I wish Chris had had to make good on her threat to balance the budget with cuts. That would have shown we wouldn't miss 20% of government.

Now governments at all levels are broke, they have spent other peoples money that they could tax away from them and more still, resulting in deficit.

i can't see this passing, but this is silly Seattle.

Over 100,000 state employees, about 18,000 county employees (King) and 10,000 City of Seattle employees.

What do all these people do?

"What do all these people do?"

A lot of them spend their times in meetings thinking up 1)new regulations and 2) new ways to get more money from the public.

The Dems eliminated the 2/3 vote on taxes giving the GOP a free ride to avoid deficit decisions and bolster their standing with voters -- Dumb

Then they couldn't agree among themselves on a tax/expenditure package and showed themselves as excluding the GOP from discussions -- Dumber.

Now Bill Gates Sr., without his supporters laying any groundwork, announces "the solution". Nice guy and good citizen, but no connection with the average person on the street.

Income tax during a nasty election season in an environment where even progressives can't figure out what the Dems are doing. I doubt that they will even get the signatures, much less sell this notion in November.

Pity.

The voters will not trust any tax "reform" that is not true reform and is not comprehensive. A universal income tax, paid by all wage earners, coupled with elimination of the property, sales and B & O taxes would be a good start. Only if those taxes are eliminated constitutionally will the voters have any confidence that the income tax is not just one more burden placed on their shoulders in these difficult times.

But more important, the power brokers in this state need to remember that the people of Washington do not exist at or for the convenience of the government. The end and goal of civilization is not government. The highest achievement of mankind is not government. Government is an appliance tasked with doing some specific things and otherwise keeping out of the way. If your refrigerator or washing machine began to make unreasonable impositions on your time and budget you would replace them, would you not? The same should hold true for government.

Government isn't our yearning. It isn't our focus. It isn't our hobby. And it's becoming annoying. Time to replace the appliances. Don't forget to look at the efficiency stickers.

I am very interested in how the revenues from this would have gone up or down if the income tax had been in place during the past 10 years. What would have happened to fill any shortfalls: would the base have dropped (so say $150K instead of $200K) or would the rate have gone up? Income from stock options and capital gains is volatile compared to property tax, so we could have had some wild swings in revenue.

I am a bit more optimistic about I-1077's prospects than Mr. Van Dyk is, though it is too early to tell.

I haven't found anyone here in Washington who can say, with a straight face, that our tax system works well. There is widespread agreement that it is dysfunctional. The sales tax rate is too high; it overburdens the working poor and devastates retailers, especially in the border counties. There are about 600 exemptions for this and that; how many of them make sense, and how many amount to giveaways? And I'm not sure if anyone would write a tax more unfriendly to small business than the B&O; tax.

sjenner: According to the Gates report in 2001-02, income tax is generally slightly less volatile than sales tax. However, in a mixed system (sales and income tax), the lows come at different points in the business cycle, which makes a mixed system less volatile than a system that relies heavily on one type of tax.

"The principal objection, however, is likely to be the "camel's nose" argument — that this new tax, initially levied only against individuals with high income, might then be extended to middle- and low-income citizens". Might be...it will be. I am a firm no vote. Time and time again, the legislature has proven itself unwilling to live within it's means. It's only a matter ot time before the legislature declares an emergency and suspends whatever voter requirement is required and levy the income tax against those making 150,000 then if that doesnt work 100,0000. Yes indeed the camel's nose arguement will be used but only be it's been proven true. An example is the stadium tax scheduled to sunset now all of sudden we can extend it and use those revenues for the arts...rebuilding husky stadium. How many times has the legislature imposed a sunset clause on a tax increase and has any one seen a tax actually sunset ...anyone...anyone..Bueller?

Secondly if an income tax is the answer to our state's tax problems, how come Oregon and California which have income taxes are in such a financial mess. The legislature needs to live within it's means just like you and I. An income tax... hell no.

Stuart: Good question. Of course, over the past decade, both incomes and
property values have fluctuated greatly---rising strongly for most of the period before falling off with recession and the bursting of the housing bubble. The question usually is asked about income and sales taxes, both of which generate strong revenues in good times and falloff in bad ones.
We have none of the former and too much of the latter so, whatever the effects on overall tax revenues, the burden continues to fall on those
least able to pay.

How about a Seattle income tax to fund Light Rail expansion?

I appreciate the responses from Ted and from Pepper. I do hope we can see some sort of back-testing of how this would have worked. California and New Jersey and New York all have the proverbial three legged stool with high earner taxes and those states are not a model to emulate when it comes to reliable funding for schools and colleges.

