Odd hobbies

I’m off to Olympia again this morning, first for what I assume will be a brief run-in with our friend Tim Eyman, and then off to the House Finance Committee to hear Bill Gates Sr. testify on tax structure reform. (Talk about a couple of odd hobbies.)

For those who don’t know, Mr. Gates chaired the Washington State Tax Structure Committee, whose final report included recommendations to implement a state income tax. Whatever you think of its recommendations, the Committee’s report should be the starting point for anybody wanting to educate themselves on the structural deficit and basic unfairness of the nation’s most regressive state and local tax system.

I’ll report back late this afternoon on both events, but for now I point your attention to a couple of items in today’s Seattle P-I. First, the news that local clean-elections activist Bev Harris has been vindicated in a whistle-blower suit in California, against dominant election equipment manufacturer Diebold (“I guarantee Bush will win Ohio”) Election Systems.

The second is Paul Loeb’s guest column: “Revote? If Florida and Ohio go first.”


  1. 1

    Richard Pope spews:

    The Washington State Tax Structure Committee issued its final report in November 2002. That is two years and two months ago. It is now January 25, 2005. It has taken the Legislature over two years just to invite Mr. Gates Sr. to testify concerning the report and its recommendations? Where is the proposed legislation to implement the study’s recommendations?

    There were a few income tax bills introduced in the 2003 legislature. All of them in the Senate, none of them in the House. Fewer Senators in total as sponsors than I have fingers. Nothing was introduced in the House at all in 2003. Nothing was introduced in either the House or Senate in 2004. Nothing has been introduced so far in either the House or Senate in 2005.

    Looks like the House Finance Committee is meeting at 10:00 a.m. today. Hope that your morning commute is fun :)

  2. 2

    Mark spews:

    Well, Mr. Loeb,

    I shall not grant thee your revote in Florida until we have fully examined the 1876 Hayes/Tilden election! (Look it up, kids, it’s kinda interesting.)

  3. 3

    DCF spews:

    I want a state income tax–and I hope others will start to get on the bandwagon! It certainly would be a great deal more fair to me and my spendable dollars. No more B&O! So more sales tax! However, I must say that the state has finally simplified the DOR’s annual sales tax form–it was a breeze this year! Some of our government employees are waking from their loooong night’s sleep!

  4. 5

    Rick spews:

    The reason why state income tax proposals are perennially DOA is because everybody knows that Olympia would still keep the regressive sales tax and the anti-business B&O tax. The liberals might temporarily “reduce” them, but they would NEVER give them up as a trade-off for a “progressive” income tax.

  5. 6

    Mark spews:

    Could you be more naive? Do you honestly think that they would get RID of a tax — be it sales, property, B&O, whatever — to put in place an income tax?

    All they’ll do is say that they want to “phase in” the income tax and “phase out” whatever taxes are SUPPOSED to be replaced. But then… oops! The revenue streams won’t meet the needed levels and they’ll tell the public that the original taxes are needed for just a smidge more until things “level out.” So now they’ll have another hand in our pockets. And it is a lot easier to just nibble away using multiple “revenue streams” than it is to make the public swallow another big tax jump.

    Even if they swap the income tax for another tax, who is to say that they won’t bring the other tax back at some point in the future? “Oh, gee, gosh… Yes, we got rid of the sales tax, but all of those Internet sales were lost revenue for us and so we reinstated the sales tax in order to keep us on equal footing with other states.”

    If you think that the public should be paying more taxes, go ahead and send an extra personal check to Olympia. I’m sure they’ll find a way to spend it.

  6. 7

    Mark spews:

    Ack! Rick… we posted at the same time and mine inadvertently looks like a response to yours. My “naive” comments were directed at MOH et. al.

  7. 9

    Mount Olympus Hiker spews:

    Wrong, Mark.

    In order to secure voters’ support, legislation would be passed that would require the sales tax to be abolished if voters passed a constitutional amendment allowing for a state income tax AND the legislature subsequently passed a bill levying an income tax.

