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Will WA income tax plan drive people to Oregon?

August 17, 2010

Look who wants to give Washington state an income tax.
Wall Street Journal Editorial Board,

The battle between taxpayers and government unions will define the fiscal future of the 50 states, and the newest battlefield is Washington state. That’s where a few rich taxpayers led by Bill Gates Sr. and the Service Employees International Union (SEIU) are bankrolling a November ballot measure to create the state’s first income tax.

And not just a toe-in-the-water tax. They’re diving into the deep end with a proposal that would immediately impose a 5% tax rate on income above $200,000, or $400,000 for married couples. The rate would climb to 9% on single filers making $500,000, or $1 million for couples.

No state has introduced an income tax since Connecticut nearly 20 years ago, and that state’s experience has not been happy. The top rate in Hartford began at 4.5% but has since climbed to 6.5%. Washington wants to leap over that and achieve California and New Jersey heights in one giant step. Washington would move overnight from one of the nine states with no income tax to having the eighth highest rate in the country.

Mr. Gates, a wealthy lawyer whose son is among the richest men on the planet, is pitching the proposal as a chance for 97% of the voters to pay the state’s bills by socking it to the richest 3%. What he doesn’t say is that Washington’s lack of an income tax is among its main comparative advantages in luring those top 3%, along with their businesses and jobs, into the state.

In addition to Washington, the states without an income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. Combined they had an average 18.2% growth rate in jobs over the past decade, more than twice the 8.4% job growth of the nine states with the highest income tax rates, according to a new report based on Commerce Department data by the American Legislative Exchange Council.

The liberal Seattle Times accurately describes the state’s zero income tax as “a selling point. An asset. And more than that: It’s a bonus for living here.” Even liberal Democratic Governor Christine Gregoire begins her sales pitch to prospective business investors with the reminder: “No income tax.”

That’s an especially powerful attraction on the West Coast, where California and Oregon impose a top tax rate of 10.55% and 11%, respectively. Proponents say Oregon raised its income tax last year, so Washington should get in the game. But Oregon at least has no state sales tax. Washington has close to the highest sales tax burden in the nation, varying by area but reaching as high as 10% in Seattle depending on what you buy.

To win votes, the ballot measure resorts to all sorts of trickery. Unions describe the initiative as tax “relief” because it includes a mandatory cut in the hated property tax (only by 4%) and it eliminates various unpopular fees and taxes on business. Still, the overall impact of the measure is a $1.5 billion tax increase in 2012 and $2.5 billion a year by 2016. Small business taxes are cut, but they are also hit with a whopper of a new tax: a personal income tax paid out of their profits. Over half of the tax will be paid by Washington businesses.

The biggest deception is the description of the new income tax as “an excise tax on income.” This language is cleverly designed to dodge the state’s constitutional prohibition against an income tax and the requirement that any tax be “uniform upon the same property.” Obviously a tax that hits only 3% of taxpayers and applies graduated rates is anything but uniform. Proponents claim that because the tax is withheld from worker paychecks, the money was never the property of the person who earned it. That’s like saying if someone steals your paycheck, it’s not your property.

We hope Washington voters aren’t duped by the claim that only the rich will pay this tax. After two years, the law allows the legislature by simple majority to extend the tax to nearly everyone. The revenue from the tax will finance new spending, which will soar and lead to even higher deficits in the next downturn, which will create political pressure to expand the tax to the middle class.

Income taxes are always sold as a one-time way to reduce deficits, but they always become engines of greater spending, and eventually deficits. Just ask Californians. If Mr. Gates wants the rich to finance more Washington spending to create more SEIU dues-paying jobs, he and his son can do so by donating their own fortunes.

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Discuss this article

Bad Man August 17, 2010

Mr. Gates Sr. appears to have his head in his posterior when it comes to what tax payers will put up with. Of course what would one expect from a lawyer who runs a non-profit divorced from the realities of everyday economic realities. This is nothing more than class warfare on the more fortunate.
If idiots like the Senior Mr. Gates want to pay more taxes, they can send as much of their money as they like to the State Treasury and the IRS.

bob j August 17, 2010

well, not suprising,,since ive heard over (alternative) radio broadcast that a certain man by that name ,,not sure if same one ,but could be ?? is a booster of the globalists,global bankers, and new world order proponents, one world govt.fiasco. as well as eugenics and population reduction by(forced means)??) so is not suprising as this is an extreme liberal posistion as is the proposed taxes. let me tell you ,Oregon taxes even without sales tax ,which has been voted down 9 times, are no easy way to go.and washington residents can now come down to oregon and buy things without sales can northern calif residents. is good for oregon which is a poor state. did someone say second only to Ms.? seems Ive heard that somewhere.however these communist ,socialist, liberal, ones will always kkeep trying to increase taxes no matter where they are. some folks think socialism ,communism, are posistions of the poor ,,not so are posistions of the extreme rich ,,pushed as so gives them more tyranical control. ie,,alle dirt poor except the rich rulng elite class.

Bud August 17, 2010

This could be a lot of outside Washington hype. See what happens.

Bob Clark August 17, 2010

Another point not often mentioned is this is a routine maneuver by the political class. It’s divide and conquer. If taxpayers don’t stand together against new tax measures, they eventually end up seeing all their tax bills being hiked. Today, its tax the guy making $250k or more per year. Then plans are hatched to tax the guy making $150k or above. Each time, a new minority is attacked with a new tax, and the remaining majority of tax payers allow it to pass thinking they are unaffected. But they are affected just as those in battle see their flanks being taken out.

Protect yourselves by voting no for taxes on single, isolated groups. Don’t be divided and conquered by the government class.

pyotr August 17, 2010

Obviously, those who are backing this initiative have too much money they have no idea what to do with. Why they feel that everybody else has this problem, I don’t know.

Secondly, and more importantly, is the question of what will happen the second year after the bill passes? Is anyone actually naive enough to believe that the Washington Legislature will not expand the definition of “rich”, or increase the rate? They’re going to need the “investment” Just as the Federal Income Tax on the Really Wealthy was extended to include the tips of a part time waitress, so “the needs of the public services (fire departments, schools, public art)” will lead to more and more “rich people” being allowed to “invest”.

Does anyone really trust the legislature that much? If so, contact me, I have a tunnel for sale.

Forrest August 17, 2010

Gates Sr. is an aristocratic socialist and an economic imbecile. Way to go moron, just dump our economy down the toilet to expand the socialist ruling class. Frank Herbert warned us over and over again about the perils of an aristocratic bureaucracy, it’s time to heed his warnings and sharpen our pitchforks. I’ll get the tar boiling, you bring the feathers.

bob j August 17, 2010

aw shucks ,,lets just use cold tar this time ,,easier ,not so much danger to ourselves,and if they had to peel off the hot tar ,,would take their skin, and spoil its use for lamp shades.or wall charts

oh ,,dont forget the fence rails !

Steve Kroeker August 23, 2010

The States projected shortfall is $2.6 billion. Perhaps instead of instituting an income tax on all Washingtonians, the Bill & Melinda Gates foundation could donate the $2.6 billion to Washington to cover the shortfall.

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