Why I-1098 would be very bad news for Washington state
A leading attorney argues that the measure is badly drawn, including such problems as no assurance that it will be deductible from federal income tax.
Before you make a decision on I-1098 (the Income Tax Initiative), please take a moment to consider.
In the past, many of us have discussed the need to take another look at our Washington tax structure. Many of us have also been advocates for education and higher education. However, having done my own research and analysis about how 1098 is drafted and about how it would impact our businesses and our economy, I have concluded that 1098 is a very bad idea.
Initially 1098 would create a state income tax of 5 percent for single filers for income over $200,000 and 9 percent for single filers for income over $500,000. (The tax is based on federal income AGI.) The thresholds for couples are $400,000 and $1 million. It purports to grant a 20 percent property tax cut, but the cut is only on the state portion of the property tax, so the real cut is closer to 4 percent.
There is a $400 per month B & O tax credit. The new B & O tax credit would not be particularly beneficial to the overall business community, since approximately 43 percent of those businesses are already exempt. There is no cut in the sales tax.
Although the money is initially earmarked for education and health care, the legislature can sweep those funds any time. The legislature has done so 74 times over the last 10 years. Since 1098 is not constitutional, any time after two years the legislature can change any provision of the initiative. The legislature has repeatedly swept earmarked funds into the general funds and repeatedly modified statewide initiatives. We will be starting with the fourth or fifth highest income tax rate in the country (experts disagree as to whether it would befourth or fifth, but the point is that we would be starting out in the top 10 percent of income tax states). When has the legislature ever modified taxes to decrease them? It will only go up from here. Think California.
Three more important facts about 1098:
- It was drafted to avoid the phrase "income tax," and thus is drafted as an "excise tax." So, there is no assurance whatsoever that the tax imposed by 1098 will be deductible from federal income tax. If that ruling is not obtained, this would be the only state income tax in the country to not be deductible from federal income tax.
- I-1098 does not allow any deductions from your Federal Adjusted Gross Income.. None. Not for charitable contributions; not for home mortgages. Washington will be one of nine of the 42 states with an income tax that has no such deductions. Many of you sit on nonprofit boards. Many of you know that approximately 53 percent of charitable donations are made by individuals with income over $200,000. I expect that if 1098 passes, some of the dollars currently flowing to nonprofits will instead be diverted to the legislature.
- I-1098 applies to income derived from sub S corporations, LLC's, partnerships, trusts, dividends, capital gains, rents, etc. Many of our businesses operate through these entities. Many of our businesses reinvest in their business, but first, they will have to pay 9 percent to the state. Surveys show that these businesses will invest less in people and capital improvements in order to pay the tax.
I have served on three Washington Gubernatorial Competitiveness Councils, so I am keenly aware of the importance of being attractive to new and existing businesses. 1098 would take Washington state from being competitive, to one of the worst states to start or retain a business. We would have the 4th-5th highest income tax rate in the country. Most small businesses are created as sub S, LLC's or partnerships. One of the reasons many people in the venture capital area and tech area are so concerned about this is that they know that if 1098 is in place, entrepreneurs will not locate in Washington state and many will simply move their businesses. We are already seeing plans to relocate to Washington state being put on hold, awaiting the outcome of the 1098 election. We are already aware of companies exploring alternative states, due to the difficulty of recruiting into a state with such a high starting income tax rate. The purported B & O cut only applies to about 25 percent of businesses, as a little less than half are already exempt. Enacting a tax increase that is almost 200 percent larger than the biggest tax increase in Washington history will be a blow to our business environment.
I-1098 is also horrible fiscal policy. This will be the largest tax increase in Washington history. Even California has discovered that this type of income tax is extremely volatile and leads to overspending in the good years; then, when an economic downturn occurs, a scramble for more funds to pay for the funds promised in the good years, resulting in new taxes and increases in existing taxes. High earner taxes have failed everywhere: (Oregon: receipts less than half anticipated; Connecticut: a decade of no job growth; New Jersey: stagnation and now an effort to roll back taxes; Maryland: 12 percent of high earners died or left the state in the first year of the new tax). Keep in mind that Washington state also has the highest inheritance tax in the country — not a good idea to die here!
This initiative is opposed by a broad coalition. If you check the Defeat 1098.com website, you will see a broad-based non-partisan coalition. To date, Defeat 1098 has 2,150 donors at an average of $1,200 per donor. Note that the Yes on 1098 group has 300 donors, the majority of which are public employee unions. Their average donation is $11,000. Large union contributions are pouring in the door.
