In the cyberfuture, all the middlemen will lose their jobs. Or so goes the theory. Insurance agents, music label executives, car dealers, and even university administrators will be annihilated as consumers turn directly to the infinitely efficient Web to buy and sell goods and services. Such “disintermediation” is supposed to transform politics, too, as voters cashier the thousands of middlemen–senators, council members, commissioners–who represent them. Once again, the theory is that the efficient Web will let voters cast their ballots directly on all the issues.
Out here in Washington state, where we already run on Internet time, the voters decided that political disintermediation via the Web was taking too long, so they passed Initiative 695 by a 58 percent to 42 percent landslide in the Nov. 2 general election. I-695 came in two parts. The first cuts the much-loathed annual license fee on cars from 2.2 percent of the car’s value to a flat fee of $30, putting a $750 million a year dent in state and local revenues. (Some of the license fee goes to local government; most of it goes to a shared transportation fund.) The second part of I-695 achieved disintermediation: It prevents any state or local jurisdiction from raising taxes or fees without a vote of the people.
So, if the city of Seattle wants to so much as boost late fees on library books, it has to ask the voters. The same goes if the University of Washington wants to add a quarter to the price of a cheeseburger at Husky Stadium.
The government’s first response to the tax revolt was … a bunch of new taxes. The measure doesn’t take effect until Jan. 1, so dozens of towns and counties have increased service fees on water, sewer, utilities, garbage, business, and parks. From “The Inevitability of Death and Taxes Department” comes the news that some jurisdictions are raising the price on cemetery plots. As a countermeasure to all the taxes, many drivers whose tags expired after the November election are playing cat and mouse with the cops, hoping to postpone the purchase of new tags until January, when they can pay the $30 fee. (The savings are real: It cost me $450 to license my 1996 Honda Accord this year.) Meanwhile, in the halls of the Capitol, the disintermediated legislators are walking around like zombies. Stripped of the power to increase taxes, the House and Senate have been reduced to ceremonial bodies.
The roots of the current tax revolt go back to 1993, a recession year in which voters narrowly approved the Republican Party sanctioned Initiative 601. I-601 placed a spending limit on the legislature, based on inflation and population growth, but offered no tax relief. Instead, it diverted all excess state revenues to a special, almost untouchable reserve fund.
A s Washington’s economy improved, the reserve fund swelled to today’s $1 billion, creating a political opportunity for I-695 mastermind Tim Eyman, who makes his living selling mail-order sorority wristwatches out of his Mukilteo garage. Eyman and his compatriots collected a record-setting 500,000 signatures for I-695, arguing quite rightly that the state was flush with cash. Every time the political establishment damned I-695 as reckless–warning of reduced police forces, cut public health services, dry-docked commuter ferries, abandoned bus routes, and super congested roads–Team Eyman just pointed to the $1 billion surplus.
The state’s popular Democratic governor, Gary Locke, campaigned vigorously against I-695. But he changed his tactics at the last minute when he saw the measure was going to pass. Locke promised voters that the next legislature would reduce the car tax if they voted I-695 down. This only gave I-695 additional credence. See! The state doesn’t need the money! Locke’s vacillation also reinforced I-695’s ideological point that legislators can’t be trusted with tax rates.
One peculiar thing about the Washington tax revolt is that taxes are relatively mild out here. There is no state income tax, property taxes rank 19th (as of 1996), and the average sales tax is about 7.5 percent. So what started as a revolt against an unpopular tax turned into a referendum on disingenuous politicians–and their allies. Microsoft, Boeing, Weyerhaeuser, labor, and virtually every editorial page in the state opposed I-695, portraying it in hyperbolic, apocalyptic colors. The political, corporate, and union establishments put their money where their mouths were, too, dropping $2.1 million to fight the measure, outspending the tax rebels by 10-to-1.
The vote cut along class lines. Opposing I-695 were the wealthy who live in Bill Gates’ waterfront village of Medina (750-618 against). Embracing it were the working-class residents of Tukwila and Renton, who passed it 2,065-1,378 and 7,103-5,190, respectively. The turnout was high (57.7 percent) for an off-year election, making the whole drama unspool like a Frank Capra movie: The little guys beat the fat cats, only the little guys were right-wing Republicans instead of good government liberals. The biggest applause line on election night came when Eyman screamed, “From now on, the politicians are going to have to ask your permission to take your money.”
Most”yes” voters dismissed the predictions of doom as exaggeration, according to polls conducted on either side of Election Day. They suspected government of wanting to punish them for approving the measure. And they also doubted that the political establishment–which helped pass new taxes to build two new pro stadiums in Seattle for multimillionaire owners–would ever ease the irksome car tax. This confluence of a bad tax, a $1 billion reserve, a botched opposition campaign, and voters willing to call a bluff resulted in the I-695 victory. The unintended side effect is radical, direct democracy: In what other state do voters set the tax rates?
The inevitable legal challenges have arrived, but they’re all piecemeal, failing to address sweeping constitutional questions. Given that the justices on Washington’s Supreme Court are elected, legal pundits say it’s more likely that the court will narrow I-695 than overturn it. Meanwhile, Locke has proposed spending about half the reserve fund to bail out local governments–perhaps because he doesn’t want to be outflanked by the state auditor who has positioned himself as the Democrat who can make I-695 work (the auditor wants a financial review of all state programs). The Republicans, predictably, want to preserve the surplus, which they call the “rainy-day fund,” by outsourcing government services and cutting budgetary “fat.”
The $1 billion cushion averts the apocalypse for now. But when the cushion is spent in a year or two, or when the next recession arrives, the disintermediating voters will find themselves playing the roles of budget analysts and tax wonks. What and who will they tax? Will they tax themselves to build highways and create new bus lines? Or will they stay the course and ask government to do more with less?
Instead of waiting for judgment day, watch-salesman Eyman is hastening it with “Son of 695.” This tax-cutting initiative, which he is readying for the November 2000 election, will cap annual property-tax appraisals at 2 percent and exempt vehicles from the property tax (on the long shot that the government might start taxing cars as property). And in a final act of disintermediation, Son of 695 retaliates against all these mayors and council members who thought they got the drop on Eyman: It will roll back all taxes and fees increased since July 1999, when I-695 qualified for the ballot.