    You don’t get it, Mark. We want to get RID of the sales tax because it’s regressive and it hurts people who aren’t well off. We don’t want to ADD more taxes, we want a switch.

    Once we have a state income tax, we won’t need a state sales tax, and voters wouldn’t allow the Legislature to levy one anyway.

  8. 10

    Frank spews:

    I assume when supporters of the income tax say “no sales tax”, they are only unitentionally misleading people… what they really mean is “no state sales tax”, right? King County has numerous bond/levy obligations funded by local sales taxes (I believe Safeco Field among them). Those wouldn’t be repealed by the Legislature, would they?

  9. 11

    chuck spews:

    No more sales tax OR property tax. Once a year reconing with the state is the only way income tax will pass.

  10. 12

    chuck spews:

    Property tax is just as regressive, as it is passed to the renter in many cases or the struggling family or elderly that are on fixed income…personally, in my rentals the increase in rent is 4 to every one dollar tax increase, many others I know charge more than that. This is one of the reasons the property taxes should be paid by the occupant, I think a lot of struggling renting families would save money.

  11. 13

    Mark spews:


    Please put down the Kool-Aid cup and re-engage the “Question Authority” part of your (assumed Dem) brain. The Dept. of Revenue has specifically studied how to keep sales taxes AND property taxes AND add an income tax. And not every income tax option has been graduated.

    As Frank correctly points out, the Legislature can also only remove the 6.5% state portion of the sales tax. And what about the Streamlined Sales Tax?

    Don’t you think that the number-crunchers should be spending more time figuring out how to stretch a tax dollar more efficiently instead of trying to dig deeper in taxpayers’ pockets?

  12. 14

    Eric L spews:

    Until recently I lived in Pennsylvania, a state that uses both sales and income taxes. Now I come to a state where the sales tax is very high and many consider it both a good idea and politcal suicide to start using an income tax to replace part or all of the sales tax, and all I can wonder is what the hell is everybody so afraid of? Most states use both a sales tax and an income tax, and they don’t as a general rule have larger and more wasteful budgets because of it. Is there something uniquely untrustworthy about the Washington State government that I just don’t see not having lived here that long? Or is there something uniquely paranoid about our voters, that they dread a tax system more like those the rest of the states use? Mark, Rick, et al., clue me in here. So out of fear of WA voters those proposing an income tax usually propose eliminating the sales tax completely, yet as much as WA politicians clearly fear an income tax, Mark thinks if we swapped taxes there would be no fear left. Is it easier to raise an income tax than it is a sales tax? The Democrats now control everything and are looking at a budget deficit, one of the country’s worst education systems, unmet transportation needs, and are still nervous about raising taxes, yet apparently if we modified the way we tax not only would politicians show no restraint in taxation, but also there would be nothing Mark, Rick, Tim Eyman, or anyone else could do about those greedy politicians.

  13. 15

    Mark spews:

    Eric L,

    Where did I say there would be “no fear?” My primary argument was that it was naive to presume that the Legislature would somehow give up a revenue stream without a fight. And if they don’t give up the old revenue stream, all they’ve done is increased taxes — yet again. Did you know that Seattle already has close to (if not the) highest sales tax in the country?

    This is a state where B&O taxes are on your GROSS receipts — effectively condemning many startup businesses to a crib death via taxes. Olympia’s interest is not in long-term revenue growth and/or stability. It is in squeezing out every possible dime before pushing the public into a “throw da bums out” rage.

    If there weren’t issues with spending problems, why would even the Dems be signing off on performance audits?

  14. 16

    RDC spews:

    Re Comment 12 by Chuck…

    Could you elaborate? I must be misreading your post. The way I read it, you are saying that everytime the property taxes on one of your rental units goes up, you raise the rent $4 for every #1 of increase. And then you say that you believe that property tax should be paid by the occupant, rather than the owner, and that if this were the case, struggling renting families would save money. Is there some compelling reason why you have to raise your rents on a 4 to 1 basis. Aren’t you in a position to give those “struggling renting families” a break by raising your rents on a 1 to 1 basis for increased taxes? What you do with your rents is, of course, your business, but your statements seem contradictory.

