The "rich" have options most of us don't. What happens to the expected revenue when they decide to move to a state or foreign country with a lower tax rate. I know a couple of Oregonians that moved to Washington after the Oregon voters voted to add a higher income tax to the rich. They own businesses that can be managed from a distance or easily moved.

Anyone believing the Democratic Party does not intend for an income tax to apply to everyone hasn't been paying attention. In the 2009 legislative session, Senator Rosa Franklin (Democrat) introduced Senate Bill 5104 to the state legislature. Though not advanced, the bill was "retained in its present status". Meaning it is still alive. Here is a link to the bill:

http://apps.leg.wa.gov/documents/billdocs/2009-10/Pdf/Bills/Senate%20Bills/5104.pdf

In this, Senator Franklin documents the true goal of her party:

NEW SECTION. Sec. 301. TAX IMPOSED--RATES. (1) A tax is imposed
on all taxable income of resident individuals, estates, and trusts and
on all individuals, estates, and trusts deriving income from sources in
Washington for each taxable year based on the type of return filed and
the amount of income in accordance with this section.

(2) For every married individual who makes a single return jointly
with his or her spouse and for every surviving spouse, the tax is
determined in accordance with the following table:

If taxable income is: The tax is:
Not over $49,900 . . . . . 2.2% of taxable income
Over $49,900 but not over $120,650 . . $1,098 plus 3.5% of the excess over $49,900
Over $120,650 . . . . . . . $3,574 plus 6.0% of the excess over $120,650

(3) For every head of a household, the tax shall be determined in
accordance with the following table:

If taxable income is: The tax is:
Not over $37,425 . . . . 2.2% of taxable income
Over $37,425 but not over $90,488 . . . $823 plus 3.5% of the excess over $37,425
Over $90,488 . . . . . $2,681 plus 6.0% of the excess over $90,488

(4) For every individual, other than a surviving spouse or the head
of a household, who is not a married individual and for every married
individual who does not make a single return jointly with his or her
spouse and for every estate and trust, the tax is determined in
accordance with the following table:

If taxable income is: The tax is:
Not over $24,950 . . . . 2.2% of taxable income
Over $24,950 but not over $60,325 . . $549 plus 3.5% of the excess over $24,950
Over $60,325 . . . . . . $1,787 plus 6.0% of the excess over $60,325

(5) Taxable income of a taxpayer exempt from taxation by internal
revenue code section 501 is exempt from taxation by this title.

Didn't Rosa Franklin retire?

Didn't the Democrats control Olympia most every time she brought her income tax idea forward?

Didn't it die every single time?

You're my boy, BlueLight, but your Rosa Franklin Mountain doesn't even get to molehill status.

Says you, Ryan. I'll let the readers decide which is more plausible: my link to living legislation or your curt assertion that "there's nothing to see here, folks. Move along".

And I'm not your boy.

All Rosa and her fellow travelers in the legislature have to do in two years, if this passes, is declare an emergency so they can gut the initiative, as they have done several times to other initiatives, to raise taxes. All of a sudden a lot more people will be "rich". Welcome to the Democrats definition of "rich". Anyone making over the poverty line is "rich" to the Dems.

Is it going to take a complete catastrophe before the leadership in this state (Republican and Democrat) agrees on a balanced package of tax reforms that adequately funds our public services and isn't too scary to business? I'm beginning to think it will.

If we were to take McIlwain at his word, then I and a lot of my fellow Democrats would agree with him: the ideal income tax measure would be broader based and would do some combination of eliminating the B&O; tax, eliminating the state property tax, and putting a serious dent in the sales tax. I-1098 is a good start in that it substantially increases the B&O; exemption and reduces the state portion of the property tax by 20%. The Gates report has a lot of good discussion of the merits of various tax sources that the states use, and while there seems to be widespread agreement that the current system has serious flaws, doing anything about it is difficult, to say the least.

A piece of evidence is worth a thousand words, and the MinnPost article you linked is a good one in that it contains actual data. By no means does it provide a definitive view on the impact of the state tax structure on economic activity, but it does demonstrate that the public needs to be more skeptical when hearing such claims as that 1-1098 will cause in the economy.

"Gregoire says...she doesn't have a better idea."

Is it any wonder that voters feel betrayed and fed-up?

Good article about a very interesting debate. Wish the author had also mentioned some of the whoppers told by the other side. For example:

Bill Gates Sr.: The legislature will never extend the tax to other taxpayers or use the money to fund anything other than education and health care.

