Washingtonians have always said “No” to a state income tax, and the companion message has been “Yes” to businesses seeking to move here. So powerful are these dual messages, our state typically ranks high in the national rankings of business-friendly states.Why anyone would want to change that winning formula is a mystery to us, but such foolishness seems to sprout like an invasive species whenever the state runs out of money. It’s happening again this year; another proposal for a state income tax is moving from a back burner to the front of the legislative stove.
More on that bummer news in a moment, but first let’s celebrate Washington’s improvement to No. 7 among the states in a business-friendliness assessment by the nonpartisan Tax Foundation of Washington, D.C. That’s up one notch from last year, and one of the driving reasons is the absence of a state income tax. As Aaron Corvin reported in a Thursday Columbian story, all but one of the top 10 states boast the absence of one or more of the major taxes (state income tax, state sales tax, major business taxes, unemployment insurance taxes and property taxes.)
As Washington struggles to escape the lingering economic crisis, this No. 7 ranking will play a huge role in economic development. Surviving businesses obviously will look to relocate in states that have healthy business climates. Many companies already have and will continue to migrate from California, which ranks 48th in the Tax Foundation ratings. It’s the only western state in the bottom 10. Meanwhile, six western states -- Wyoming, Nevada, Alaska, Washington, Montana and Utah -- are in the top 10.
Oregon, which has no state sales tax, ranks 13th, improving from 15th last year.
Unfortunately, as we noted earlier, not every legislator seems to understand these rankings. Gov. Chris Gregoire has proposed a temporary increase in the state sales tax, and at least one bill in the Senate mentions a state income tax, or at least sending such a proposition to the voters in November.
History screams that this would be a waste of time. In 2010, a compelling 64 percent of voters statewide rejected a state income tax (on taxable income above $200,00). That same year, 54 percent of voters repealed legislation that had created a sales tax on soda, bottled water and other products.
Nevertheless, this year Senate Bill 6495 (no sponsors from Clark County) seeks to ask voters to impose a state income tax ranging from 2.2 percent to a whopping $3,574 plus 6 percent for upper-income individuals. If anyone promoting that bill cannot ascertain how we achieved that No. 7 national business-friendly ranking, then they ought to at least read this passage from a Thursday statement by the Washington Policy Center: “With the exception of targeted sin taxes in 2001, 1994 and a 911 tax in 1991, voters haven’t been kind to tax increase proposals on the ballot. In fact, tax increases specifically earmarked for education went down in flames in 2010 (64 percent no), 2004 (60 percent no), 1989 (66 percent no) and 1973 (77 percent no).”
Washingtonians clearly want to remain business friendly. We could do no greater damage to our national prestige than creating a state income tax.