Clear Fog Blog

Political musings from Warren E. Peterson

Trojan Horse for Washington – I-1098 Income Tax

Posted by Warren Peterson on July 2, 2010

The last three income tax proposals were referendums that would have amended the state constitution to allow an income tax. They also included lowered sales, property, and Business and Occupation (B&O) taxes. All three went down to defeat by double-digit margins.

The latest run at a state income tax, I-1098, is an initiative. It promises to reduce state property and B&O taxes and raise about a billion new dollars for education and healthcare in exchange for an income tax on the wealthy. It still requires a vote of the people to enact but lacks any constitutional protections so in two years the Legislature could amend it anyway they want. Conventional wisdom says it will meet the same fate at the polls as previous attempts to impose an income tax in Washington. But these are different times. The economy is in a grand funk and more people than ever receive some benefit from government. At least one poll shows people evenly divided on the issue. Oregon voters recently approved an increase in that state’s income tax partly because it affected only the rich.

Should it pass, the pressure on the Legislature to lower the initiative’s tax threshold ($200,000 for singles, $400,000 for married) to ensnare more and more citizens will be irresistible especially when the Democrats are in power. And what is to prevent the Legislature from using the billion new dollars to supplant existing funding and going on their merry way spending just like they always have? Even if the billion dollars is additive to education and healthcare, will those dollars actually improve anything or will they just end up in bureaucracy and higher labor costs? If an income tax is such a panacea for cash strapped states, why are so many of them with sales, property and income tax in financial trouble? No income tax is a competitive advantage for Washington. Why give it up? Will an income tax drive wealthy people out of the state? The late Tom Stewart moved his company, Food Services of America, to Arizona in 2006 in part because Arizona has no inheritance tax. Will there be unintended consequences?

Taxes are a necessity but they need to be fair, reasonable and predictable so individuals and businesses can plan accordingly. They also need to be low in order to limit government expansion and leave more money for private investment and individual use. I’d consider a tax reform proposal if: 1. It was revenue neutral. 2. Income, sales and property tax rates and application bases were in the state constitution and linked so the Legislature could not play leapfrog i.e. raise income tax this year, then sales tax next year etc. 3. Any changes in rates or bases required voter approval. 4.The income tax was flat rate. 5. The B&O tax was banned.

I-1098 fails to meet any of these conditions.

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4 Responses to “Trojan Horse for Washington – I-1098 Income Tax”

  1. TomW said

    I am originally from Oregon. We were told time after time that the only way to fund education was through a sales tax and time after time we voted it down. When I moved to Washington I was amazed that even though I made less an hour, I had more money in my pocket. It didn’t take long to figure out that the sales tax is really the only fair tax.

    Every day billions of dollars change hands illegally. When a pimp shakes down one of his workers he doesn’t pay any income tax, but when he buys a new velvet hat with a feather he will pay a sales tax.

    In a time when we are all about being green, maybe we should be more concerned about consumption than income. If you have more money, you will likely spend more money, thus paying more taxes. If you don’t spend your money it is being invested, which helps everyone.

    Trusting the government of Washington State with an income tax is like trusting a child to guard the cookie jar. Eventually the cookies will be gone…

    • LC said

      Take it from a fellow Oregonian I was there years ago when the state of Oregon wanted to implement a sales tax but we were all too smart and kept on rejecting the proposals. This is just the reverse of that same scenario. I hope the folks here in Washington won’t be taken in by the promise to only tax the rich because that’s BS.

      LC

  2. LC said

    Boy am I scared!!! Proposed bill 1098 is yet another ploy to get a income tax established in our fair state (WA). Again and again voters have rejected income tax because the general public feels that 1) We do not want more tax or tax venues and 2) We do not feel that any state needs both income tax AND sales tax. 1098 looks and sound real nice but it is an approach to getting “Income tax” on the books. Once on the books you better believe that the bar will come down with regard to how much one makes before he can be taxed. Just as the article indicates, the government will maneuver and message the bill after it becomes law to a final point where most Washington residence will have an income tax pure and simple.

    Don’t fall for this trick because that’s all it is a trick and a trap.

    LC Campbell

  3. Tom said

    You’re absolutely right Warren, Tom and LC. Conneticut voters faced a similar situation in 1991 and were duped into a state income tax. They now have tax on income above $13K!!. What happened to the economy in CT since they passed this in 1991?: no job growth in the 15 years after 1991 (while job growth was >20% in the rest of the country during the same period and >29% during the 15 years before 1991 in CT), decrease in median personal income (while median personal income at the national level rose), and net population loss. These are the cold, hard facts regarding the effects of a state income tax.

    If you have friends or family eligible to vote in WA, let them know about this sham and how costly this will be for everyone as this gets modified down the line to lower incomes. This thing is a wolf in sheeps clothing and it needs to be defeated.

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