Note that every major newspaper in the state has opined against this measure. But, because 1098 is posing as a "soak the rich" class-warfare type of measure, if the facts are not put out about how this will negatively impact our economic climate, it may well pass. I urge you to get involved.
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Comments:
Posted Fri, Sep 24, 7:57 a.m. Inappropriate
I checked the anti-1098 web site. I did not see a broad and diverse coalition. I saw groups in the state who owe their existence to the donations of time and money from the wealthiest 1% of the state. Elites.
Posted Fri, Sep 24, 8:18 a.m. Inappropriate
Talk about selective and distorted fact use. The 4th or 5th highest rates in the country? For me and 98% of other taxpayers in the state the rate is 0%. How can this be the highest rate?
A $400 per month tax credit is of marginal use because 43% of business now pay none? These are probably the same businesses whose owners won't pay an income tax tax because their income is too low, that is why they don't pay B&O.; The credit will go to those who make more and will more likely be in the range for the income tax. So there is a specific break for those who may be paying the income tax.
To state that income taxes for higher earners have failed in specific states is to blame the tax rate rather than the overall recession in which ALL tax collections have fallen. So people deliberately tanked their businesses in order to avoid taxes? I also find it interesting that people in Maryland chose to die rather than pay the tax. Really?
I would think that having so much income that I have to pay these taxes would be a good kind of problem, unless my lifestyle demanded every bit of cash I could muster to keep my luxuries in place.
Posted Fri, Sep 24, 8:28 a.m. Inappropriate
That's really too bad about the higher earner tax in Maryland causing people to die. I'm really glad that we're able to prevent deaths here by imposing a high estate tax. Do they teach tax policy at medical school?
Posted Fri, Sep 24, 8:42 a.m. Inappropriate
Everyone is entitled to their own opinion, but not their own facts. I love Cross Cut, but it is in bad need of an editor and a fact checker. Brewster--you can't do it on your own!
Posted Fri, Sep 24, 8:46 a.m. Inappropriate
So many facts wrong, so many claims unsupported. Where to begin?
1) I-1098 increases the B&O; tax small business tax credit to $4800, not $400 as you state. That means that under I-1098, 81% of all businesses will not pay B&O; tax, and another 12% will see their taxes reduced.
2) I-1098 has public accountability in spades, such as required public annual reports that show how the $$ are spent, number of people benefited, and monthly reports on deposits, withdrawals, and balances.
3) I-1098's *effective* tax rates will be among the lowest in the country, because the first $400,000 is exempt from the income tax. In effect, you're deducting the first $400,000 you make (should you be so lucky to bring that big a paycheck home).
4) As for S Corp and other business income reported on personal tax returns: Business expenses are *not*, in fact part of adjusted gross income. They are deducted from gross business income, and if there is net profit after, *that* gets reported as personal income. (Which by the way, is a much much better deal than paying B&O; taxes on gross income, regardless of whether you turn a profit.) S Corps also pay no corporate income tax to the feds.
5) It's great that you "expect" charitable funds to be "diverted to the legislature". But do you have any factual basis or evidence for your claim? I doubt it, otherwise you would have printed it here, right?
6) You are "seeing plans" put on hold, as "companies" are exploring whether to move? Evidence please. Otherwise, you're just fearmongering. If not having an income tax is soooo wonderful for Washington's business environment, then our state's economy should be going gangbusters, right?
7) It's so interesting how business types talk a big game about how important education is to competitiveness, etc. -- but when it comes to paying for it...mmm, not so much. Case in point: you call I-1098 "horrible fiscal policy", when in fact it will help lower class sizes and make college more accessible. That doesn't sound very horrible.
Posted Fri, Sep 24, 8:57 a.m. Inappropriate
In the final analysis, this is just one more tax that, once implemented, will be spread to a wider and wider base and raised along with all the rest. This state needs real tax reform, not just the piling on of more taxes. The people can't afford more government. We have other things we need to spend our money on - at least, that portion of our money we're allowed to keep.
Posted Fri, Sep 24, 10:36 a.m. Inappropriate
Wow, this article makes the no on I-1098 people look really unprepared and ill-informed.
The article says Judith M. Runstad is a 'leading attorney'. Leading in what?