  15. 17

    Eric L spews:

    I believe you on Seattle having among the highest sales taxes in the country, I think they’re pretty crazy myself, but then it’s in one of those few states where state and local income taxes are not allowed. All talk of starting an income tax has included reducing or eliminating state sales or property taxes. Do you really think politicians in our state think they could get away with creating an income tax without substantially reducing the sales tax? The B&O tax is a problem, Sims campaigned on a plan that included getting rid of it, but it seemed generally understood among Democrats that his tax reform proposals would doom him in November, so he lost big time, validating the idea that tax reform is a loser issue and probably guaranteeing that the Democrats won’t end up doing much about it.

    I guess my point is that it seems to me the political climate in the state is a big part of the problem. The fact that we have picked all the worst ways to tax, with the B&O tax you mention and the regressive state sales and property taxes, is probably part of the reason for the strong anti-tax sentiment in the state. But no one wants to address the issue because swapping some taxes for others is going to be understood as just a sneaky way to squeeze more taxes out of the people. So how do we get out of this situation? How do we get something done on tax reform?

  16. 18

    RDC spews:

    Comment 2 by Mark…

    Given your comments, this one and others, we likely have more in common with an interest in history than in our current thinking about taxes and politics. I am familiar with the Tilden/Hayes contest in connection with studying the Gilded Age. I am studying the Gilded Age because of a conviction that the direction our society is headed in now has much in common with that long ago time.
    Both parties made a Faustian bargain. Hayes got to be President (and tea became the drink of (no)choice at White House soirees), but the Republicans abandoned the south and the ex-slaves and lost their soul. The Democrats abandoned the prospect of occupying the White House but gained the South and institutionalized rigid segregation, losing their souls as well. That election strikes me as being very similar to the 2000 election, and not just because Florida played a central role. Both were very close, the ultimate outcome in both was very questionable, and both changed history dramatically, for the worse, in my view.

  17. 19

    zip spews:

    Not to disparage anybody here, but I have always taken tax recommendations from Mr. Gates Sr. with a grain of salt. His law firm had and still has a big gravy train working for government. It is possible that he knows who butters their bread.

    One advantage Washington businesses have when recruiting skilled employees from out of state is our lack of state income tax. These kids are smart enough to figure that one out, and the ones I’ve recruited don’t seem to mind our sales tax. They are oblivious to B & O tax. The high cost of housing is a negative (in Puget Sound area) but my experience is that the lack of state income tax puts us in a better position than other areas such as the Bay Area that also have high housing costs.

    I would like to see a comparison of our sales + B&O tax receipts over the last 5 years to Oregon and California tax receipts. I suspect that ours took less of a dip when the economy tanked.

    I agree that our tax system is a Rube Goldberg deal and needs fixing. Speaking of regressive, it seems that the combination of tobacco and gasoline tax probably exceeds sales tax outlay for many of our poorest. The will of the State to reduce the tax load on poor people is demonstrated by the continued reliance on the lottery for the general fund. The additional money coming in from all of the new mini casinos has got to be huge, and I doubt that Bill Gates Jr. frequents one. This state is completely stuck on a multitude of regressive taxes and will have a hard time getting unstuck. Mainly because they have not demonstrated that they can be trusted to actually be fair, so will have a hard time getting a more fair tax system approved by the voters.

  18. 20

    zip spews:

    The most regressive tax of them all is the Lottery: a voluntary tax on the poor. I would not be surprised if Lottery + gasoline + cigarette taxes total more than sales tax expenditures for the poorest in this state.

