Why the I-1098 income tax measure is good for the state
It's not perfect, but it's a good start toward rectifying some of the state's terrible tax structure and improving our colleges and schools.
Don't believe the smokescreen. Initiative-1098 is simple. It’s a tax on high-income individuals — to be specific, on income in excess of $400,000 a year for couples, offset by decreases in property tax and business and occupation tax. The incremental revenue will support education and health care.
To illustrate why I-1098 is right for Washington, I’m going to quote a portion of an email message I received in July, out of the blue, from a 2005 alumnus of Computer Science & Engineering at the University of Washington, where I teach:
Recently, I read (an article in which) you were quoted as saying: “The principal role of great public universities is to provide socioeconomic upward mobility to the citizens of their states.” For several days after reading that, I couldn’t help but think about my own story and reflect on how blessed I am to have had access to a UW Computer Science & Engineering education. Five years after graduation, I am now fully appreciating the amazing value of the education I received, and I want to sincerely thank you and all the educators who work to achieve this mission.
I grew up in an immigrant family where my mother worked as a restaurant cook, seamstress, child caretaker, and currently still works as a night shift office janitor. My father, not able to leverage his Chinese literary education to find a well paying job here, has spent his 17 years in America as a manufacturing worker. Neither of my parents has ever held a job that paid more than $13/hour, and they will never see an opportunity for promotion into management.
Under these economic circumstances, I did not grow up with music lessons, summer camps, or private SAT tutoring. Many of my UW friends grew up with parents with business and engineering pedigrees and/or local Microsoft, Boeing resumes. I’ve often imagined how much I would have enjoyed access to such accrued intellectual capital, early / frequent exposure to technology, and guidance to navigate the world of academia and workplace. I believe these advantages are consequential and the cumulative effect on a child’s likelihood for success over his/her lifetime cannot be overstated.
Yet, with hard work in school, combined with the privilege to have been accepted into UW Computer Science & Engineering, I was able to compete for one the most rewarding careers this country can offer. In a span of five short years in the tech industry, I find myself on a solid trajectory into the American middle class …
I am sure I am just one of many students who came from similar socioeconomic backgrounds, so I’m extremely saddened to read that the past decade’s enrollment increases have had to be rolled back. Every eligible student not admitted is a life and family not significantly changed or improved.
That’s why 1098 matters — why it’s right for Washington.
What about the arguments against?
All national studies, and all common sense, argue that Washington has one of the most regressive tax systems in the nation. One local self-interested consulting firm has interpreted the Washington data to argue that our system is not regressive — without conducting a comparative analysis of other states. Who are you going to believe?
The claim that "it will hurt small business” is a conscious attempt to mislead. It’s every bit as shameless as agribusiness defending its subsidies by talking about “the family farm.” When you hear “small business” you’re supposed to get tears in your eyes thinking of your neighborhood dry cleaner. In actuality, though, it’s the LLC or S-Corp returning a half million dollars per year or more per partner. This same misleading nonsense is promulgated nationally; see a good analysis here.
There are some legitimate reasons for concern about 1098.
Yes, our lack of an income tax is a plus when recruiting employees from out of state. (But wouldn’t we rather have our own kids educated to fill these jobs? Additionally, the opponents of 1098 can’t have it both ways — either our current tax system is favorable to high-income individuals and thus an inducement to get them to move here, or our current tax system is no more regressive than that of other states!)
Yes, the legislature should be smarter about how it spends money, and may monkey with 1098 after a few years. (So, it’s your legislature — elect a different one!)
Yes, at least in the short term there may be an impact on high-end philanthropy, since there is no deduction. (This will pass, with time.)
Ultimately, my feeling on the revenue side is that Washington needs to move away from its dependence on sales tax (which is demonstrably regressive) and business and occupation tax (which is a tax on gross rather than net, so is not sensitive to the inherent huge margin variations among industries). I wish that with one stroke of the pen our state could have a decent tax system and decent leadership. Absent that, we’re stuck either with the status quo, or with incremental steps.
Note, by the way, that our lousy statewide public K-12 system (clearly lousy, by all national measures, although there are pockets of quality) and our lack of bachelors-degree capacity in higher education both are "bad for business" (lack of a quality indigenous workforce, and a major additional expense for employees who want something different for their kids). Admittedly, money alone won't fix these things, but given that we trail nearly all other states in the amount of our economy that we invest in education, it would be a start.
I heard people say, "I know someone in the technology industry who has already moved from Washington to Nevada in anticipation of the passage of 1098.” Let me say a word about Nevada. If someone wants to move from Washington to Nevada, let 'em! They can have Nevada's K-12, Nevada's higher ed, Nevada's wonderful climate, Nevada's lovely scenery, Nevada's average IQ and education level ...