Posted Fri, Sep 24, 10:41 a.m. Inappropriate
Judith M. Runstad is a leading banking and real estate attorney.
Posted Fri, Sep 24, 11:36 a.m. Inappropriate
Interesting that Judith writes "(experts disagree as to whether it would befourth or fifth, but the point is that we would be starting out in the top 10 percent of income tax states)."
Which experts?
This rationally explains how the tax would rank--with references:
http://washingtonpolicywatch.org/2010/06/28/chart-of-the-week-initiative-1098-effective-tax-rates-are-lower-than-most/
Posted Fri, Sep 24, 2:09 p.m. Inappropriate
"don't tax you, don't tax me, tax that man under the tree"
I-1098 is disquieting for the simple reason that in a democracy the majority can vote to tax a specified minority. I don't make nearly enough money to have this Initiative affect me; in fact, I probably have no friends or acquaintances who will be affected but doesn't it bother advocates that this Initiative is such a cynical separation of us and them? extended to it logical conclusion the high income earners would pay all the taxes and the rest of us would never have reason to resist a tax increase. We hold the power to make a tiny minority pay for not just most of our government but for all of it.
Given this extreme example the high income folks would just move to another state I suppose (just owning a mansion here does not necessarily make you a resident) and it seems likely to me that even the subject Initiative would encourage some people to take their businesses and bank accounts to other states. It seems to me that our economy in Western Washington has depended on individual business initiatives (Boeing, Amazon, MSFT) more than some other states. After lumber, that's what has made this economy perform well. Read Runstad carefully, she makes a better case than the commenters here are willing to admit.
Posted Fri, Sep 24, 2:50 p.m. Inappropriate
Keith, I have read Runstad very carefully and she is riddled with factual errors that no one including Runstad is responding to. The main thrust of her article is the slippery slope logical fallacy: http://en.wikipedia.org/wiki/Slippery_slope.
What we are voting on is a progressive state income tax. This concept was invented by the ancient Greeks: http://en.wikipedia.org/wiki/Economy_of_ancient_Greece#Taxation and is still alive and well in the vast majority of modern democracies. Are you advocating a different form of government?
Posted Fri, Sep 24, 2:52 p.m. Inappropriate
I'd have to agree with westside that Judith Runstad should have included a reasonable disclaimer in her piece, along the lines of:
(Full disclosure: Judith Runstad and her husband, Jon, have a net worth of several million dollars and would probably have to pay income tax under I-1098. Most of their close friends would also see their taxes increased under this measure.)
Posted Fri, Sep 24, 3:01 p.m. Inappropriate
Adjusted Gross Income can be very different than the income we usually think of as net income. AGI includes Wages, Salaries, Tips (line 7), dividends (lines 9a and 9 b), capital gains (13), business income (12), IRA Distributions (15a), social security benefits (20a) and more. This is all added up on line 22. You can then subtract various items such as SEP and Simple contributions , moving expenses and some other items, to get to AGI on line 37. The section following line 37 is where you can elect to take either the standardized deduction or itemized deductions, and various credits.
There is always the potential for these definitions to change. Right now for example, you can exclude $250K (single) or $500K (couple) gain from the sale of a house you've lived in for two years. That differs from the case of several years ago.
One thing that has not gotten any discussion at all is just who makes up the people who would be subject to the tax. What percentage of "high earners" are people selling assets, and what percent are people who have actual cash earnings in that year?
I could imagine a scenario where a family member passes away, the surviving spouse has been in the house for a long time, and suddenly finds out he (or more likely she) is a "high earner" according to the definition of the law. Though, if that "high earner" also happens to have a retirement home in the sunbelt, and spends more than half the year there in the year of the sale, they may not end up paying tax in Washington State after all.
If this passes, it will be a major economic boost for tax planners and accountants. The effective rate on dividends and capital gains will be significantly higher under many scenarios in DC, and couple that with a change in our tax code as well and you create major incentives for people to adjust their behavior.
In the other article, the UW professor blasts Microsoft for recognizing its income in Nevada. He says "who would want to move there." One person who moved there is Pierre Omidiyar, founder of Ebay. A "move" does not have to be long term, it just needs to be "long enough" for tax purposes.
This may come across as a cynical post. That's not the intent. If anything, what makes me really cynical is the way so many of the downtown law firms and people who are against this tax have greatly benefited from the huge amount of debt our government has taken on for sports stadiums, light rail, the third runway and other projects. I just think voters need to be fully informed of what they are voting on.
