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Originally published October 4, 2012 at 8:50 PM | Page modified October 5, 2012 at 10:31 AM

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Truth Needle: Inslee claim on tax swap half true

Truth Needle: Democrat Jay Inslee accuses Republican Rob McKenna of supporting a public-schools funding plan that would raise property taxes for thousands of people. But Inslee omits important context and offers no detailed alternative.

Seattle Times political reporter

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The claim: Democratic gubernatorial candidate Jay Inslee is running a TV ad criticizing Republican Rob McKenna for saying he does not want to raise taxes, while supporting a "property tax swap" related to public-schools funding that would raise taxes on "hundreds of thousands of taxpayers." Inslee doubled down on the line of attack in a debate Tuesday in Yakima, calling the swap "a gimmick that doesn't help us move forward" on education funding.

What we found: Half true.

The "tax swap" that Inslee refers to has been floated by Democratic and Republican legislators as a partial remedy to the state's failure to adequately fund schools.

The state Supreme Court affirmed that failure in January with its ruling in a lawsuit (McCleary vs. State of Washington) brought by parents and education groups. The court found the Legislature has long been shirking its constitutional duty to pay for basic education.

The tax-swap proposal would try to address one part of the funding problem called out by the court — an overreliance on local levies to pay for schools.

Under the swap concept, the Legislature would fix that by increasing the state property-tax levy for schools, while reducing local school levies by the same amount.

Overall, the plan would be roughly "revenue neutral" and wouldn't raise more money for schools, at least initially. But supporters say it would begin to ensure the state is covering the costs of basic education.

McKenna has endorsed the tax-swap concept as one part of his education plan, which pledges to find billions more for public schools over time by holding down costs in other parts of state government.

Different versions of the tax swap have been proposed over the last few years by key legislative budget writers state Sen. Joe Zarelli, R-Ridgefield (who has since quit the Legislature) and Rep. Ross Hunter, D-Medina.

McKenna has cited both men's plans in talking about the concept.

It is true, as Inslee's ad asserts, that a tax swap as outlined by either Zarelli or Hunter would result in taxes going up in property-rich school districts such as Seattle and Bellevue, although those districts would receive no additional funding.

But the ad fails to mention that property taxes would go down in many property-poor school districts, such as Yakima.

In recent days, McKenna campaign aides have hotly disputed the Inslee ad, arguing it is not true that McKenna has proposed a plan that would raise taxes.

They argue that McKenna has not endorsed any particular version of the property-tax swap, so it's impossible to know whether anyone's taxes would go up.

However, McKenna himself acknowledges taxes would go up in some places as a result of a tax swap.

"The fact is that property-rich school districts with large commercial tax bases are going to share more of the burden because that's the only way you can comply with our constitution," he said in an interview.

What about Inslee's claim the swap is merely "a gimmick" that would do nothing to move the state "forward" on education funding? "All it does is help Olympia politicians on paper," Inslee said in an interview.

That's false, according to some who have worked on or analyzed the tax-swap proposals.

They said a tax swap would make school funding more equitable and stable across the state. It would mean, for example, that school districts would no longer be as reliant on persuading voters to pass levies every few years.

And they noted the McCleary decision means the state has to stop the overreliance on local taxes.

"It's very hard to imagine a scenario where you deal with McCleary and don't do something like this," Hunter said, though he noted his plan is still being reworked and details could change.

Frank Ordway, director of government relations for the League of Education Voters, agreed. "It's the only option on paper that is a viable starting point," he said.

The League of Education Voters declined to endorse either gubernatorial candidate this year, and has criticized both Inslee and McKenna for ruling out general tax increases to grow funding for schools.

But on the tax-swap issue, Ordway was particularly harsh on Inslee, who he said displayed no apparent comprehension of the issue.

"At least McKenna is wrestling with the landscape," Ordway said.

"The Inslee campaign has shown no interest or inclination to understand the interplay between state and local levy dollars or what the McCleary ruling means for the state," he said.

Asked about his own plan for dealing with the McCleary decision and overreliance on local levies, Inslee fell back into his standard stump speech, saying he'd create jobs, close unspecified tax loopholes and operate a more efficient government to get more money for schools.

Bottom line: The tax swap is a complicated topic — a fact the Inslee campaign is relying on to stoke voter fears.

Inslee's attack ad is correct in that the tax-swap concept endorsed by McKenna almost certainly would cause taxes in some places to go up.

But Inslee is off the mark in dismissing the idea as a mere gimmick with no benefit to schools. And he gets extra demerits for offering no credible alternative.

For those reasons, we rule Inslee's claims half true.

Jim Brunner: 206-515-5628 or jbrunner@seattletimes.com. On Twitter @Jim_Brunner.

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