Mr. Hannauer: Since Connecticut and California have lots of rich people and a high income tax that proves that high income tax states attract wealth generators.

And the use of tax regressivity data that ignores the B&O; tax.

Arthur Laffer is a credentialed moron, which makes him a perfect pundit for the Tea Party era.

This statement, "because it wouldn't touch the sales tax, it would do nothing to make the system less regressive" is just completely absurd. When determining if the tax structure is progressive or regressive you have to look at the sum total of ALL the state and local tax mechanisms (not each one individually) and figure out how much each income bracket pays in taxes across the board. True, the poor will pay just as much in sales taxes with or without 1098, but adding a new tax targeting the rich and reducing B&O; and property taxes, as 1098 will do, will lower the overall burden on the middle class and renters (often the poor) while raising the tax burden on the rich. It makes the overall tax structure more progressive by leveling out the percentage of income paid in taxes across all income brackets.

How can anyone be surprised?

The Democrats are useless -- they've only given us Republican-lite policies that are geared toward helping corporations, not people.

The Prez himself refuses to call for a pause in foreclosures, despite the clearly illegal activities the banks have done.

The Dems have already caved on tax cuts to the wealthy -- they're just waiting until after the election to continue ALL the Bush tax cuts.

The Dems have done NOTHING to clean up the regulatory agencies like the BP disaster.

If gov't does nothing for you, the only rational vote is -- cut MY taxes, since not even the Democrats are gonna do anything for people

"The Washington State Tax Structure Study Committee, which Bill Gates Sr. chaired (the so-called Gates Committee), proposed an income tax with a corresponding cut in the state's share of sales and property taxes.
...
The legislature ignored the recommendation."

It isn't that the legislature ignored the recommendation. It is more that the legislature is incapable of taking action on substantive tax reform due to the extreme polarization that exists in the legislature. Real reform requires bi-partisan action to avoid the inevitable Eynman initiative repeal. There is currently no Republican support for reform. As Chris Vance stated in an earlier Cross-cut piece, the Republican caucus does not have the ability to create policy due to their time in the minority. They are so focused on policy that requires "tax cuts" that they cannot work within their party on any revenue neutral policy. The business community in particular has withdrawn itself from governance within the state.

Matt McIlwain is more than eager to tell you the type of policy that he would like to see. When pressed though, he will tell you that once this initiative is addressed that he is withdrawing from any political activity to focus on his family.

Does ANYONE have a plan that addresses improving and funding our education system? The Gates Senior plan seems to be a rational one that addresses inequities and regressivity in the existing system and taxes those who benefit most from our society and also those who most likely have benefited from higher levels of education provided by our society.

I can put on a tea party hat just like the next guy and rail against bureaucracy, potential future changes by our elected representatives, and how "they" are redistributing all the money I "earned" (or inherited, or got lucky in the stock market with, or because I'm so talented was rewarded with ridiculous levels of compensation, or because my government does such a good job of limiting the number of professionals in my field, was rewarded with a high income due simply to government-controlled supply and demand).

How many opponents have successfully gamed the system and avoided significant levels of taxation? How many of them are happy to pay a mere 15% on their capital gains while others slave at the minimum wage? How many of them reap huge tax benefits by deducting home mortgage interest payments for multi-million dollar homes on their tax returns? How many of them understand that the government since the Reagan years has been preserving and protecting the value of their current investments by keeping inflation low? How many of them are thankful for the tax breaks given to start-ups and high-tech companies and aeronautical companies that ultimately result in higher compensation way beyond the levels in this income tax proposal?

Methinks opponents of the income tax live lives too narrowly focused on their own interests without examining the value and interests of millions of others with less power and money and education. This is clearly a sort of clueless class warfare, where the wealthy are oblivious to the fact that they are sucking the mother teat dry, leaving others hungry, and the runt to die.

Sadly, the financial elite in this company have been brainwashed by their well developed financial brains to believe that everything is about the money, and when you say it's not about the money, it's about the money, and indeed, all that there really is is the money. In this world social workers and teachers have virtually no value because they are inefficient or wasteful. So it's no wonder that opponents cannot ever believe that our elected representatives (of the people, by the people, et al.), might someday actually create and fund a much improved educational system with the income tax that will benefit the 6 million people in this state, and that they might help provide that legacy through this modest state income tax. And they are probably right, when our education system starts improving, the legislature will want to make that system even better by increasing the income tax someday so that their children can go to college in state at a reduced rate and have a first class education along with all the other well-educated children of this state. Money is a means to an end. If you don't much believe that other people should be educated like you, then vote against the income tax.

