Are Washington voters ready to soak the rich? Bill Gates Sr. certainly hopes so — although he doesn't describe it or think of it in those terms.
Gates is spearheading the campaign for Initiative 1077, which would impose a 5 percent tax on anyone who earned more than $200,000 a year ($400,000 for a couple), and 9 percent on anyone who earned more than S500,000 ($1 million for a couple). The money would be used to reduce state property taxes by 20 percent, and provide a $4,800 credit on the state's goofy business and occupation tax. The funds left over — an estimated $1 billion a year — would be divided 70-30 between education and basic health.
It's certainly eye-catching politics: The father of the nation's richest man wants Washington to tax high personal incomes.
A state income tax is hardly a new idea, here or elsewhere. Washington is one of only seven states that lack some form of personal income tax. The others are Alaska, New Hampshire, Tennessee, Florida, South Dakota, Nevada, Texas, and Wyoming. Curiously, none of these states is listed among the states facing the largest budget gaps; California, Illinois, and New Jersey top that list.
In this state, a tax on personal income, corporate income, or both, has been passed by the voters or the legislature, and/or put on the ballot for public approval roughly a dozen times in the past 80-odd years. Every time, it has perished: Courts have ruled against it, governors have vetoed it, and the public has voted it down decisively.
Why should this time be any different? Gates' initiative needs two things to succeed: a change in the public's attitude toward the income tax and a change in the state supreme court's. Without the first, it won't pass. Without the second, even if it passes, it will never raise a dime.
The income tax's public appeal reached its high-water mark in 1932, when voters approved Initiative 69, imposing a graduated tax on personal and corporate incomes, by more than two to one. Washington’s farmers had lots of property and not much cash to pay taxes on it. The Grange, representing farm interests, sponsored initiatives to limit the property tax and replace the lost revenue with a tax on income. Organized labor and teachers' unions came on board.
What wasn't to like? At the start of the Depression, not many Americans paid federal income tax. For most citizens, therefore, voting for a graduated income tax meant voting to tax the rich.
Anyone who doubts the Grange framed the issue in terms of class conflict should check out a Grange News cartoon from 1928 that shows three men carrying a log: a poorly dressed man labeled “The Homeowner” struggles with bent knees under the thick end of the log; “The Farm Owner,” dressed in overalls, struggles along with him; a third man, “The Bond Owner,” dressed in a plutocrat’s top hat and spats, strolls along resting a soft hand casually on the small end of the log.
In the same 1932 election that saw them approve Initiative 69 — and vote overwhelmingly for Franklin D. Roosevelt — the people of Washington imposed a 40 mill limit on property taxes. To plug the revenue gap until the income tax went into effect, the 1933 legislature imposed a business and occupation tax. Then in Culliton v. Chase,the Supreme Court ruled that a graduated income tax was unconstitutional. The court reasoned that income was a form of property and the state constitution says clearly in Article III that “[a]ll taxes shall be uniform upon the same class of property.” Therefore, the state could not have a graduated income tax.
Legislators could have come back with a flat-rate income tax, but they didn’t. Instead, they waited the constitutionally-mandated two years for amending an initiative by a simple majority then exceeded the 40-mill limit on property taxes. The people wouldn’t stand for it. In 1934, they passed another 40 mill limit on property taxes but turned down a constitutional amendment that would have authorized a graduated income tax. The income tax was evidently an idea whose time had already passed. “There is abundant evidence that [voters] knew what they were doing,” J.W. Gilbert wrote in the Seattle Times. Whatever their reasons, “[t]he next session of the Legislature . . . must devise new sources of revenue.”
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