    In reading the Gates report, I was surprised to see how highly we are taxed in total considering the “need” for additional services that we constantly hear about. i don’t believe that the data (Tables in Chapter 3) back up the talking point contained in the report that “Washington’s average burden for both state and local taxes is typically in the midrange
    of all states.” The way I read the tables we are in the top 13 to 15 per capita, and the top 11 or 12 vs. personal income (omitting 1999 and 2000 when the bubble inflated the personal income side). Are our state and local govts delivered services in the top 11 to 15 nationally? If they are, why are there so many “needs”?

    I have a hard time totally buying the recommendations of Mr. Gates Sr. His law firm has a very large client base in government work. It may be that he knows who butters their bread. Or that this is the part of our culture he knows and understands best.

  19. 21

    zip spews:

    On further review, it appears that Mr. Gates does not include Lottery revenue in the totals. In fact, I find no mention of it in Chapter 3. Am I skimming this report too fast or did he leave out a huge source of revenue to the State?

  20. 22

    Chuck spews:

    Could you elaborate? I must be misreading your post. The way I read it, you are saying that everytime the property taxes on one of your rental units goes up, you raise the rent $4 for every #1 of increase. And then you say that you believe that property tax should be paid by the occupant, rather than the owner,>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    Yes the renter would save money, you see when tax is raised on me I cannot pass it imediatly to the renter so I must multiply it to make up for lost revenue as well as attempt to catch futur increase…

  21. 23

    DCF spews:

    Higher sales tax than WA = Tennessee 7% (has income tax on interest and dividends only); Rhode Island 7%; Mississippi 7%; California 7.5%. Nevada (has no income tax), Minnesota and Washington are tied @ 6.5%.

    How has Oregon handled their tax issues? They still didn’t have any sales tax the last time I was there.

    Chuck, renters do pay the property tax in the view of our library district. Renters get their library cards free if they live in our library district. Besides I do believe that you (as the owner of the property) can deduct the property tax as an expense on your income tax. So it would seem to me that you get a couple of advantages from owning rental property when it comes to property tax.

  22. 24

    Mark spews:


    If you look at the combined average city/county rates, Washington ranks third at 8.35% average. Only TN (9.4%) and LA (8.55%) are higher.

    I didn’t look up whether or not those states had income or property or other types of taxes.

  23. 25

    RDC spews:

    RE Relative tax rates…the Tax Foundation, which I believe is usually thought of as a conservative organization, ranks states on several tax issues. Washington state ranks fairly high on the rankings of states with a good business climate, tax-wise (9th). On total tax collections as a percentage of income, we rank right at the national average, and that puts us at number 18 on the list. My computer (aka me) can’t do links, but the website is Taxfoundation.org.

  24. 26

    Mark spews:


    But did you read the “Sales and Gross Receipts Tax Index Rank” under “2004 State Business Tax Climate Index?” Washington is DEAD LAST… NUMBER 50… BOTTOM OF THE BARREL. What saves us overall is the lack of personal & corporate income taxes.

    If you read the report itself, it says, “… Washington has the lowest score [on the sales/receipt taxes] because it has both a sales tax and gross receipts tax, thereby creating a high effective sales tax rate of 10.3 percent. Moreover, Washington levies its sales tax on most business inputs—such as services,
    manufacturing, and leases—and maintains relatively high excise taxes.”

    This, of course, only relates to the “business-friendly” aspect of the tax issue. The other, much larger part (IMHO) is the fact that we can’t trust the Legislature not to try and implement all of the taxes instead of swapping one for another.

  25. 27

    RDC spews:

    Mark…I’ll take another look, but as to business friendliness, the overall ranking would seem to me to be more important than a breakout of a particular segment. I was surprised by the relatively high ranking, given all the grousing I hear from business. And, yes, I know, this is a measure of tax friendliness, not of the regulatory climate.

    I need to do some research before commenting further, but regarding your last paragraph, we have no choice but to trust the legislature when it comes to state taxes. Other than the initiative process, which I sense the people of Washington are growing both weary and wary of, the legislature is the only body that can deal with taxes.

    And, if you were alive in 1876, would you have been for Tilden or Hayes?