You plainly have to have been watching so much Bloomberg and Fox News and have no real

Do high wage earners have any real comprehension how lucky they are, and how their selfishness is destructive to society?

The McIlwain conjecture: If high earners have to pay a state income tax, some of the smart people who want to create or at least work on the Next Big Thing will just leave — or won't come here in the first place.

As the article’s author points out, this ignores many reasons people choose to live in Washington State including numerous amenities that fit individual needs and wants. And smart people clearly benefit in many ways from living in proximity to other smart people. In effect, they might be willing to pay the price for richer lives even though their wallets would be slimmer. Some, of course, might be motivated by disposable income only and relocate.

I’m guessing that no one has studied this issue to definitively conclude that a 5 or 9 percent tax rate on high-income earners would exceed a tipping point that would drive our economy into the ditch. The opponents of I-1098 haven’t offered any evidence to support the claim. And both sides have supporters who clearly have benefited from our (at least until recently) dynamic economy.

So we seem to be left in a quandary -- how to decide? There is the obvious need to find money for all levels of public education which most acknowledge is crucial to our economic future. Even charter schools appear to work best when they receive extra incentives. And the pain of this recession may continue for some time, so shoring up the safety net is another reason that people with the means should contribute more.

But there is one tangential study that might at least give pause to I-1098 opponents. Last month researchers at Princeton, after reviewing recent surveys of 450,000 Americans, reported that people’s happiness increases in sync with income up to about $75,000. Above that level, their day-to-day happiness and satisfaction with life levels off.

To Stuka -- "where the wealthy are oblivious to the fact that they are sucking the mother teat dry, leaving others hungry, and the runt to die."
OR, "Do high wage earners have any real comprehension how lucky they are, and how their selfishness is destructive to society?" ???

You have got to be kidding me! Read a book about business, about economics, for chrisakes, but don't weigh in on these forums with this kind of crap.

Do you have any idea at all about how capitalism works? This is not a zero sum game. The wealthy do not get that way by taking money from the poor. They get wealthy by starting businesses, hiring people (creating jobs), and providing a better product or service to the customers. Is there some bad or selfish part there that I missed? Where do you think jobs come from?

I have absolutely no problem paying more, or even a lot more than a less well off person, but I will fight to my last breathe against a bill that plans to tax one group of people and not another. We all need to have some skin in this game. We all must pay some tax. Tax us all a 5% income tax, but tax us ALL.

This is insane.

Washington does not have a revenue problem. Washington has an expense problem. The legislature spends too much. Even in the recession it has continued to spend more and more and more. All of this "budget cut" and "no resources" stuff is utter nonsense.

The citizens of Washington are smarter than this. The political class - including the public unions - are just trying to get more. And more. And more.

Want our government to be like California's? Then tax the most productive people in the state. And suffer the consequences.

No on this unconstitutional initiative.

California's major problem is the the situation that would obtain in Washington if I-1053 passes: the requirement for a two-thirds vote of the legislature to vote new revenue.

Washington is one of only 7 states in the nation that don't have an income tax on all levels of income. An income tax on the top 3% of earners is not exactly political heresy.

As far as high-earners moving out of state, I doubt if Craig Ballmer or Paul Allen or the McCaws will do so. Some years ago when the City of Seattle proposed taxing local developers a small amount on their huge projects in order to support low-income housing, they all claimed they'd move elsewhere if that happened. It did happen, but strangely ehough, the very next weekend, their ads for hugely-expensive condos appeared in the real estate section. Apparently $19 per square foot didn't exactly break them. What did break them several years later was the financial disaster caused by their own colleagues: the banks and mortgage companies. That "I'll move elsewhere" threat is getting old. If people or companies want to move, they'll move anyway. Boeing did.

Hey Taupe,

I've read WAY too many books on business and economics. And have read too many Wall Street Journals and Economics mags not to have absorbed some inkling of what business is all about. I know how capitalism works pretty well. I've made lots of money working in high tech, investing in high tech, and I understand how the high-tech mind and the entrepreneurial mind work. I'm also a big critic of the inefficiency of government and bureaucracy in general, not to mention the legal but inbred corruption by special interests of our political system. This is standard Republican and Tea Party fare.

You say, "The wealthy do not get that way by taking money from the poor. They get wealthy by starting businesses, hiring people (creating jobs), and providing a better product or service to the customers."

