Why should homebuilders care about Initiative 884?

Why should homebuilders care about Initiative 884?

BIAW’s Senior Officers have voted to oppose Initiative 884 (I-884), a $1 billion tax increase initiative. Sponsored by the League of Education Voters and supported by Governor Locke, I-884 would raise the state’s sales tax by one cent to fund education spending by an extra $1 billion per year.

Why, you may be wondering, would BIAW care about an initiative to increase education funding? After all, who of us is against providing students with a good education? And it’s only a one cent increase—what politically correct, civic-minded voter could oppose that? Surely even us greedy, mean homebuilders couldn’t argue against it.

Those pushing I-884 are betting on just such a reaction. They point out that by increasing the state portion of the sales tax by just one cent (6.5 percent to 7.5 percent), over $1 billion will be generated. That money will be used to implement preschool programs, reduce class sizes and increase teacher’s salaries, among other things.

The fact is the increase in sales tax would have a devastating impact on affordable housing, since Washington State is one of only six states in the nation to levy a sales tax on the labor and materials that go into the construction of a new home. (After paying sales tax on labor and materials, an additional Real Estate Excise Tax is levied based on the total selling price of the home.)

While supporters of I-884 are trying to convince voters that a one cent increase in the sales tax is not a hardship for anyone, the fact is that one cent represents a whopping 15.4 percent increase. Increasing the sales tax by 15.4 percent could considerably increase the cost of buying a home. According to the National Association of Home Builders, every $1,000 increase in the price of a home squeezes 400 families out of the housing market.

And there is no evidence that increased funding for schools will even improve education. According to the Evergreen Freedom Foundation (EFF), a free market public policy think tank, Washington State currently allocates about $9,000 per student per year. EFF points out that some of the lowest performing schools in the state receive the highest per student allocations, such as T.T. Minor in Seattle that averages more than $10,000 per child per year. We’re spending money in the wrong places in education—directing more of it to the same wrong places won’t help.

But what about that pay increase for teachers? Don’t they deserve more? Of course the teacher’s union is all over that, beating the usual drum that our educators are underpaid and deserve the pay increase I-884 promises.

But teachers should be wary of their union’s propaganda because I-884 will be two steps forward and one step back for teachers. Out of the $1 billion, only about 9 percent will go to increasing teachers’ salaries. But just like everyone else, teachers will be on the hook for 15 percent higher sales tax on everything they buy.

Many teachers already are unable to afford a home in the school districts in which they teach. Teachers, just like everyone else, will be less able to afford a home if I-884 passes.

And let’s not forget that when home prices increase, so do rent prices. So the salary increases promised with I-884 will be more than eaten up by these across
the board increased housing costs.

Supporters have to collect 250,000 signatures by July 2 to put I-884 on the November ballot. So when you are approached by a signature gatherer wanting your John Hancock for I-844, remember to Decline to Sign.