I cringed when I saw the headline of today’s editorial in the Seattle Times, “Sims’ tax plan: bold but impractical.”
The Times has been consistently ardent in their opposition to a state income tax, to the point of belittling William Gates Sr. in a Bruce Ramsey column last December (“The joys of not having a state income tax.”) Gates found it appalling that Washington had the most regressive tax structure in the nation, a sentiment Ramsey pooh-poohed, suggesting our regressive tax system is necessary “to offset the unfairly progressive federal income tax.”
So in the context of the editorial board’s topsy-turvy world, where balancing budgets on the backs of middle- and low-income households is not only defensible, but a moral and economic imperative, the headline on this new editorial had me expecting the worst.
In truth, the editorial was rather even-handed, applauding the Sims’ plan as bold, serious and pro-growth, while pointing out the obvious political hurdles of passing the necessary constitutional amendments.
But I’m guessing those hurdles shrank considerably once the details of the Sims’ plan were released last week. By eliminating the burdensome B&O tax, and replacing it with nothing, Sims may have turned the plan’s most dangerous potential opponent — the business lobby — into his biggest ally. The business community gets everything it could ask for: increased investment in essential infrastructure, and zero taxes. When push comes to shove, powerful business interests will be pushing and shoving to get the Legislature over that two-thirds hump.
While I personally had some initial reservations over this aspect of the plan, I have grown to appreciate it’s subtle brilliance. Eliminating corporate taxes is not only a clever political move in regards to the plan’s passage, it also eliminates one of the most corrupting forces in Olympia… the annual feeding frenzy of corporate lobbyists influencing legislators to pass billions of dollars of special interest sales and B&O tax exemptions. Without corporate taxes there can be no corporate tax exemptions. While the Sims’ plan is sure to be a job creator over all, it is certain to put more than a few lobbyists out of work.
As to concerns that business is getting off scott free, well, there’s a school of thought that says businesses don’t really pay taxes at all; they just pass it on to consumers. That’s a tremendous oversimplification, but when you consider the fact that business owners will now be taxed at as much as 10 percent when they take profits out, it’s a tradeoff I think many progressives will be willing to accept.
The end result is that Washington will move from having the most regressive tax structure in the nation, to one of the most progressive. 80 percent of households will see their total tax burden decline, with only the top 4 or 5 percent seeing significant increases. At the same time, the ability to deduct the income tax from our federal returns will produce hundreds of millions of dollars in new revenues that can be used to either further cut taxes or fund needed investment in education, transportation and other essential services.
Sims estimates the plan will save Washington citizens $731 million in federal taxes, but the number is likely very conservative. The Gates Commission projections were considerably higher, and it is not unreasonable to suggest that a final analysis could more than double the savings.
That’s a lot of money to leave on the table for ideological reasons, which helps to explain why even such a knee-jerk income tax opponent as the Times is willing to take Sims so seriously:
This page has both big reservations about a state income tax and realism that putting one into place is almost politically impossible. But Sims deserves credit for forcing people to stop and think about the best way to pay for state government.
That may seem like a tiny concession, but it’s huge considering the hard line the Times has previously held on this issue. Sims has clearly made the editorial board (if not the headline writer) reconsider its position.
And that is what political leadership is all about.