Posted Fri, Sep 24, 3:46 p.m. Inappropriate
A quick addition to sjenner's post about AGI:
AGI also accounts for business expenses and investments (cost of goods sold, labor costs, vehicle expenses, etc.) via Schedule C and/or Schedule E, depending on the business type. Net business income - or loss - shows up on either line 12 or 17 of Form 1040, and is included in AGI on line 22.
Business owners can also "carry back" losses for 2 years (more recently 5 years), and carry forward losses for up to 20 years, which can help smooth out potential tax liability. (See: http://www.irs.gov/publications/p536/ar02.html)
Posted Fri, Sep 24, 4:12 p.m. Inappropriate
Let's be clear about this proposed tax. It is on the income over $400,000 (per couple). If a couple makes $400,000 income in a year, they pay no tax. Many people do not get this point.
About grand dad passing away and grandma becoming a high earner, wouldn't that be inheritance, not income?
I think most people in Washington state wish they had these kind of high earner problems!
If you are running a business or S CORP that is making more than $400,000 in actual income, I would hire a new accountant or just be thankful you have a very successful business and pay your taxes.
Posted Fri, Sep 24, 6:07 p.m. Inappropriate
Andy, I read your link: "..Direct taxation was not well-developed in ancient Greece. The eisphorá (???????) was a tax on the wealth of the very rich, but it was levied only when needed — usually in times of war." Is that the system you see in "the vast majority of modern democracies"? the article you reference goes on to say that taxes were levied on practically all properties and many transactions; it does not suggest that the wealthy paid nearly all taxes. It does hint that collecting taxes was a problem in BC Greece as it apparently is now.
My reservation about a tax that only applies to a tiny minority who have little voting power is simply that it is a corrupt and divisive maneuver and is not really compatible with honest self government. We should all pay taxes to fund the government we want.
Posted Fri, Sep 24, 6:13 p.m. Inappropriate
I think the comments ba makes are correct about business expenses and the ability of people to smooth out income via their schedules. Andy asks "wouldn't it be inheritance" in the case of the widow? This is something a tax expert will have to answer. The big question is what's the basis of the property once the surviving spouse inherits it. Is it the original basis, or the basis at the time the first spouse passes away? My original assumption was it was the origial basis, but now on second thought I'm not sure.
The broader point is: this stuff is very complicated, accountants are going to love the new business, and some people could get nailed who in no way, shape or form consider themselves to be "high earners." Unfortunately the assumptions the pro 1098 campaign makes are not clear at all. OFM seems to just assume straight-line from 2006, which is dubious.
Posted Fri, Sep 24, 7:09 p.m. Inappropriate
It is really important for a publication such as Crosscut to be honest with its readers as to the backgrounds of its columnists. The tagline for Runstad is patently disingenuous.
Rather than stating that "Judith M. Runstad is a Seattle attorney with a long record of civic leadership in the region." It should be stated that Judith Runstad was a former partner and "land-use attorney at Foster, Pepper & Shefelman PLLC." Furthermore, she has served as a director of Safeco, Wells Fargo & Company, and Potlatch Corporation. She has served as a board member and past-chairman of the Greater Seattle Chamber of Commerce, Downtown Seattle Association, Alliance for Education, and the Seattle Foundation Board. She is a past chairman of the King County United Way Campaign.
She has served on several gubernatorial commissions, including Governor Locke's Competitiveness Council (as co-chair), the Governor's High Speed Ground Transportation Commission, and the Governor's Washington State Growth Strategies Commission; currently, she is co-chair of Governor Gregoire's Washington Global Competitiveness Council.
http://en.wikipedia.org/wiki/Judith_M._Runstad
Her husband H. Jon Runstad is a leading downtown Seattle developer and founder of Wright, Runstad & Company.
Not to question her motives because it is apparent that she exhibits a commitment to serving the community, it does seem like this tax is expressly targeted towards Washington residents like Ms. Runstad who currently pay taxes disproportionately to their income. A simple Google search indicates that she was compensated to the tune of $238,431 by Wells-Fargo in 2008 and $124,661 by Potlatch in 2009.
As a lawyer and banker, a very high incomer earners like Runstad will not be re-investing profits into their businesses Hence, the I-1098 tax is very effective one at generating revenue for the state since it will not affect how Ms. Runstad conducts her business. I seriously doubt that a higher tax on her income will resulting in her working less in her director positions for these large corporations.
