April 20, 2010 in Region

Washington voters could see income tax initiative

I-1077 would target top earners
Curt Woodward Associated Press
 

OLYMPIA — Washington’s long flirtation with a state income tax gets new life this week with Wednesday’s expected announcement of an initiative campaign to tax the earnings of couples making more than $400,000 annually.

As presently drafted, Initiative 1077 also would cut the state property tax by 20 percent and increase the business-and-occupation tax credit to $4,800. For individuals, the tax would start at adjusted gross incomes higher than $200,000.

Bill Gates Sr., father of the Microsoft Corp. co-founder, was scheduled to headline an event Wednesday in Seattle where community leaders would announce their intentions about pursuing I-1077.

A spokesman would not confirm any campaign Tuesday evening, but political observers have expected a possible income tax campaign to surface since the conclusion of the special legislative session earlier this month.

The proposed initiative sets out two tax brackets. The first tax rate would be 5 percent assessed on the portion of joint incomes that exceed $400,000, or $200,000 for individuals.

For joint incomes above $1 million, the tax would be $30,000 plus 9 percent on income above the threshold. Single incomes above $500,000 would pay $15,000 plus 9 percent of earnings above the threshold.

Advocates said it would raise about $1 billion per year for education and health programs. To qualify for the November ballot, supporters will need to collect more than 240,000 valid petition signatures by early July.

The elder Gates has been among the state’s most prominent advocates of tax reform. He was chairman of a special state committee that in 2002 recommended a state income tax as a possible addition to Washington’s revenue stream.

Most of the state’s taxes come from two sources: The 6.5 percent baseline sales tax and the B&O tax, levied on a business’ gross receipts. Property taxes also are in the mix, but have relatively strict caps on their annual increase — the consequence of another voter initiative.

Income tax measures have been attempted over the years in Washington with little success. A graduated income tax was enacted by initiative in 1932, passing with about 70 percent of the vote. But it was thrown out by the state Supreme Court, which pointed to the state constitution’s call for uniform taxation on property.

Voters have defeated subsequent attempts to amend the constitution for a state income tax, most recently in 1973.

Since then, some legal experts have said a modern court might throw out the 1933 court decision that defeated the original income tax, arguing that the old decision is based on obsolete legal theory.

State Senate Majority Leader Lisa Brown, D-Spokane, has supported the notion of a state income tax and said a ballot measure is likely the best way to pursue one.

Brown said voters want good schools and a social safety net, and “this recent recession showed us that’s very difficult to achieve given the way our tax system is so unfair.”

The state has recently grappled with a two-year budget deficit approaching $12 billion.

Amber Gunn, economic policy director of the conservative Evergreen Freedom Foundation in Olympia, said the aftermath of the Great Recession is an especially poor time to consider pushing an income tax.

“All that’s going to do is deter business, deter employment, deter investment in the state,” she said.

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