Re: “Camel’s nose” argument. Who’s to worry when we have the Eyman initiative mill protecting us.

I’m serious.

Thanks to Mr. Van Dyk for the comprehensive summation of Washington state's unique taxation history. (I cannot but wonder to what extent this legacy is yet another example of class struggle in action -- a legal maze cunningly designed by the infinitely self-protective timber barons to ensure taxes disproportionately burden the poor.) Meanwhile Mr. Van Dyk's report is most informative such work I have yet seen: unquestionably a print-and-save item destined for my Washington state history file. Thanks again.

"Whether it passes or not, it should be followed by a comprehensive review of the entire state tax code, which is an incoherent mess compared to those of many other states."
This is what passes for logic among progressives?
If you were really interested in fixing the state's tax code, wouldn't you do that BEFORE you added yet another layer of complexity?
Why can't the left be honest and say they want full-blown socialism? Are they afraid they'll lose the independent sheep who vote based on the best TV ad?

cphilips: In a perfect world, we would from this moment begin designing a more appropriate state tax system. I have outlined my own ideas. (Others will have their own ideas). But, since this is not a perfect world, and attempts at comprehensive reform have not succeeded over prior decades, we must face the present situation as it exists. I-1077 has been proposed. It will succeed or fail. Either way, we must look beyond it and the task of comprehensive reform which will remain.

Ted:
You write: "voters have repeatedly rejected an income tax."
When was the last time Washington voters have passed judgment on an income tax? 20 years? 30 years?

There is this bizarre idea “out there” that there are tons of “small” businesses with owners making dividends or salaries of $200,000 or more per year and that people at that pay level, if taxed as under I-1077, would tend not to expand their businesses and create jobs as much.

Poppycock.

First--and I say this as a small-business owner myself--most successful owners of actual *small* businesses work very hard and bring in anywhere from $15,000 to $100,000 a year at most. Any business that is making enough money to pay a dividend or salary of $200,000 or more is very likely *not* a small business. Successful owners sometimes think of themselves as “small” far beyond the point they became medium or even big. (Typically income over $100,000 comes from investment income, not from operating a small business, anyway.)

Second, let’s say by some odd circumstance your small business is able to pay you $200,000 or more in a given year. I-1077 imposes a tax on income. One obvious way to reduce your income is to devote resources in excess of $200,000 to investments in your small business or in a new business. Any rational business owner who has read I-1077 will instantly think of lowering their taxable income by creating jobs in such ways; I-1077 will probably tend to create jobs over time, in actuality.

Third, I-1077 may be largely tax-neutral for many if not most small-business owners. It involves a dramatic decrease or elimination of B&O; taxes while imposing an income tax on individuals making over $200,000. That sounds tax-neutral to me if you’re a sole proprietor, or an LLC/S corporation, etc. Plus, an income tax is deductible from your federal taxes if you itemize, so your total tax burden locally and federally probably won’t change particularly.

Fourth, the income tax itself is only 5% on income over $200,00. That means if you make $210,000 you’ll pay $500 extra year (less than your annual cable bill). At $300,000 that’s an extra $5,000 a year. That $5,000 is *not* suppressing any job creation, and as I just pointed out it’s probably a tax-neutral change anyway.

I'm a small-business owner. I support I-1077 wholeheartedly, without reservation, especially because of the B&O; tax provisions, but also because a state with a stabler and more predictable budget is also a state that’s easier to do business in. Any rational small business owner should support I-1077.

smacgry: You are wrong in your assessment. I have sold small businesses for more than 20 years. The really successful ones make a lot of money, some well in excess of $500,000. Just because you don't know about them does not mean they do not exist. I do know them. (They are small, with less than 100 employees.) These entrepreneurs have a nice house, a vacation house, a nice car or two and they take a few nice trips every year. The rest of the money they invest in their business. And for good reason. When they go to sell the business every extra $1000 of profit will increase the value of the business by about $10,000. It is the best possible place to invest for them. If you tax them more, they will have less to invest in the company. These people are our most successful entrepreneurs; they are the ones who grow the fastest and create the most jobs. Reducing the resources available to our most successful entrepreneurs makes absolutely no sense.

The answer to the tax issue is to reduce government expenses and therefor not require any increase in taxes. I pay more than enough in taxes and am getting really tired of the state trying to figure out all kinds of ways to take more money from me. Reduce the size of government. Cut expenses. Cut programs.