Ref:
http://people.forbes.com/profile/judith-m-runstad/64860
Posted Fri, Sep 24, 9:58 p.m. Inappropriate
Judith Runstad states "...So, there is no assurance whatsoever that the tax imposed by 1098 will be deductible from federal income tax..." I find it amazing that a lawyer with her "credentials" does not know that, in practice, there is no "tax deduction" for a State Income tax for higher income earners. Yes, the expense is reported on Schedule A but then the Alternative Minimum Tax (AMT Form 6251) kicks in and disallows the income tax deduction. Her article lacks the academic integrity to be taken seriously.
Ref: See instructions for Form 6251 http://www.irs.gov/pub/irs-pdf/i6251.pdf
--Raoul
Posted Sat, Sep 25, 5:32 a.m. Inappropriate
The increases in spending by the state have been breathtaking. The state does not need more taxes, it needs far, far less spending. Public employee unions are basically the government organizing itself to extract way-above-market pay and benefits for public employees. This whole system of public employees being granted defined benefit pensions, Cadillac medical plans, can't be fired, etc., and then rewarding the politicians who support this through campaign contributions--is corrupt and will bankrupt the state.
The public employee unions seem to have no conception of the work, sacrifice, dedication, intelligence, creativity, etc., involved in actually generating weatlh, as opposed to being a government employee taking the wealth from those who generate it. A certain, limited amount of taxation is appropriate for absolutely necessary government services. Beyond that, what people earn should belong to them. All government functions that can be outsourced, should be outsourced, so that government spending and public employee unoins can be kept under control.
Posted Sat, Sep 25, 7:34 a.m. Inappropriate
Businesses cannot use carryforward and carryback to "smooth out" their income. Those terms apply only to a year in which a business loses money. So if a business makes $800,000 one year and loses $300,000 the next (perhaps from investing in new employees) the business could not get the 5%/9% back paid on the excess of $200,000 the first year. Of course the business owner could just get married and save some money that way. Now we're subsidizing marriage for rich people.
Posted Sat, Sep 25, 9:07 a.m. Inappropriate
As an attorney, Runstad realizes that the reason lawmakers are allowed to change initiatives after they have been on the books for two years, is that they are elected to make and adapt laws to a changing world. So, to cite this law as a reason to oppose this or any other initiative is pure poppy cock. Change that law if you don't like it or elect new lawmakers if you don't like how they carry out their jobs. You expect a less specious argument from an attorney, especially one who has a good reputation.
Posted Sat, Sep 25, 9:32 a.m. Inappropriate
Imagine a brain surgeon at Seattle Children's Hospital. He makes about $600,000 a year (having achieved that after years of study and residency when he was making a fraction of that). He is soon to pay almost 40% in federal taxes, $240,000, leaving him $360,000 a year. He is now asked to pay an additional $54,000 to the state of WA. He now has $306,000 Add in property taxes and sales taxes, and he is paying well over 50% of everything he earns performing surgery to some form of government support. He is now a 50% slave, and only gets to keep 4 hours out of every eight that he works. He turns to you and says, "listen, I was giving to more charity, but between mortgage, malpractice insurance, loan payments, car payments, and so forth, I don't have the capacity to give the $54,000 I used to give to charity." And he looks to you to understand. But you scream at him: "you are the elite! You are in the top 1%! You must be made to pay for what we need! We need it you have it, give it to us! From each according to his ability, to each according to his needs! You have NO CHOICE! And you're a BASTARD for not continuing to give to charity in spite of this tax! And... you're earning too much for surgery anyway!!" (which is how many of you commenters sound)
And the doctor looks at his situation, and he wonders, does he have a choice? Can he not move to someplace that may need a surgeon, that doesn't ask him to give up an additional $54,000 to people who don't appreciate it, don't respect it, don't express any form of gratitude that he's giving that $54K for their use, for their kids, for the community? Why not move? Can a majority of people impose a penalty on him that he can't escape? Do others have a right to impose their will upon his freedom? His ability to earn?
So then, we lose a brain surgeon, and his subsidy of schools and healthcare, all of his charitable contributions, and all the sales and property taxes he might have paid. Now, tell me that this punitive looting, this parasitical attitude, is a good idea.