I heard someone say, "I moved from Canada to Washington because Canadian income taxes were greater than 50 percent." Let me say a word about Canada, too. I lived in Canada for five years, before moving to Seattle in 1977. My wife is Canadian, and her entire family lives in the Toronto area. In 1973, when I was a student operating on about $4,000/year in income, I got hit by a car while riding my bicycle. Busted my tib, fib, and femur, spent three months in hospital, and four more months in a cast and then in rehab. Covered. Ten years ago, my University of Toronto Ph.D. advisor developed prostate cancer. Covered. Last year, my wife’s brother, a 65-year-old watercolor artist, had a heart attack. Covered (including helicopter medevac to Toronto from the little town in which he lives.)
Maybe you would rather pay lower taxes and not have that sort of social safety net, because you personally don't need it. Not I. I’ll take the social safety net. I also don’t bitch about paying school taxes despite the fact that my kids didn't use the schools.
I have lived a blessed life. I have had every advantage. I’ve also worked hard, but it wouldn’t occur to me to assert that I have not also benefited enormously from the circumstances in which I was lucky enough to be born and raised. I’m not self-made. And neither are most people. My personal view is that those of us who have been blessed have two obligations: (1) to admit it, and (2) to be willing to do what we can to assist those who have not been blessed.
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Comments:
Posted Fri, Sep 24, 6:20 a.m. Inappropriate
Ed please feel free to send any extra money you may have to the state at any time. We do not need a state income tax for YOU to do that. So let's see we pass this on individuals making say 400k plus a year, wait two years and the "fools" that we elect, figure that one out say well gee we need more money to squander so now everyone making oh lets say 75k gets to contribute. What faith should any of us have that this will not happen. Again, feel free to send YOUR check at any time. Just leave us and me OUT
Posted Fri, Sep 24, 6:26 a.m. Inappropriate
Read the article by Judith Rumstead on Crosscut and really think about what she is saying....again, feel free to write your check
Posted Fri, Sep 24, 8:45 a.m. Inappropriate
Professor Lazowska's statement "Yes, the legislature should be smarter about how it spends money, and may monkey with 1098 after a few years. (So, it’s your legislature — elect a different one!)" is dripping with disingenuousness. He should know that as long as Seattle dominates our state's politics, the chance of electing a Legislature that cares a whit for the burdens of the taxpayer is virtually nil. To say that we should vote for a tax that is prone to mischief, and then we should vote for a Legislature that is less likely to engage in such mischief, ignores the more economical solution: Simply don't vote for the tax. Taxpayers in this state are on the ropes. To tell them "If you don't like the Legislature, just elect a new one" is as helpful as telling a Southern black sharecropper "If you don't like the Jim Crow law, change it!" Thanks for the helpful advice.
Posted Fri, Sep 24, 8:53 a.m. Inappropriate
Ed, thanks for talking about this from such a personal perspective. Your stories, and those of others you've shared, make it clear why I-1098 is a good first step toward making our state a better place to live.
Posted Fri, Sep 24, 11:35 a.m. Inappropriate
What a surprise! A public employee saying the income tax is a good idea.
Posted Fri, Sep 24, 12:10 p.m. Inappropriate
It never ceases to amaze how government control over our lives and pocketbooks grows - not by overt force of arms or violence, but incrementally by the willing acquiescence of the educated and learned.
Posted Fri, Sep 24, 12:35 p.m. Inappropriate
Here's my problem with I-1098 proponents...
I AGREE with the following statements that "Washington has a regressive tax system," "We depend too much on the sales tax," and "Washington violates its constitution by under-funding education."
HOWEVER, those three statements can exist entirely independent from each other; and the solution to any or all of them is not necessarily to institute this income tax, as proposed in 1098.
Posted Fri, Sep 24, 2:14 p.m. Inappropriate
I-1098 is a trojan horse and bad news for Washington.
http://clearfogblog.wordpress.com/2010/07/02/trojan-horse-for-washington-i-1098-income-tax/
Posted Fri, Sep 24, 5:13 p.m. Inappropriate
For a computer science guy, you need to improve your logic. You bring up Canada's tax rate and then go on to tell three anecdotal stories about medical care that supposedly make your point that Canada's tax rate is good. This does not follow. Canada could have the best medical care in the world; this does not mean that the tax rate is good or optimal. These are two different issues. If you want to comment that Canada's tax rate is good, support it with logical arguments not anecdotal stories. And by the way, medical stories support medical issues, not tax issues. And if you want to tell stories, my neighbor is from Canada and I will match her stories of bad health care in Canada against your good ones any day of the week.