Actually, that's how the wealthy who start businesses make money, not always how the wealthy make money. The wealthy make money in a lot of different ways. Over time the system has evolved so that the wealthy have many, many advantages that the poor and middle class do not have that allow them to build and maintain large fortunes with relatively little effort. In my view, the proposed income tax isn't about punishing the wealthy for being rich or selfish. It's about identifying the right revenue vehicle for providing education to children in this state. As a class of people, the wealthy have benefited either directly or indirectly from their educations or the educations of those in the businesses they run. Not only have they benefited, they KNOW they've benefited from that education, so understand the value of education in their own lives and the lives of other citizens. So asking them to pay an income tax makes sense. They will pay disproportionately, but they know they have been rewarded disproportionately because of their education (ok, AND their innate smarts and hard work, the the entrepreneurial risk they've taken, etc.) But the opportunity to get a good education was part of their success. So, just like bank robbers rob banks because that's where the money is, the income tax generates revenue for education because that's where the financial benefit that comes from education is.

You say, "I have absolutely no problem paying more, or even a lot more than a less well off person, but I will fight to my last breathe against a bill that plans to tax one group of people and not another."

All taxes tax people differentially (except, I guess, a universal head taz). Property taxes tax property owners, and not non-property owners. B&O; taxes tax businesses and not non-businesses. The sales tax taxes people who buy stuff, and not those who don't. The web of various taxes is personalized depending on what you own, buy, and earn.

The progressive income tax taxes higher incomes at higher rates. It isn't strictly "fair", but what system of taxes is? The regressivity of the sales tax at low incomes complements the progressivity of the income tax at high incomes. In general the property tax provides services and facilities that enhance the value of the taxed property, e.g., fire, water, sewer, schools.

I've heard that most states have Constitutions that make education of their citizens a top priority. Washington's Constitution does this. Unfortunately, our state is falling behind in providing a good public education to our kids. To my mind, the number of slots available at the UW for our own high school graduates is absurdly low and unaffordable to many who seek a college education. Education is supposed to be the "paramount" duty of the State, yet, I repeat, we're falling way behind.

Like many, I can point fingers at bureaucracy-heavy school districts, unaccountable teachers unions, and the teaching and testing methods I don't think work very well. I'd like to fix all that. AND at the same time I want to make education a mandatory spending and TAXING priority. I believe in the value of good teachers and good schools. The more we have of both, the more good, productive citizen we'll have, who will have productive lives and fill the jobs of tomorrow.

You say, "We all need to have some skin in this game. We all must pay some tax. Tax us all at 5% income tax, but tax us ALL."

Everyone has skin in the game if they pay sales tax. Even the wino living on the street pays the sales tax for his bottle of wine. He (or she) probably has NO income, but still pays a tax. I agree with you that that it would be preferable to tax everyone (although I'd prefer to do it progressively). But you of course realize how difficult it is to propose ANY income tax that will be voted in. I presume that the proposed tax is one that has some chance of passing, simply because it is not a new tax on everyone. Is this fair? If the people vote for it, then in our society it just is. The people don't have to like it and they don't have to think it is fair. If just is if the people vote for it.

I believe the wealthy in general don't fully realize how much of their financial success can be attributed to a system that often allows high earners to reap rewards that are exponentially greater than the effort put into earning those rewards. That's capitalism. That's economics. That's innovation and paying for talent and supply and demand. And that's Boeing and Microsoft and Starbucks and Amazon. But taxing progressively is part of capitalism too. Unrestricted capitalism tends towards larger and larger monopolies squeezing out competition, and then becoming little bloated bureaucracies not unlike the Federal and State governments. Typically, these companies are led by billionaires who controlled the allocation of stock, and thus the allocation of riches, thus assuring that they, their friends and the upper echelon in management or early investors got the lion's share of stock allocation. That's the way it is. The rich in this case decide who gets rich. It's the accidental millionaire problem (or opportunity if you like). The question is how do you tax this sort of income? And why is it right to privilege individual capital gains in the billions with a tax rate that is lower than that for a guy making an average salary? That's what we've done, thus allowing the creation of many billionaires. Is it fair?

I don't think so, even though I've benefited greatly from it. I think a progressive income tax at higher incomes makes so much sense that it's almost comically absurd to hear people who are well off complain about it. The wealthy in this state can choose to live like kings with access to every creature comfort known to man. They have benefited from the education that society has provided them. Their obligation, in a fair and rational society, is to provide those educational opportunities to the next generation. I can understand the complaint by the wealthy (and the average Joe too) about government and taxes and people redistributing their money to people who don't deserve it. But that's zero sum thinking. The pie gets bigger for everyone if we educate everyone. If you're richer because you're smarter, then pass it on.