Posted Sat, Sep 25, 10:19 a.m. Inappropriate
The problem with your argument, "benmc", is that you are addressing a group of people who are by and large so narcissistic that they cannot feel empathy for anyone, especially those whose prosperity they resent, for the simple fact that it is not their own.
Posted Sat, Sep 25, 10:21 a.m. Inappropriate
Hopefully practicing medicine in this wonderful place is more than a paycheck for this physician. Part of the reason he makes as much money as he does is that he practices medicine in the US. He likely wouldn't make that in another country. And drop him into a third world country and he likely wouldn't be a doctor at all -- just another poor wretch. So hopefully this doctor gets the joke. He is prospering not despite the place where he lives but to a large degree because of the place (and the rules) where he lives. I don't doubt for a minute that if this doctor leaves, another will take his place and perhaps one who appreciates why he has what he has.
Posted Sat, Sep 25, 10:21 a.m. Inappropriate
Dan Evans just came out against I-1098 as well. The Bill and Melinda Gates chair of Computer Science at UW has a thread supporting I-1098 here on Cross-Cut, of course he gets a $187,000 a year Salary and wouldn't be bias in favor of his endowments opinon...would he?
Posted Sat, Sep 25, 12:14 p.m. Inappropriate
Pythagoras, you write about Ms. Runstad's list of accomplishments as if they were a bad thing.
Posted Sat, Sep 25, 4:01 p.m. Inappropriate
Amazing how everything in Ms. Rundstad's article was reported by Robert Mak in King 5 Upfront last week. It was in fact checkers and Robert confirmed everything Judith mentions. count me as a no vote.
Posted Sat, Sep 25, 5:16 p.m. Inappropriate
"Hopefully practicing medicine in this wonderful place is more than a paycheck for this physician."
-- I'm sure it is: so why don't more people make the decades long sacrifices, and take the risks, to do it?
"Part of the reason he makes as much money as he does is that he practices medicine in the US. He likely wouldn't make that in another country."
I'm not really sure that is relevant.
"And drop him into a third world country and he likely wouldn't be a doctor at all -- just another poor wretch. So hopefully this doctor gets the joke. He is prospering not despite the place where he lives but to a large degree because of the place (and the rules) where he lives."
Ah. So, then, since the PLACE where he, and you, and I live, we then should expect a bit more relative equality wouldn't we? I mean, if you're saying the man is just another denizen of the coal mines but for his place of birth, then it stands to reason that, if not all, at least many more should experience a similar level of prosperity. If that were true... then why would the many need to tax the few at all?
Obviously I disagree with you: I think it is the doctor's personal qualities that led to his prosperity. I doubt even in his own high school there are as many achieving the same income, because they didn't pay the same prices in personal sacrifice.
And I don't think that his efforts or achievements mark him for slavery. To put it another way: I think he has more right to his money than you or I do.
"I don't doubt for a minute that if this doctor leaves, another will take his place and perhaps one who appreciates why he has what he has.— Mikos"
Oh, certainly. Brain surgeons, like money, grow on trees.
Posted Sat, Sep 25, 6:19 p.m. Inappropriate
benmc, your state tax numbers in your 'editor's pick' comment are incorrect. Can you show how you came up with them?
Maybe the money from the new tax will send benmc and the crosscut editor back to remedial arithmetic class.
Posted Sat, Sep 25, 7:08 p.m. Inappropriate
keith, eisphorá and liturgies are widely regarded as the beginning of progressive income taxation, and the birth of the concept that the rich have greatly benefited from society and should contribute back in the form of taxes. Almost all modern democracies now have progressive income taxes.
Washington state currently has a regressive tax system, meaning the poor and middle class pay a higher percentage of their income than the rich. Even I-1098 does not fully correct this.
Eisphorá would be a great way to pay for the Iraq and Afghanistan wars.
Posted Sat, Sep 25, 9:41 p.m. Inappropriate
Benmc reduces the public policy argument to personal, psychological resentment. In fact, I really don't care that others get rich: Ichiro and ARod and Oprah can keep their gazillions--if folks are dumb enough to pay that money to watch boys and girls play, well, those people deserve to be fleeced. But when it comes to health care and the needs of children to be taken care of, then the rules of wealth change. The drive to maximize one's wealth in the face of a child's suffering is obscene. Would your brain surgeon gladly devote pro bono time to work for the good of poor children, even those who have no health insurance, while giving up a "paying" customer? Or would she leave the state for greener pastures? Would she do it for free or would she ask to be subsidized by the state so she can keep her home in Laurelhurst and keep her BMW (it really has nothing to do with "paying back loans")? Who really paid the most for her education? If she attended public schools and the UW, then the citizens of Washington subsidized her. If she went to Johns Hopkins, then the citizens of the U.S. subsidized her education through the "charitable" contributions deduction, which any rich person will take advantage of to maximize their wealth while claiming to be be charitable. Her "loans" were subsidized by the citizens, anyway. You are trying to tap into the old myth that "real" Americans "earn" their way in the world and shouldn't be subject to "punitive" treatment. That's like saying the pioneers earned their homestead and forgetting the ethnic cleansing of the U.S. Cavalry.
