Spokane7
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September 12, 2010 in Business
Caldwell: I-1098 is not a business-friendly tax option
Nobody out here in Eastern Washington likes to admit it, but King County is the great trough from which most of the rest of us feed.
Initiative 1098 is a great opportunity to increase our caloric intake.
Seattleites and their neighbors up to the Cascade Divide contribute slightly more than 40 percent of all state revenues. That’s from about 28 percent of Washington households, albeit those with two Beemers in the garage.
The income tax proposed in I-1098 would have the state reaching still deeper into their pockets. The levy would collect 5 percent of individual income above $200,000, and more than $400,000 for couples. North of $500,000 for individuals, or $1 million for couples, and the rate goes to 9 percent.
The initiative also provides for a 20 percent reduction in state property taxes, and an increase in the business and occupation tax credit to $4,800, which would exempt about 85 percent of Washington businesses, and reduce the rate for others.
The net result would be about $11 billion in additional revenues to the state over the five years following implementation of the tax in 2012.
And guess who pays? Our King County benefactors, of course.
According to a pie graph posted by the Sightline Institute in Seattle, 57 percent of those with incomes above the tax threshold live in that county. Only 11 percent live in Eastern Washington.
This is as close as it gets to a free ride for those of us on this side of the Cascade curtain.
But is this a ride we want to take, or even need to take?
There’s no denying Washington’s tax system is among the most inequitable. In fact, according to a study released in November 2009 by the Institute for Taxation and Economic Policy, Washington has the most upside down tax structure of all the states.
The poorest 20 percent of non-elderly residents pay 17.3 percent of their incomes in taxes. In Idaho, the share is less than one-half that; 8.6 percent.
The culprit, of course, is a 6.5 percent state sales tax on which counties heap as much as 3 percent more. Property taxes take another 4.2 percent of low incomes.
But I-1098 does not provide for sales tax relief. And that 20 percent property tax break? Landlords will take that, and thank you very much, because rental income will be subject to income tax. Tenants, disproportionately low -income, will not see a dime’s worth or lower rents.
Nor do small-business owners think an increased B&O tax credit will offset the hit from an income tax.
A survey done for the Association of Washington Business found the number who expected a hit from the new tax far exceeded those who would benefit from the B&O credit. Almost two-thirds oppose I-1098.
Many said they would slow hiring, cut salaries, reduce investment and, at the extreme, pull up stakes and move out of Washington.
State officials perpetually fight perceptions Washington is anti-business, and high-tax. The state is neither. Using 2008 numbers from the Census Bureau, the Department of Revenue calculated the state and local tax burden was $105.49 for every $1,000 in income – 30th highest among the 50 states. Per capita taxes are $4,354, 16th highest.
Not stellar, but not awful.
And in another study the Small Business and Entrepreneurship Council ranked the state fifth best for entrepreneurs and small business, based on 16 tax measures.
The sales tax is a problem. Right now, revenues are a problem, but states that rely on an income tax are subject to the worst fluctuations in revenues, not the least.
Setting taxes by initiative is never a good idea. The November ballot includes several and, if past experience tells us anything, the results will be contradictory.
All should be defeated. But hey, vote for I-1098 if you like. It’s not our money.
Caldwell: West Point trained local bankers to survive 
richardthelionhearted on September 12 at 7:08 a.m.
Business licenses in Spokane alone would go up to about $4000.00 yearly if this passes! Vote NO to this bill!! It will shut down many, many business. Will kill the little guy!
Coffee on September 12 at 10:28 a.m.
I bet it will only take a few years before they raise the taxes that the I-1098 lowers also lower the the amount you can earn before you get taxed. Next I bet they will withhold taxes from your pay check of course they will give it back when you file your state income tax (witch you will have to pay for:). The states may also just pull a California on us and issue IOU s.
MrDavis on September 12 at 5:42 p.m.
Once the state gets its foot in the door with an income tax, it will be gradually expanded until everyone is paying it. When the Congress promoted the income tax amendment to the U.S. Constitution, it was sold with the argument that the rate was less than 1%.
Dazzeetrader11 on September 13 at 1:25 a.m.
If Bill Gates wants to throw in his oney…let him do it. This is nothing more than panalizing people who’ve worked hard because they’re successful. Redistribution of YOUR money anyone? Seems a bit foolhardy and unethical. Know why? Because it is. E Wa needs this like another Obama. VOTE NO!
JBlim on September 13 at 6:36 a.m.
Bert’s statement that:
“And that 20 percent property tax break? Landlords will take that, and thank you very much, because rental income will be subject to income tax. Tenants, disproportionately low -income, will not see a dime’s worth or lower rents.”
I’m not sure how true that is, that applies only to landlords who have taxable incomes over $200,000/$400,000. (Remember real estate is a cash flow game.) The market will force the others to lower their rents because of their lower expenses, everything else being the same.
Also, the usual scare story:
“Many said they would slow hiring, cut salaries, reduce investment and, at the extreme, pull up stakes and move out of Washington.”
If they move out of Washington, or cut back their operations, that only creates an opportunity for another business to take up the slack. Customers with cash and no businesses there to sell them anything, uh-huh… .
WillyPeter on September 13 at 1:33 p.m.
Anyone who thinks that only the rich will pay this tax increase is, in my opinion, ignoring the history of progressive taxation in America. It will cost all of us more. If not today, tomorrow for sure…
Dazzeetrader11 on September 14 at 1:24 a.m.
Blim..ur a dim light…but you’re right. ANY tax will be passed along. And NO…don’t be a foolish man…no business will come to Washington for the same reason the old business left..TAXES!
Already Gregoire wants to charge new companies to locate in Wa St. Our group told her to fly a kite. Others have too.
Taxing sucessful people who work hard is unethical and completely contrary to America’s principles. I know the socialists and liberals want to reshape our history but they won’t be successful. As you must know, the jobs gained are 90% government and 10% private jobs. WOn’t work.
If Gates wants to throw in his money…fine..let him do it. BUT nobody speaks for my money except me.
If the libs don’t like my position..let them leave. I’ll fight for my rights. Cowards leave…Americans don’t. They fix things.
JBlim on September 14 at 6:23 a.m.
Yeah, Daisy, I can just see it: Some young physician is deciding where to practice medicine. He likes his home California, but he has heard of the extraordinary doctor shortage in Washington State. Sick people are dying, willing to pay anything for care. He could easily make a fortune. His adviser, lets call her Daisy, advises against it, though. No sonny, don’t be an idiot, you’ll have to file a state tax return … But Daisy, I already file a state tax return, he says. Daisy says no, taxing successful people who work hard is unethical and completely contrary to America’s principles … .
Coffee on September 14 at 10:35 a.m.
No JBlim what she would advise the young Dr. is to move to Tennessee were they are just as sick ( they have allot better tasting food so higher avg weight ) and no progressive tax :)
Masterb on September 15 at 10:21 p.m.
What a great idea!
Property tax will go down, B&O tax will go down.
The fat cats will finally need to pay some taxes for once!
Steveo on September 19 at 1:06 a.m.
New Jersey had this same tax, exactly the same, for nine years. In that time $70 billion in wealth left their state and took their incomes with them. When $30 or $50 or $70 billion leave Washington in response to this tax Olympia will just lower the level to $20,000 to make up the difference. It is very simple, regardless of your current income, only vote yes on this if you want to pay a state income tax for the rest of your life. Don’t worry about me, if this passes my business and I will be in Idaho.