from personal property taxes.
History of Motor Vehicle Excise Tax
In 1937 Washington adopted a statewide Motor Vehicle Excise Tax (MVET) of 1.5% instead of levying a personal property tax on vehicles. In 1959 this tax was increased to 2%. Initially all of the MVET funds went into the state’s General Fund. In 1979 .2% was added for ferry construction, the first distribution earmarked specifically for transportation purposes. Currently, the MVET of 2.2% is based upon the value of the vehicles. A flat license fee of $23.75 is also required for every registration renewal. The total state MVET revenues collected in the 1997-99 biennium was $1.598 Billion. The MVET comprises approximately 19% of the 1990-01 Washington State Transportation Budget (see Attachment 1).
In November 1998 Referendum 49 was passed by Washington voters. It reduced the MVET by $30, revised the vehicle depreciation curve, and adjusted the distribution formula for the funds. Referendum 49 reduced MVET revenue by $258 million in the 1999-01 biennium and removed the share that went to the state’s General Fund. It earmarked a larger portion to support state transportation programs and specific city and county services including local health, public safety, local and regional public transit services and sales tax equalization programs to cities with a small tax base. Referendum 49 has provided new bonding authority for state highway projects to be guaranteed by future MVET revenue.
Initiative 695 could replace vehicle MVET taxes with another tax on your car. The ballot measure repeals a state law that exempts vehicles from personal property taxes. Its passage would authorize the existing personal property tax law and reinstate the tax on all vehicles. According to the state Office of Financial Management the average rate could be 1.5%. This would be in addition to the new $30 Vehicle Registration Fee. Each county would have to provide for a method of vehicle evaluation and the administration of the personal property tax. The tax revenue collected would go into local and state general funds.
Initiative 695 appears to have a number of potential legal defects. For example, it seems to cover two subjects. Under the state Constitution, state legislation can cover one subject only, but so far there is no pending lawsuit to keep the initiative off the ballot. Traditionally Washington¹s Supreme Court has not reviewed the legality of initiatives prior to their passage.
There is also a question as to whether there will still be statutory authority for the MVET taxes already approved at the local level for public transit services and the three-county Sound Transit if the state MVET is repealed.
The cost of holding elections is not insignificant. It is estimated that it costs about $4 million to hold a special statewide election and $800,000 for an election in King County and $100,000 in Tacoma.
It is difficult to understand all the impacts of this ballot measure. The state’s MVET has changed and evolved over 62 years into a system that is very complex. Comparisons made with other states’ uses of MVET taxes is not useful because each state’s tax structure is unique to that state’s history, economy and fiscal requirements. Most states’ tax structures include a state income tax while Washington’s does not.
Public officials have been cautioned about commenting on 695 lest what they say be interpreted as favoring or opposing the measure. State law prohibits the use of any public funds to support or oppose ballot
Effects of Initiative 695
- The annual vehicle registration (license) fee would be increased from $23.75 to $30.00.
- The existing personal property tax would be re-imposed on all vehicles and, according to the state Office of Financial Management,the average rate could be 1.5%. This would be in addition to the new
$30 registration fee. Each county would have to provide for a method of evaluating each vehicle and administering the personal property tax. The revenue would go into the state and local general funds.
- The current 2.2%MVET, the state travel-trailer and camper excise tax, the state clean air excise tax and King County¹s existing local option license fee of $15.00 would all be repealed.
- The owner of an expensive vehicle would pay exactly the same amount to renew its registration every year that the owner of a less costly car would pay.
- Public agencies would lose an estimated $7.1 billion in funds over the next six years. Of this amount
- The WSDOT would lose $4.2 billion.
- The following non-highway programs would lose a total of $2.9 billion:
- Local transit systems – $1.4 billion
- City and county health and public safety funds and equalization programs – $1.1 billion
- Sound Transit – $0.3 billion
- Washington State General Fund – $0.1 billion
- An election would have to be held every time a public need arose that required new or increased taxes or fees except for increases in higher education tuition and emergency measures approved by a two-thirds majority vote of each house of the state legislature.