Sorry, Benmc, wealth is not the Calvinist reward for hard work and being blessed by god that then gives you some mysterious "right" to your wealth. It is the function of public policies determined, to no one's surprise, by the wealthy themselves who buy the majority of politicians who set the policy. Duh!
You'd be much better off trying a utilitarian, Reaganite trickle-down theory which, as we've seen, works so well.
Posted Sun, Sep 26, 1:17 a.m. Inappropriate
Benmc, just like the federal tax, this is a graduated tax.
I'm not arguing for or against this initiative, just trying to expose facts.
Consider your scenario of a single $600,000 income earner: (200k * 0%) + (500k -200k * 5%) + (600k-500k * 9%) = $24,000. That is an effective tax rate (24,000/600,000) of 4%, not 9%.
Repeated: not $54,000 in taxes, but $24,000.
Posted Sun, Sep 26, 1:18 a.m. Inappropriate
" your state tax numbers in your 'editor's pick' comment are incorrect. Can you show how you came up with them?"
Andy, oh, I can help you out. First, get a calculator. Then, use the number 9, which can be found on your numeral chart between 10 and 8 (I think it was the number of the day on Tuesday, did you miss that episode? Elmo repeated it twice, man!) That number represents the amount of tax that will be levied on anyone who earns more than $400,000 as an individual, and it is based on their gross, not net of federal taxes. So, your next step is to use your calculator to multiply 9 by 6. did you get 54? Good for you!
Now, try it with all those zeroes. 600,000 times 9 percent means you will need to use something kind of tricky, but trust me, it works: .09. Multiply that... did you get $54,000? Way to go andy!!
For further study check out "Percentages: Decimal's Tricky Pal" which I believe is graduate level study at Evergreen, your alma mater.
Posted Sun, Sep 26, 1:42 a.m. Inappropriate
Cascacedelete, ok, I'm wrong. Thanks. Sorry Andy.
In general:
My point still holds, though the numbers in my original post change. The tax is motivated by a false belief that the brain surgeon "owes it to society." That's crap. You want to take it from him because he has it and give it to others because they demand it, just admit it. But don't convince yourselves that it's morally superior to letting him have ownership of his own property. You are stealing it, for use by what you call "society," but which in reality is a bunch of service employees with far less concern for suffering kids than the doctor has. Where does it end? How much are you willing to take before you realize it IS punitive, it IS an act of taking due to envy, to give to those who you claim to have compassion for, but in reality are just another abstract object that you employ for your grand egalitarian schemes?
And when you engage in this kind of class warfare, your victory is an instant loss: the capital and consumption dollars that could have done so much more for society in free and unfettered hands, end up in the hamfisted mitts of clueless bureaucrats-- and union leaders, like Andy Stern, who earns more than brain surgeons but achieves nothing for anyone but his greedy kleptocrat self.
Posted Sun, Sep 26, 6:01 a.m. Inappropriate
"Many of you sit on nonprofit boards."
Obviously the intended audience for this piece does not include me, or nearly everybody else. This is cluelessness on a grand scale.
Posted Sun, Sep 26, 10:52 a.m. Inappropriate
Benmc, Your points are made quite elegantly. I agree wholeheartedly.
Posted Sun, Sep 26, 1:14 p.m. Inappropriate
benmc, that is ok. It is a very common misconception that once you get to $200,000 you suddenly pay $10,000. I do pretty well with basic arithmetic, it was the calculus and linear algebra that caused me a few problems in school. ;)
I did read 'Atlas Shrugged' when I was about 12, and even then I thought it was sort of juvenile. Perhaps you should read some other philosophers to get some perspective on the concept of society. Then we can debate the merits of Anarcho-syndicalism and the role of the state!
