The left-of-center Economic Opportunity Institute today, in a column in the Everett Herald, proposes a state income tax for Washington residents, followed by the quick assurance that, really, only a few people would have to pay it.
The first federal income tax started at 1% and only applied to the wealthiest 2% of people in the country. The first 1040 tax form was one page long. With 98% of the people exempt (at first), it’s not surprising that the idea was popular at the time (making OTHER people pay more in taxes has always had political appeal.) Today the top rate is 35% and, as we know, the federal income tax now applies to far more than just the wealthiest 2%. The folks at EOI would like to start a Washington state income tax at a 3% rate, rising to a 5% rate on yearly incomes over $1 million, and impose it on the wealthiest 4% of households.
If you are among the 96% who wouldn’t get hit by the new tax at first, don’t get too comfortable. Once Olympia takes a drink from the new money pipeline, you can be sure they will start looking for ways to open the tap wider.
This posting raises a valid question; the revenue equivalent of the legal "slippery slope" argument. Would it not seem more reasonable, if it included a repeal of the B & O tax, a truly unfortunate tax on gross receipts, as opposed to profits?
Bill Gates Sr has a striking presentation about the breadth of a tax system's foundation, without an incomes tax. I think he's probably in the group that will pay more, but he seems to think it's worthwhile.
The last time we ran this issue by the people, it was voted down by the very folks who would end up paying less in taxes. If we offered them a B & O repeal, maybe the business community wouldn't drum up so much opposition among the middle classes. Worth thinking about?
Posted by: km | July 23, 2008 at 05:07 PM
This posting raises a valid question; the revenue equivalent of the legal "slippery slope" argument. Would it not seem more reasonable, if it included a repeal of the B & O tax, a truly unfortunate tax on gross receipts, as opposed to profits?
Bill Gates Sr has a striking presentation about the breadth of a tax system's foundation, without an incomes tax. I think he's probably in the group that will pay more, but he seems to think it's worthwhile.
The last time we ran this issue by the people, it was voted down by the very folks who would end up paying less in taxes. If we offered them a B & O repeal, maybe the business community wouldn't drum up so much opposition among the middle classes. Worth thinking about?
Posted by: km | July 23, 2008 at 05:08 PM
To my knowledge it is against the WA. state constitution to have an income tax for it is looked at as double taxing due to the others we pay. An income tax would be a constitutional ammendment requiring super-majority from both houses and then a vote by the citizens.
Posted by: Todd W. | July 24, 2008 at 10:18 AM
If the state increased the small business B&O tax credit (from $35 to $100) while suspending most of the special interest tax breaks, it would net around $270 million in 2009-11 - and give us a more fair tax system to boot.
We could also extend the sales tax to services, which would result in a big tax cut for the affected businesses, because their B&O tax rate would change from the 1.5% services rate to the 0.471% retail rate.
Posted by: ba | July 24, 2008 at 12:25 PM
Mr Guppy has it exactly right, let the camel get his nose under the tent and soon you have the whole stinky camel sleeping with you.
I've always defended the right of the rich in this state to give generously in any way they feel moved. Heaven knows they are much quicker to act and more focused on working solutions to our real problems than any bureaucrat or legislator in Olympia. The more money laundered through Olympia the less we can expect from our rich neighbors who will feel more like uttering the old saying: "I gave at the office."
Posted by: Margaret Wiggins | July 30, 2008 at 11:04 PM
Any tax could be considered a slippery slope, so that argument doesn't wash. The sales tax has already slid to 9.4 percent because of ST...and may be climbing yet.
The real questions we should be asking are: what are we getting for the tax and what will our kids be getting 20-30 years hence?
At least by implementing a state income tax, you could start to ease the burden of a sales tax that has cities addicted to zoning for big box, Wal-Mart style developments just to bring in revenues. This just encourages crappy urban planning. So now, here we sit with a depressed economy and sales taxes are way down. Cities that depend upon sales tax (it's about 50 percent of state tax revenues now)are seeing revenues drop off a cliff.
ON top of that, sales tax is highly regressive while income tax is progressive. Those who make more, pay more; those who earn less, pay less. With sales tax, those who earn $1 million a year pay a lower percentage of their income for that widget than people who earn $25,000 a year. That's punishing the poor, and we've been doing that for far too long. I also think the federal tax rate should be returned to levels we had it at during the 1960s and 70s, when fat cats paid their fair share.
Posted by: S.G. Sarter | December 11, 2008 at 01:02 PM
Any tax could be considered a slippery slope, so that argument doesn't wash. The sales tax has already slid to 9.4 percent because of ST...and may be climbing yet.
The real questions we should be asking are: what are we getting for the tax and what will our kids be getting 20-30 years hence?
At least by implementing a state income tax, you could start to ease the burden of a sales tax that has cities addicted to zoning for big box, Wal-Mart style developments just to bring in revenues. This just encourages crappy urban planning. So now, here we sit with a depressed economy and sales taxes are way down. Cities that depend upon sales tax (it's about 50 percent of state tax revenues now)are seeing revenues drop off a cliff.
ON top of that, sales tax is highly regressive while income tax is progressive. Those who make more, pay more; those who earn less, pay less. With sales tax, those who earn $1 million a year pay a lower percentage of their income for that widget than people who earn $25,000 a year. That's punishing the poor, and we've been doing that for far too long. I also think the federal tax rate should be returned to levels we had it at during the 1960s and 70s, when fat cats paid their fair share.
Posted by: S.G. Sarter | December 11, 2008 at 01:03 PM