Washington doesn't need an income tax
Washington state voters will likely again be asked to pass a state income tax this fall.
Proponents of the measure want to impose a tax of 5 percent on people with yearly incomes over $200,000 and on couples with incomes over $400,000. The rate would rise to 9 percent at the $500,000 and $1 million levels.
Given well-heeled backers like labor unions and Bill Gates, Sr., supporters gathered enough signatures for Initiative 1098 to qualify for the ballot.
The initiative would reduce the state property tax by 20 percent and increase the business tax credit to $4,800 a year. In this economy any tax cut is welcome, but the levels proposed here are not significant. The state makes up about a fourth of property tax bills, so the net reduction would be only 4 percent. Average homeowner savings would be $180 a year or less, or about the cost of a latte a week. Reducing small business taxes would help create jobs, but to do that Olympia could simply lower business and occupation tax rates, without adding an income tax on top.
Voters have rejected a state income tax four times before – and with good reason. As a high-tax state, not taxing incomes is one of the few comparative advantages Washington retains. An income tax is a sure way to send businesses and investors elsewhere.
Backers say an income tax would stabilize revenues, but income tax states like California have worse deficits than ours. They call it tax reform, but it doesn't change our three-legged structure of property, sales and B&O taxes – it just adds a fourth leg.
Tax proponents say the income tax would hit only 3 percent of earners. Sure, all new taxes start small. The gas tax, the sales tax, property taxes – these were all modest at first. Once in place, an income tax could, and probably would, be extended to more people.
Tax proponents say this can't happen because the initiative requires voter approval to extend the tax. That may work for the first two years, when initiatives can't be amended without a supermajority, but after that lawmakers will do whatever they like. In fact, they already have. This year they repealed the Initiative 960 tax limit and promptly passed an $800 million tax increase.
Finally, a word about fairness: Tax proponents say it is fair to vote for an income tax. But is it really fair to ask 97 percent of people to impose a tax on the remaining 3 percent, especially when proponents promise the majority this is a tax they will never have to pay?
It may be one thing to ask citizens to tax themselves for the common good, but the appeal by tax proponents isn't about fairness – it's about power. This is a cynical, mean-spirited appeal that seeks to divide our communities along economic lines.
Real fairness would be for Olympia to match its spending to the considerable revenue the public already provides. Instead of seeking new ways to tax, lawmakers should set priorities and learn to live within their means… just like the rest of us.
Paul Guppy is vice president for research at Washington Policy Center, a non-partisan independent policy research organization in Washington state. For more info, visit washingtonpolicy.org.
