In one of what will eventually prove to be many editorials against Initiative 1098’s proposed high earner’s income tax, the Seattle Times warns readers “Don’t Calitaxicate Washington,” which I suppose they thought was a really clever pun, but which merely comes off as just kinda stupid. You know, like the rest of the editorial:
BILL Gates Sr. — father of the famous one — recently dropped $400,000 into the campaign to convince Washington voters to saddle themselves with a state income tax. On Aug. 3, the Service Employees International Union in Washington, D.C., put $200,000 into the same effort to change Washington law. The total raised by Initiative 1098 approaches $2 million.
Um, I’m not sure what the return address is on the check, and there are all kinds of rules about which funds come from where, but the SEIU money going into the I-1098 campaign is coming from SEIU locals and their members right here in this Washington, predominantly SEIU 775NW, which represents health care workers. I mean the Times would like you to think that it’s being funded by evil, out-of-state special interests, but it’s not. It’s the same folks who fund a lot of progressive causes in Washington state… you know, the folks who represent working people.
The cash being poured into the pro-1098 campaign aims to convince you, if you earn less than $200,000, that you will not pay the tax. You may not, in the first years.
Um… you will not pay the tax. “May not” makes it sound like maybe you will, maybe you won’t. But you won’t. Individuals earning less than $200,000, and households earning less than $400,000, will absolutely, positively not pay this tax.
But the tax will be expanded. Taxes always are.
No they are not. And if the income tax is ever expanded to lower income households, it will only be through a vote of the people. I mean, can you think of another major tax increase that hasn’t come before the people via initiative or referendum? Even the legislature’s recently passed temporary, 2-cent per can soda pop tax is coming before voters this November. That’s just the way things work around here.
And even before this happens, you will feel it, because it will sap income, investment, jobs and pay all across the state.
Because… why? The Times doesn’t explain how a tax on the top three percent of households, who would still enjoy one of the lowest effective tax rates in the nation, would sap income, investment, jobs and pay for the rest of us. They don’t explain it, because they can’t. They just believe it because the Soviet Union collapsed or something, and thus taxing wealthy people must be bad. Or something.
Washington is one of nine states with no tax on wages and salaries.
Washington also has the most regressive tax structure in the nation, and by far. That means if you earn less than $20,000 a year you live in the highest taxed state in the union, but if you earn over $200,000 a year you live in one of the lowest. And the Times is okay with that.
This is a big advantage in recruiting people to work here, and in keeping people from leaving here. When Gov. Chris Gregoire went to the Paris Air Show in her first term to recruit aerospace companies to Washington, the first item of her sales pitch was: no state income tax.
It may be a recruiting pitch, but there’s no credible study to show that state income tax rates have a substantial impact on individuals’ decision to come or leave. I mean, Nevada has no income tax, and it has the highest unemployment rate in the nation. And I don’t particularly see the economy or population booming in South Dakota or Wyoming either. It’s a bullshit argument.
It’s a selling point. An asset. And more than that: It’s a bonus for living here.
Huh. The Blethens sure don’t think much of their home state. I thought the bonus for living here was living here. Who’d have thought the Times would make an even worse tourism board than they do an editorial board?
The new tax created by I-1098 would top out at 9 percent of adjusted gross income, with no deductions. That’s not quite the highest rate in the country: Oregon’s, at 11 percent, is at the top. But Oregon has zero sales tax.
Let’s be clear. I-1098 would impose a 5% tax on household income in excess of $400,000 ($200,000 for an individual), and 9% on household income in excess of $1 million ($500,000 per individual). That means a family earning a half a million dollars a year would pay an additional $5,000 a year in state taxes… compared to $46,500 in California, which taxes a household earning $500,000 9.3% on every dollar earned. Of course, state income taxes are fully deductible when calculating federal income tax. So really, you’re looking at an additional $3,250 dollars in taxes a year (compared to $30,225 in CA), out of a half million dollars earned. That’s an effective rate of only about 0.65%. I don’t think anybody’s picking up and moving to Texas over that.
Of course as incomes go higher, so does the effective rate; a household earning $2 million a year would pay an additional $78,000 after the federal deduction, for an effective rate of about 3.9%. But then, the higher the income the less the marginal value of the tax paid, and this would still leave a WA two-millionaire with one of the lowest effective tax rates in the nation.
We would have high rates of sales and income taxes, which would be putting up a sign saying: Don’t invest here. Don’t create jobs here.
Of course, what the Times fails to mention is that I-1098 would also slash the state portion of the property tax by 20%, while exempting 80% of businesses from the onerous B&O tax. Oops.
Meanwhile, with I-1098’s top rate still below that of other Western states like Oregon, California and Hawaii, where exactly are folks gonna go? Idaho? Sure, Idaho’s top rate is only 7.8 percent, but it hits nearly everybody, applying to income over $26,418 a year, and to every dollar earned. And… well… it’s Idaho.
California did that. Its state income tax on high earners is 10.8 percent, and its sales tax mostly ranges from 8.75 to 9.75 percent. Such high levels of tax have not brought wealth and balanced budgets to California. Skilled people are leaving.
If Bill Gates Sr. and the SEIU push I-1098 past the voters, they will succeed only in bringing California’s luck here. And that would be a sad day.
So rather than emulating California’s example of a more fair tax structure, the Times would prefer we follow California’s example of decimating its once envied K-12 and higher education systems… the foundation on which the state built its economy into the eighth largest in the world.
I mean, the whole tortured “Calitaxicate” pun is a giant, smelly, red herring. Most states have an income tax. What sets California apart is not how it raises revenue, but how it spends it.
What this state needs is investment in new ideas and new work — and a tax system that smiles upon it.
What this state really needs is investment in our children. Do we want to see the state continue to cut funding for K-12 education? Do we want tuition and fees at state universities eventually rise to the point where we price the middle class out of a college education while financial aid fails to keep up? Do we want to knock tens of thousands of children off the health care rolls? Because that’s what happens if we don’t pass I-1098, and we don’t do anything else.
And that, more than anything else, is what risks turning Washington into California.