I read with interest the article on Crosscut about the 6,449 employees in San Francisco earning more than $100K. Who do you think adds more to our city, community and our country...the city worker earning in excess of $100K or the entrepreneur?

Taupe, our small business is structured so that money the business earns that is re-invested into the business does not count as personal income for Federal tax purposes. We only pay Federal income tax on the money we take out of the business as our own income. Unless the high earner's state income tax works in a completely different fashion I think this would not impact entrepreneurs who re-invest company profits back into their companies.

Outside of this legislative session's odd grab bag of candy and soda taxes what are the most recent state tax increases that were not voter approved? I can't think of one for a long, long time, but I'm sure I'm missing something.

Our federal taxes - especially for high income earners - are as low as they've been since the early 30's. Our State taxes are very low for people with large incomes. If you earn over $200,000 in Washington you are taxed 4.6% of your overall income by the state. If you are a high earner you may be tired of paying taxes, but you are not taxed very heavily. In fact, high income earners in Washington pay less in State taxes than almost any other state.

On the other hand, if you are poor in Washington you are taxed at a higher rate of income than almost anyone in the nation. 17.3% of the poorest people's income goes to state and local taxes.

sdstarr: No, it does not work that way. Almost every small business is either an LLC or an S-Corp, so the company itself does not pay taxes; the profits flow through to the owner and the owner must pay taxes of these profits. Cash is not "reinvested into the business". What are you talking about here? There is no "reinvestment". Sure, you can buy a piece of equipment, but only a portion of the cost can be deducted for tax purposes-- it is called depreciation. Besides, more and more businesses are service businesses, as is mine. I expand my business by hiring a new person. There is no reinvestment into the business. If I have a good year and make a very nice profit I must pay tax on all the profit. So how do I pay the salary of the new person I hired at the end of the year? It either comes out of next year's revenues or from my cash reserves on which I had to pay tax. I cannot keep cash in the company that is not taxed.

And by the way, the State of Washington takes 1.5% of my revenues whether I make a profit or not. They take it right off the top.

Seriously? Another committee to study the issue? That's the best you can offer?

And you call the creation of a dedicated fund for education and health care at a time of budget crisis "business as usual"?

I don't understand whether Van Dyk is saying that progressive voters won't support this, or middle-to-low-income voters won't support this, or that Washington voters are as a whole "progressive" and they won't support this. Certainly the first is not true; the second probably is, and Washington State as a whole is not a progressive state. If it were, we wouldn't have the pile-of-post-it-notes tax system that we do. And at least several groups are studying tax reform and have been for some time, athough Van Dyk doesn't seem to realize that. The success of complete reform is questionable, since the economy will probably soon be reported as "up" and no one but the minority progressives will care.

Washington was founded by progressives. Back then, progressives were people who feared the concentration of power in any large institution, especially railroads and government. One might dare to say that today's Tea Party demonstrators are their modern-day heirs. The people who began calling themselves progressives during the Dub'ya years are not progressives at all. They're big-government leftists. This conversation would be easier to track if the words didn't keep shifting their definitions.

Checking in this a.m. to respond to later comments.

It is easy to see how the whole "progressive" designation might have become confused.

First, Crosscut and other authors do not write the headlines and lead-in paragraphs preceding their copy. Editors do. In this case
the headline said that "progressive voters" might oppose the proposed
income-tax proposal. But that is not what my copy said. It said
that Washington, known as a generally progressive (by any definition) state, might be thought receptive to a more progressive tax system.
Progressivity in a tax system means that people and institutions are generally taxed according to their ability to pay and that middle- and lower-income taxpayers do not bear unfair burdens (such as with regressive sales taxes).

My point was this: Historically, middle- and low-income Washington taxpayers have shied away from progressivity in their tax system, as represented by income taxes, because they feared new taxes (progressive or not) would simply be added to present taxes rather than replace them.

Yes, "progressive" as a political term has changed in its meaning many times. Most recently, during the early Reagan years, in particular, officeholders and candidates once known as "liberal" began calling themselves "progressive" so as to avoid an L label they thought politically damaging to them.

The point of the piece: Progressivity is a good concept in tax policy.
We should try it.

"The state property-tax reduction would indeed be 20 percent but, since the state share of the property tax is only 20 percent of a property owner's bill, the real property tax cut would amount to only 4 percent."

I am not sure that makes any sense, not to me anyway.

While I only earn $40K annually and little savings, I will vote no on this initiative. Just because I do not earn that kind of money does not mean I am resentful or envious of them enough to take away their incomes.

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