One minor correction of what Stuka said: property owners who are investors don't actually pay property tax; they pass the tax on to their renters in the form of higher rent. (Renters can tell, because they're told "The rent's going up because my property tax went up.") So those who don't own property actually pay property tax. In addition, property owners can take federal income tax deductions, which non-property owners can't.

Those are only two advantages that people with means have that don't seem terribly fair to me. I'm sure there are many others. So saying that it isn't fair if only the wealthy pay state income tax is somewhat disingenuous.

The opposition won me over on the points of: (a) it can be extended to the rest of us in two years; and (b) nothing prevents them from moving the money elsewhere, and they've done it before. I already disliked the throwing money at education and health care without having any accountability part of it. I understand why they had to go this way to get an income tax, which I think would be the best way to fund all state functions, with voter-approved sales taxes to fund all county and local functions. This initiative falls far short of moving our tax system to this kind of arrangement. A more-comprehensive approach is needed.

Sarah,
Twisting the English language is not a good argument. To say, " property owners who are investors don't actually pay property tax; " is total BS. If you write a check to the government, you are paying taxes. Period. If you don't write a check to the government, you are not paying taxes.

Do you think it is unfair that a property owner considers his expenses (including taxes) when deciding what the rent should be?

What is disingenuous is your statement that the people who pay taxes don't really pay taxes.

To Stuka,
You say: “the wealthy have advantages .. that allow them to build and maintain large fortunes with relatively little effort” Are you kidding me? Oh, yeah, that’s right we can just build and maintain large fortunes with relatively little effort. Please pass the hookah to me when you are done with it.

The wealthy are not “rewarded disproportionately because of their education”. This is totally incorrect. Wealth is created through entrepreneurship. Entrepreneurs are typically not the highly educated. In fact, the more educated one becomes, generally the less entrepreneurial one is. The key traits of successful entrepreneurs are tenacity, street smarts and the willingness to take a risk. I know many very very smart people who could not take a risk if their life depended on it. How do I know these things about entrepreneurs? I have worked with entrepreneurs for over 30 years. They are the gutsy ones, not the smart ones.

One the other hand, I do believe that education is extremely important. Just because education is very important, does not mean that bill 1098 is the best way to raise money for education.

Be careful how you define the game. When I said skin in the game I was referring to the topic we are discussing here – the income tax. You are now defining the game as anyone who pays taxes in some way. This is not fruitful for purposes of discussion. If we are talking about the income tax it is not productive to say “I pay sales tax, so I shouldn’t have to pay income tax.”

And another thing, you say “system that often allows high earners to reap rewards that are exponentially greater than the effort put into earning those rewards.” I contend that the reward is exactly right for the effort. Who are you …some all-knowing judge of effort? Who are you to say the effort was not enough for the reward? I say let the market be the judge of that. I know many many entrepreneurs and the rewards they receive are totally justified. And what about the entrepreneurs who fail, who go out of business? There are many more of these than there are successful ones. So, it ain’t about effort. It is about creating value. And when you say their rewards are too great for the value they create, I say bull. Prove it. The market is the arbiter of value, not you.

Sorry to use bad language, but I cannot help myself. This is just total crap: “Unrestricted capitalism tends towards larger and larger monopolies squeezing out competition, and then becoming little bloated bureaucracies not unlike the Federal and State governments. Typically, these companies are led by billionaires who controlled the allocation of stock, and thus the allocation of riches, thus assuring that they, their friends and the upper echelon in management or early”

First of all there is no such thing as unrestricted capitalism, at least in America. If there was some bloated bureaucratic company just sitting there fat and happy, a number of entrepreneurs will jump on it and grab its business so fast it will make your head spin.

What is wrong with a company being led by a billionaire? Maybe the guy is kind of smart and he should lead the company. And by the way, CEOs do not control the allocation of stock. The stock market does. (Maybe time to refill the hookah?)

The simple fact that taxing only the top tier wealthiest in Washington would constitute the largest ever tax increase says it all:

Wealth has become too concentrated. An income tax, however imperfect, is a step to making our system a little bit more fair.

If Balmer decides he is Atlas and "shrugs" (leaves MS and moves out of state) Many, many people, include MS employees will be very, very happy.

DJ, you say "Wealth has become too concentrated." Why do you say this? How do you know that wealth has become too concentrated?

Many millionaires who rely on municipal bond investment for tax exempt income are laughing all the way to the bank as Gates Sr. wants to tax the high end earned incomes of the 'rich'. Will Gates Sr. be subject to any new Washington state income tax?