Tuesday, August 9, 2022
Aug. 9, 2022

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In Our View: Penalizing Success

That would be one of many negative effects if a state income tax is created

The Columbian
Published:

Just because the most recent proposal for a state income tax came from a select few who will be taxed the most — and not from politicians — does not make it any more palatable.

Bill Gates Sr. is leading the drive to get Initiative 1077 on the Nov. 2 ballot. The proposal is to tax only the rich … for now. It’s those last two words that worry alert Washingtonians. Granted, Gates is not a politician. Still, if a state income tax is created in Washington state, from the political perspective it will be even worse than the proverbial camel getting his nose in the tent. It will be more like the camel has a grenade in his mouth. Many legislators this year clearly demonstrated their willingness to raise taxes, even in defiance of voter-imposed restrictions, and in years to come they’ll surely find ways to bypass a few pesky rules that Initiative 1077 would set forth.

For individuals earning over $200,000 or a joint income exceeding $400,000, the proposed state income tax rate would be 5 percent. That rate would increase to 9 percent on portions exceeding $500,000 for individuals and $1 million for couples. Gates and other I-1077 supporters say the revenue would amount to about $1 billion, to be dedicated to education and health programs.

One of the most vapid arguments is that Oregon voters recently approved higher taxes on the wealthy, so hey, voters in Washington might do the same. That is the consummate apples-and-oranges analogy, largely because Oregon does not have a state sales tax while Washington does. And nowhere in the wording of I-1077 is there any mention of any accompanying decrease in our state’s sales tax if the proposal becomes reality. Furthermore, that gouge-the-rich mentality in Oregon fuels the recruiting of corporate offices from that state, and the hope they’ll relocate on this side of the Columbia River. That sales pitch would be pretty much nullified — much to the detriment of border areas such as Clark County — if a state income tax is created here.

Another flimsy argument in favor of I-1077 is that it would carry a 20 percent cut in property tax rates. Don’t be fooled. What they’re really talking about is the state property tax, which makes up only about one-fifth of overall property taxes. The rest are local property taxes. One estimate is that property owners would see less than a 5 percent decrease in total property taxes.

About the only argument for I-1077 that makes much sense is: Why not just let the voters decide in November? Because that would be a waste of time, in our estimation. Even if the measure makes it onto the ballot (we doubt it will), and even if voters approve it (even more doubtful), it probably will become ensnared in a lengthy legal battle. More than once the state Supreme Court has ruled, essentially, that a state income tax violates the state constitution. Some legal experts argue that those rulings are antiquated and could be interpreted differently by a modern court. Again, though, why meander into that judicial quicksand?

The Seattle Times recently editorialized that I-1077 would hurt job creation: “The tax employers pay for unemployment benefits is higher than in most other states. So is the tax they pay for injuries at work. So are the costs of environmental protection.” As one of just seven states with no personal income tax, the Times correctly declared, “We are one of the few states that can say, ‘We levy no tax on success.’ ” That’s why we have so many high-tech companies, so many good-paying jobs and remain so competitive on national and global levels.

The absence of a state income tax is a glorious attribute for our state in many ways, most rooted in economics. To expect that this advantage can magically be replaced by a nonsolution to our state funding woes is pure fantasy.

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