Posted Sun, Sep 26, 1:21 p.m. Inappropriate
Oh, I went to Western. Go Vikings! I do work with some engineers from Evergreen doing bioinformatics and they are better at math than me and benmc. Go Slugs!
Posted Sun, Sep 26, 7:33 p.m. Inappropriate
Many of you are framing this tax as class warfare, but it is not. Currently our state's tax structure unfairly burdens those of the lowest income bracket - the percentage of their incomes that go towards sales tax far exceeds that of those who earn the most. Simply, this income tax evens out the burden borne by the haves and have-nots.
Posted Sun, Sep 26, 11:47 p.m. Inappropriate
"Here Come the Brides"
Posted Tue, Sep 28, 5:02 p.m. Inappropriate
Something I haven't heard discussed yet is if this initiative passes, what new state bureaucracies are we going to need to create to handle the collection of this tax? Can the Dept. of Revenue handle the additional work, or will they need to hire a large group of new public employees?
I would think we will all have to fill out new State income tax forms to confirm our income to determine eligibility?
Posted Tue, Sep 28, 9:52 p.m. Inappropriate
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 Thu, Sep 30, 10:16 p.m. Inappropriate
Gates’s ads are good but I’m voting “no.”
Posted Thu, Sep 30, 10:17 p.m. Inappropriate
Gates’s ads are good but I’m voting “no.”
Posted Fri, Oct 1, 5:43 p.m. Inappropriate
This whole article is written by someone who will pay this tax. That's enough reason to dismiss her argument right off the bat.
The argument that rich people make jobs is crap. Middle class folks with good ideas who want to get rich make jobs. It's called the American Dream. We need to give the middle class a big tax break and 1098 does that.
I'm saving $156 a year and I'm going to spend it on Main Street, not invest in Wall St. or China or where ever gives me the highest return. Middles class purchasing power is what drives this economy. Time to give them more of it.
Posted Fri, Oct 1, 7:21 p.m. Inappropriate
Washington's taxation system is a mess. We all agree to that.
I think we'd all agree also that high-income people (lik eMs. Runstad and her husband) have better access to tax attorneys than low-income people. I know some high-income people. They do not pay the same percentage of their income in tax that low-income people do. On average, they pay about 3% of their income in taxes (aside from what their attorneys do for them) and low-income people pay on average 17% of their income in taxes.
That's not fair.
The State Medicaid office's Doug Porter said today that Washington residents on Medicaid would lose their pharmacy benefits due to cuts. My daughter is one of the poor disabled Washington residents who would lose access to medications.
Given the mess we have in our tax system, and given the cuts that have to be made, which do you think is more fair:
1. That my daughter and many thousands of other people--poor and/or disabled--lose their medication benefits?
OR
2. That people earning more than $200K a year pay a 3% tax?
Choose. Don't think of two years from now; think of now, and choose. Those are your choices.
Posted Sat, Oct 2, 9:49 a.m. Inappropriate
The tragedy of 1098 is that it masks a very significant property tax cut under the guise of being some kind of Robin Hood-esque "Tax on the Rich".
It is quite the opposite!
Real tax reform in Washington State would require a change in both our state Constitution and in the way properties are assessed.
After 20 years of meteoric growth, I would hazard to guess that many of the large properties in this state are not correctly assessed under "best use".
I mean, I see mini-farms next to suburban developments. Are you telling me, that the one acre with six $400,000 homes on it, is taxed at the same rate as the empty acre next to it?
And while the Big Budget Maniacs are clamoring for making everything a "real city...just like New York" what they don't realize is that Washintonians don't pay anywhere near the property taxes that East Coasters do.
I'm all for fairness and paying...but right now, foisting an even more unfair property tax, foisted upon us by the very few people who would get huge tax rebate, in state that already has an archaic and unbalanced system would be a tragedy!
http://www.latimes.com/news/nationworld/nation/wire/sns-highest-property-taxes,0,428343.story
"New Jersey residents pay the highest annual tax bill of any state - a median $6,579 per year, according to the Tax Foundation, which calculated the tally using data the U.S. Census Bureau released on Tuesday.
Connecticut comes in second place ($4,738), followed by New Hampshire ($4,636) and New York ($3,755)."
Washingtonians pay about $2500...nowhere near what the "Big Infrastructure" states pay. And many of these states have City Taxes for people who feel the need to live in density and want to take money out of their paycheck for all the goodies.
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