You claim that this new tax will not hurt small business. It will not hurt most small businesses, that is true. But it will hurt the fastest-growing small businesses, the ones who are creating the most jobs. Why? Because the most successful small business owners earn more than $200,000 per year. I know this because I work with them in a consulting capacity. These are the companies that are the most successful, the fastest-growing, and therefore the ones creating the most jobs. The business owners pay personal income tax on their corporation’s profits. This aftertax cash is then used to grow the business. (Most small businesses are LLCs and S Corps.) It makes absolutely no sense to raise taxes on the companies who create the most jobs, especially when job creation is our state and our nation’s most pressing problem.
Raising taxes is the easy way out. The difficult problem is cutting the state budget. And it must be done.
If we were to raise taxes, let’s at least do it in a way that is fair to all. Taxing one group and not another is simply not right. (The argument “They can afford it” is totally a bogus argument.) Almost half of Americans pay no income tax. We are moving toward a country where there are the makers and the takers. The same is true for Washington State. Do you realize how insane it is to have an election in which one group of people (the majority) vote to raise the taxes of another group (the minority)? America was not founded on these principles and neither should Washington State.
Posted Sat, Sep 25, 8:33 a.m. Inappropriate
Professor Ed made 187,000 last year in Salary at UW. He is simply self-interested in keeping the money flowing into his department from his name sakes chair.
Posted Sat, Sep 25, 10 a.m. Inappropriate
"They can have Nevada's K-12, Nevada's higher ed, Nevada's wonderful climate, Nevada's lovely scenery, Nevada's average IQ and education level..."
Ever heard of a company called Zappos? I estimate the average intelligence of any one of their employees to be greater than the overpaid Dr. Ed.
Posted Sat, Sep 25, 3:57 p.m. Inappropriate
Yes Dr. Ed Don't believe the smokescreen. Initiative-1098 is simple. It’s a tax on high-income individuals — to be specific, on income in excess of $400,000 a year for couples, offset by decreases in property tax and business and occupation tax. And within 10 years it will be extended to everyone. Why because the f(*$ing legislature just cant help themselves. This tax increase will not bring in the added revenue that's predicted. Dont believe it....Oregon passed similar legislation and low and behold the revenue projections are lower then projected. Dr. Ed, you're drinking the kool-aid.
Posted Sat, Sep 25, 5:21 p.m. Inappropriate
Dr. Ed, why do so many Canadians come to the USA to get specialized care?
How have we managed to pull that off... I mean with such low taxes, how is such a fact even imaginable?
Posted Sun, Sep 26, 12:59 p.m. Inappropriate
Dr. Ed, I read this an laughed out loud before realizing it wasn't a parody. Given the force of your logic and arguments you might be better of with just writing "I think 1098 is really, really, swell" one hundred times. Seriously, what you wrote could be used in a textbook on logical fallacy. One with a big picture of a straw-man on front.
Posted Mon, Sep 27, 9:45 p.m. Inappropriate
I will be sending a link to your piece to as many people as I can in Nevada. You should be made to defend your denigration of an entire state, or forced to retract it with an apology.
Posted Thu, Sep 30, 10:20 p.m. Inappropriate
Gates’s ads are very good. But if 1098 passes then wealthy people will leave the state. How is that a good thing?
Posted Thu, Sep 30, 10:20 p.m. Inappropriate
Gates’s ads are very good. But if 1098 passes then wealthy people will leave the state. How is that a good thing?
Posted Thu, Sep 30, 10:20 p.m. Inappropriate
Gates’s ads are very good. But if 1098 passes then wealthy people will leave the state. How is that a good thing?
Posted Sat, Oct 2, 1:11 p.m. Inappropriate
It always amazes me that some People keep trying to push an income tax, WHEN our State Constitution PROHIBITS any such tax.
And yet year after year [ignorant, or is it just illiterate] people keep trying to ignore the truth and shove one down everyone's throat anyway.
Well here is a suggestion for those people, why not just write a check every week, for 25% or 35% of your Gross income and send it to the Queen in Olympia, or move to another State that already has one.
Why is it when money gets short, when times get tough, everyone but the Government has to tighten the belt and learn to live on less. Why should this Tax and spend and constantly ask for more, grow ever larger government be treated any different? And don't give me the old song and dance about needed services, the greater majority are NOT needed, and if one more idiot pushes children out front, hides behind them as an excuse for anything, they should be run out of the State on a rail if not tar and feathered first. Perhaps Gates, and Lasowska should both retake the required course in Washington State History and spend some more time in the library learning the truth and facts of life here in the North West.
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