The start of the annual budget process in Clark County highlights a flaw in Washington’s tax system.

“As you’ve heard for many years, we are in a structural deficit with the general fund, which simply means our ongoing expenses are exceeding our ongoing revenues,” County Manager Kathleen Otto told the county council.

Indeed, we have heard this for many years, the result of a lid on property tax levy increases in Washington. In 2001, voters passed Initiative 747 with 58 percent of the vote; that means taxing districts such as counties, cities, school districts and fire districts may not raise the annual property tax levy — the total amount collected — by more than 1 percent annually. Levy increases may be banked, allowing for a jump of up to 5 percent if previous increases were not adopted.

The thinking behind the limitation is understandable; it is a tool for keeping government spending in check and preventing radical tax increases in a particular year. In 2007, the state Supreme Court ruled I-747 unconstitutional because of the way the initiative was written, but the Legislature quickly convened in a special session and codified the measure. Gov. Chris Gregoire signed it into law, recognizing that it was the will of the people.

But there are serious problems with the limitation — namely, that it does not keep up with inflation. The last time the inflation rate in a calendar year was less than 1 percent was 2015; since then, the average increase in prices has been 3.3 percent annually. That is problematic; and when inflation is 7 percent, as it was in 2021, the 1 percent limitation has a devastating impact on the budgets of local governments.

As The Columbian has written editorially, comparing the situation to a household budget: “If household expenditures are limited to 101 percent of the previous year but prices have increased, you will need to cut down on food and gas and clothing, or maybe skip a family vacation. For one year, this might result in negligible changes; but over three or five or seven years, it starts to add up.”

That is what leaders mean when they talk about a “structural deficit.” Property taxes provide a significant chunk of revenue for local governments, which have few methods for raising funds. And when the permissible increase does not keep up with the costs for labor, gas, tools for park maintenance, asphalt for streets, concrete for sidewalks, election security and other essentials, cuts must be made.

For many taxpayers, that is a feature and not a bug. As the federal government continues to demonstrate, there is a strong appetite throughout the country to reduce the influence and cost of government, even if it means reducing services. In addition, governments at all levels must demonstrate fiscal prudence and constantly strive to reduce wasteful spending.

But a lid of 1 percent on increases is too extreme. Since 2007, when the limitation went into effect, an annual increase of 1 percent would result in a 20 percent increase today thanks to the law of compound interest; meanwhile, inflation has increased prices 56 percent during that time.

Legislators have tepidly approached an increase to the levy lid in recent years but have not passed such a measure. Meanwhile, state lawmakers are not shy about increasing taxes for the benefit of state government while city and county governments struggle to provide services.

State leaders should do more to help local governments serve their constituents, starting with a change to the cap on levy increases.