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News / Opinion / Columns
The following is presented as part of The Columbian’s Opinion content, which offers a point of view in order to provoke thought and debate of civic issues. Opinions represent the viewpoint of the author. Unsigned editorials represent the consensus opinion of The Columbian’s editorial board, which operates independently of the news department.

Yes on I-1098: Voters should pass tax reform proposal

Education, health care will benefit from tax on richest

The Columbian
Published: September 12, 2010, 12:00am

Initiative 1098, the tax reform proposal offered by Bill Gates Sr., will be good for Washington, and particularly beneficial for Southwest Washington. I-1098 will result in new investments in education and health care, tax cuts for small businesses and property owners, and a modest new tax strictly limited to the richest 1 percent.

Main Street small businesses struggling to survive this recession are among I-1098’s biggest beneficiaries. Under I-1098, more than 80 percent of businesses will be fully exempt from paying business and occupation taxes, and another 12 percent will receive a significant B&O tax cut.

For middle-class families as well as businesses, I-1098 also reduces the state portion of the property tax by 20 percent. That totals $400 million, money families and businesses can turn around and spend.

In order to invest in higher-quality education and more comprehensive health care, 1098 adds a modest tax which is strictly limited to adjusted annual gross incomes over $200,000 for individuals and $400,000 for couples. In other words, a couple earning $401,000 would pay tax on only $1,000. Couples earning less than $400,000 pay nothing.

According to estimates by Washington’s Office of Financial Management, 118,000 businesses will be newly exempt from B&O taxes, 39,000 additional businesses will see a B&O reduction, and only 38,400 out of 3.2 million filers — the top 1.2 percent — will pay the new income tax.

We all know that education is the key to opportunity. Businesses need a well-educated work force to operate efficiently and stay competitive. Yet Washington ranks a dismal 47th in K-12 spending, according to the Census Bureau. We rank 37th in awarding bachelor’s degrees and 39th in graduate degrees. And with more than 900,000 uninsured in Washington, health care has become unaffordable for too many.

Recent deep budget cuts have particularly affected Southwest Washington. Clark, Cowlitz, Pacific, Lewis, Skamania and Wahkiakum counties have suffered a 5 percent cut in the number of teachers. The waiting list for the Basic Health Plan now stands at a record 12,725 in the Vancouver area (9,000 in Clark County alone) and is rising.

I-1098 will raise $2 billion annually to restore these cuts. That money will not go to the state general fund, but instead will be dedicated to investments in lower class sizes, early learning, increased rigor in high schools, and greater access to higher education. I-1098 will also provide funding for the Basic Health Plan, long-term care and public health. In the Vancouver area, that means more than $50 million annually to hire teachers and more than 7,000 additional slots in the Basic Health Plan in Clark County.

With I-1098, Washington will join 43 other states that already have an income tax. Because 1098’s exemption is so large — the first $400,000 of income for couples is not taxed — the average effective rate on the top 1 percent of taxpayers will be just 4 percent. Neighboring states such as Oregon and California impose much higher effective rates on their wealthiest residents.

Wealthy opponents have made much ado over the fact that I-1098 includes an individual’s business income. But only 3 percent of business owners have incomes above $250,000 annually, and most states tax that same income and with much less generous individual exemptions. Moreover, business expenses, investments and losses will all be fully deductible.

Opponents also claim that after two years the Legislature will extend the income tax to all. But in Washington, the people have the last word. For instance, this November, the voters will decide on the new taxes passed last session and a new two-thirds requirement for future tax increases. The voters will decide on any change to the income tax as well, as I-1098 explicitly requires.

Let’s keep Washington a great place to live, raise a family and run a business. Please vote yes on 1098.