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Washington state income tax will find you eventually
We’ve been reading about the new state income tax proposal (Initiative 1098) for about a month or so, and I don’t know that either side has made a compelling case so far.
The pro-tax crowd has been stirring up the pot with phrases like, “The recession has forced devastating cuts to vital public services” when the cuts aren’t truly devastating; just inconvenient and harder to work with. “Tuition spiked up to 30 percent in two years”, which is costly for students, but so is the 31 percent increase in our state’s spending over the governor’s first four years in office.
And the state’s increase is measured in billions.
They’re also invoking Secret Rule No. 3 of Raising Taxes (hide behind old people and children), claiming that vaccinations, class sizes and adult day care programs are on the chopping block, when we’ve really just rolled them back to the 2008 funding level.
It doesn’t sound so scary when it’s put that way.
Meanwhile, the anti-tax crowd drops in threats that businesses will pick up and leave the state if faced with this crushing tax burden.
But they probably won’t; they’ll just pass along the cost to the consumer, not fill a job opening, and make some employee work harder to fill that gap.
It’s just another cost of doing business.
At my company, I just received an updated price list from a manufacturer I buy from, and they’re going to increase prices by about 18 percent across the board.
Does that mean that I make 18 percent less from now on?
Nope, it gets passed on to you, the customer (sorry about that).
You and I are not likely to be impacted by this initiative, except to see our taxes go down slightly. Not much, but some, and that’s always good for a few percentage points on Election Day.
And that’s the main strategy of the people behind this initiative, “This measure will lower your taxes.”
That sounds good, right? We’ve just spent the last few months suffering through increased school levies, speed traps, new fines for cell phone use while driving, higher taxes for beer, candy, bottled water, soda, cigarettes, lawyers, accountants, and tuition, plus elimination of the Bush tax cuts, passage of health care reform, and possibly another King County sales tax hike.
We could use some relief, right?
Temporarily, anyway. If you think the new income tax would never reach your income level, think again.
It’s easy now to argue, “This only affects couples whose incomes are over $400,000.”
In two years, the argument could be made again for $300,000.
In 10 years, the case could be made that rich people making over $200,000 a year need to pay their fair share (as if they weren’t paying any taxes already).
Proponents argue that any lowering of the income tax level would require a vote of the people, but King County Councilman Reagan Dunn pointed out that tax-limiting Initiatives 601 and 960 were both overturned by the state Legislature when they found it inconvenient.
The federal income tax followed the same curve, taxing only the top 1 percent to start, but it only took about 30 years to reach the bottom wage earners. What made it jump from taxing only the super rich to taxing nearly everyone?
A federal government fiscal crisis, of course, but once the crisis was over, the tax stayed for good.
It’s estimated that almost $1.7 billion will be collected from the very rich in this state, with an income tax rate of 5 percent or 9 percent depending on the income level.
That’s not enough to create a Lexus exodus to more tax-friendly states like Nevada or Florida, but the rules are different for the rich. It’s easy for someone making over $1 million a year to rearrange how income is reported, or simply pick up and move.
We’ll miss them when they’re gone, since they’ll be spending that money somewhere else.
Ryan Ryals lives in Maple Valley and writes a weekly column for the Covington Reporter, the Port Orchard Independent’s sister publication.