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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Key lawmakers considering state income tax on wealthy

 (The Spokesman-Review)
OLYMPIA – For years in Washington’s capital, state income tax proposals have been viewed much like those periodic bills to declare Eastern Washington a 51st state. They’re attention-getters aimed at spurring a discussion. No one expects them to actually pass. This year’s different. The state’s two top lawmakers confirmed Thursday that in the face of ongoing budget worries, they are seriously considering asking voters in November to approve a state income tax on the wealthy. One proposal, taxing only those earning $500,000 or more a year, “would mean that 19 out of 20 people in Washington State would not be affected at all,” said Senate Majority Leader Lisa Brown, D-Spokane. The percentage of such a tax or even whether lawmakers will push ahead with it has yet to be determined, Brown said. But she seemed supportive. Many Democrats, she said, feel that proposed budget cuts go too deep. The state faces the prospect of thousands of layoffs at colleges, schools and state agencies and deep cuts in health care and the social safety net. “We are really reeling from the recognition of what this means,” Brown said. And with lower-income and middle-class families already struggling, she said, it seems only fair to look at raising taxes on the wealthy. House Speaker Frank Chopp said House Democrats are considering the idea. But he said it’s one of several proposals. Another one: raising taxes to pay for construction bonds to build schools and other public buildings. “The key is: what would the public support?” said Chopp, D-Seattle. Voters generally don’t like a broad income tax, he said. But he also pointed to 2006, when voters overwhelmingly decided to keep the state’s $2-million-or-more estate tax. A Senate bill proposing a 1 percent income tax on high earners has been introduced in the Senate. A state report in 2007 on an identical bill said it would raise $54 million a year from just under 1,900 people statewide. But Brown said the 1 percent bill was “coincidental” to broader discussions, which would presumably raise more money. The measure would go to voters in November at the earliest. And given the lag time between the vote, expected court challenges, and the money, Brown said, such a tax would not be much short-term help for looming state budget cuts. But she also said sales taxes – the state’s main source of cash – are likely to lag behind the recovery. A state income tax would help rebuild key services and programs faster, she said. Brown also said the income tax would not be part of a broader overhaul of the state’s tax system. Brown and others have criticized the state’s unique business-and-occupation tax and Washington’s high reliance on sales tax. But lawmakers aren’t anywhere near consensus on broader reforms, she said. Republicans argue that an income tax would be akin to political suicide for Democrats, who hold a solid majority in both the House and Senate. “I hope they do a food tax along with it,” joked Senate Minority Leader Mike Hewitt, R-Walla Walla, citing an unpopular tax that voters quickly vetoed years ago. Hewitt thinks voters “absolutely” would oppose a state income tax. And he argues that it’s a mistake to aim it at the wealthy. “The people that they’re going after are the people that put money back into the economy, that create jobs,” he said. “That’s exactly what we need.” He also predicts that any high-income tax would soon be lowered to collect more money from more people. Brown said she has no illusions that it would be difficult to get voters to approve a new tax. But she said it’s a simple matter of fairness: people who earn more should contribute more. A millionaire in Idaho would pay a 7.8 percent state tax and deduct it from federal taxes she said. In Oregon, it would be 9 percent. “If they live in Washington state, they don’t pay anything,” Brown said. “I think that’s unfair.” Chopp also said the public doesn’t yet understand how bad the state budget cuts will be. “I think the vast majority of our people in this state are focusing on their own family and their own job,” he said. But as cuts kick in, he said, people will see teachers laid off, more kids in classrooms, people unable to get state help with health care. “I think over a period of months they’ll begin to understand that this is a very serious situation, and it will hit them,” he said. Gov. Chris Gregoire has repeatedly said this week that she doesn’t support the idea of a state income tax. She said it would face likely court challenges and probably wouldn’t bring in money to help with the state’s two-year budget woes. Brown said polling suggests “there is some openness” to the idea of a high-incomes tax among voters. “I believe an honest conversation about what’s fair, what’s a fair amount for people to pay for a good quality of life in Washington state. … I think that’s a conversation that nobody should shy away from having,” she said.