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An income tax to throw good money after bad

Post by Patrick O'Callahan on Sep. 23, 2010 at 7:35 pm with 10 Comments »
September 23, 2010 5:44 pm

This editorial will appear in tomorrow’s print edition.

Initiative 1098 is the most slickly packaged measure on the November ballot.

It would enact a new income tax on wealthier Washingtonians – 5 percent on individuals earning more than $200,000 a year or couples earning more than $400,000. If the idea of soaking the rich doesn’t quite close the deal, the initiative throws in two other sweeteners: a 20 percent cut in the state property tax and a higher exemption from the state business and occupation tax.

The latter two provisions allow its supporters to tout I-1098 as a tax cut. Which it is – except for the fact that it raises four times as much in taxes as it cuts.

In fact, the “middle class tax relief” it would deliver to homeowners would be barely perceptible: Because the state’s share of property taxes is small, a reduction of 20 percent would translate into savings of about 4 percent.

Clear away the clutter, and I-1098 is an attempt to create a tiered income tax without benefit of an amendment to the Washington Constitution. The state supreme court has forbidden that in the past; the initiative’s sponsors are hoping today’s justices will have different ideas when I-1098 inevitably hits the courts.

The measure has several strikes against it: It may be illegal; it would target wealth-creation in the middle of a recession, and it would enact an income tax with no constitutional limits or corresponding constitutional caps on other state taxes.

Another problem hasn’t gotten enough attention: where the money goes.

Presumably on the advice of smart marketers, I-1098’s supporters decided to add yet another sweetener by earmarking the entire $2 billion-something in new revenue to schools and health. Specifically, 70 percent would go to education, the remainder to health care and prevention efforts.

This makes for wonderful political spin, but it’s a formula for throwing good money after bad. Writing enormous blank checks to state education and health programs is likely to help perpetuate status quos that desperately need shaking up.

Constitutionally protected, Washington’s K-12 system is the least vulnerable part of the state budget and the part most impervious to reform. What it needs more than money is a top-to-bottom overhaul that insists exclusively on results and learning.

Same with health care. Medical expenses have long been eating the state alive. A measure that simply pumps $600 million a year into the system without leave from lawmakers would do nothing more than feed an ever-more-ravenous beast.

An income tax might conceivably be a good idea – if it were structured carefully, constitutionally limited and not designed to slough fortunes into hole-riddled buckets. I-1098 doesn’t remotely fit the bill.

Leave a comment Comments → 10
  1. comment_tayter says:

    An income tax is the Pandora’s box that ought not be opened.

    Once enacted, taxation would creep in every direction, for whatever reason, whenever the need for more money appeared. It would become another carry-all barge for taxation, like the licence plates are nowadays.

  2. Democrats have been aching for an income tax for decades. The ideal situation is to tax everyone who works at 100%. Now they’ll lie about that but they never ever say how much is enough. Just like any junkie, all they say is they need and want more.

  3. UnbiasedReporter says:

    “5 percent on individuals earning more than $200,000 a year or couples earning more than $400,000.”

    And what happens in two years when the legislature can amend I-1098 by a simple vote?

    10 percent on individuals earning more than$100K?

    Heck, the median income for an individual in Washington is $48,030, so let’s tax anything over that at 100%. After all, anything over that means they are richer than half of the people in the state and we all know the rich must pay.

  4. tree_guy says:

    Patrick, you authored another good column.

    I-1098s architect, Mr. Gates Sr., seems like a likeable old codger, but the claims he makes in his constant TV commercials are really just half truths. Now is not the time to add another layer of taxation.

    Our family is voting NO.

  5. I find it amusing when opponents argue that I-1098 is unlawful. If it’s unlawful, the state Supreme Court will throw it out. Why would the opponents spend $3.5 million (and counting) to defeat the initiative if they truly thought it was unlawful. It would cost only a fraction of this amount to litigate the issue. The argument that I-1098 is unlawful is simply not a valid reason to oppose the initiative.

    And as for the claim that there is no middle class tax cut here: A 4 percent reduction in property taxes is real money. If you don’t believe it try proposing a 4 percent increase in property taxes and watch the reaction.

  6. “A 4 percent reduction in property taxes is real money.”

    Do you really think the state will allow you keep that “real money”? That real money you talk about is only for two years then the state will spread it’s umbrella and take it back with interest.

    The current system is more then fair. Why should anyone get a break from paying taxes? The sales tax includes all of us. The income tax only punishes those who earn big dollars and allows parasites to feed at the public trough. This is class warfare brought to you by someone who thinks they are know best for everyone. Why doesn’t Gates Sr run for public office on this platform and see how far he gets?

  7. My basic objection is it pretends to address regressive taxation without actually doing it. Poor people in this state pay a massive percentage of their income in taxes. Far more than the middle class or the wealthy. Yet this income tax is designed to reduce property tax (by a small increment as you note) which poor people tend to not pay.

    if you’re going to do this, drop the sales tax… and if you package it in a Constitutional amendment with hard caps… then we’ll know who will be taxed and by how much.

  8. missdove says:

    The measure raises so much more money than it cuts for small businesses because our state has an extraordinarily high average income compared to other states due to the EXTREMELY high incomes of our state’s richest citizens. That is another reason it makes sense to start charging those extremely high income earners an income tax!

  9. An income tax is fairer than other taxes. If you have no income, you pay no income tax.. Sales taxes and property taxes you have to pay whether you have income or not.

    But I-1098 does not kick in until your income exceeds $200,000 as an individual or $400,000 as a couple. And you would only pay tax on the amount over $200,000 or $400,000. Only 1.2% of Washington citizens exceed this amount.

    Vote Yes on I-1098.

  10. PumainTacoma says:

    Sorry we don’t go out anymore. Too many darn taxes eating us up. Prices on dinner menus are up 20% been to Tides lately? Who can afford to go anywhere. Read the editorial this afternoon about $11M in pay raises for Tacoma…start eating ramen. This city and county are out of control. Spend thrifts and greed eating my pay check. How can anyone save for retirement. No more. Converted Tea Party members unite!!!!

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