One of my biggest complaints with Washington legislators, even those who have long recognized the need for substantial tax restructuring, is their general lack of creativity in approaching the issue, both on the political level of how one might pass an income tax, and on the practical level of what form an income tax might take.
That’s one of the reasons I so quickly latched on to the notion of a high-earners income tax. It’s an imperfect idea that displaces only a small segment of our highly regressive tax structure, but it’s a savvy proposal, politically and rhetorically well suited to our times: an unprecedented budget crisis induced by an economic downturn for which much of the blame can reasonably be laid at the feet of some of our nation’s wealthiest and most powerful corporations and individuals.
Rightly or wrongly, there isn’t much sympathy for the rich these days, a sentiment which the high-earner’s income tax proposal effectively exploits. I’m not being cynical here, simply politically adroit; Washington’s tax structure is bizarrely and cruelly regressive, and if our current crisis presents an opportunity to address this inequity even just a little, progressives would be stupid not to take advantage of it.
All that said, I would of course prefer a somewhat broader income tax that did more to address the inherent regressivity of our current system, while providing a more adequate and reliable revenue stream for the future (i.e., one which grows state revenues largely in pace with growth in the state economy). And in that spirit I’d like to take a moment to briefly introduce an immodest proposal of my own, something I call the Education Income Tax.
The proposal is simple. An income tax would be levied, dedicated solely to funding K-12 education (you know, our state’s “paramount duty”), and that income tax would be the only source of state funding for K-12 education.
The Education Income Tax essentially takes K-12 spending out of the general fund and into its own budget, with it’s own dedicated revenue stream. It also forces legislators and the governor to balance a popular public service against a generally unpopular tax. And by walling off both K-12 spending and the income tax that supports it from the rest of the budget, it eliminates the possibility of budgetary tricks through the usual fungibility of funds.
From a tax fairness perspective, the Education Income Tax would represent a huge step in the right direction by supplanting about 40 percent of the revenue that currently comprises the general fund. The state portion of the property tax, ostensibly a school levy, could be eliminated entirely, while a substantial cut in sales and other taxes would also be possible. I would expect the Education Income Tax to raise more money for K-12 education than we currently spend, yet the majority of households would still pay less in state taxes than they spend now, as the entire system is somewhat flattened.
But most importantly, by locking an income tax to education funding and vice versa, this proposal could help many voters overcome their inherent suspicion of any income tax proposal. And any income tax proposal will ultimately have to be approved by voters.
Yes, there are downsides to such a proposal. Dedicated taxes violate basic principles of sound taxation, and income tax revenue tends to be more volatile than other taxes, but the responsible use of rainy day funds can provide an effective buffer against the normal economic cycle, and besides, there’s nothing wrong with forcing elected officials to do their jobs… you know, making tough decisions. If the Legislature is faced with the choice of slashing K-12 education, or raising income tax rates during an economic downturn, so be it.
Ideally, proposals like this wouldn’t be necessary, and Washington would have followed the recommendations of the Gates Commission report years ago. But politically, we have to find some way to make an income tax more palatable to a majority of voters. Perhaps the Education Income Tax isn’t the way to go. Perhaps a high-earners income tax isn’t either. But if we want to maintain the same level of public investment and quality of life Washingtonians have grown accustomed to — and which have contributed greatly to our state’s prosperity over recent decades — then at some point an income tax becomes necessary.
And it may take some very creative thinking to get us past that point.