When our state legislature passed the “Millionaires” tax bill, proponent legislators cried with joy. The bill is touted as funding K-12 education, health care, tax credits, free school meals and Fair Start child care and early learning programs. At least that is what the preamble and intent sections of the bill says, so what’s not to love? The answer to that question takes wading through the 108 pages of this bill. In truth the bill imposes an income tax, though with at least less red tape than the Internal Revenue Code.
The figure that jumps out when reading the bill is five percent. That is the amount of income tax revenue guaranteed to go to the above-highlighted worthwhile expenditures. Specifically, 5% goes to the Fair Start for Kids Account. The rest? It goes into the general fund, where it may offset some of the desired expenditures, but can just as likely be spent otherwise. I say this from a somewhat jaded position, as I seem to recall representations that our state lottery, marijuana revenue and capital gains tax revenue were all going to fund education. And yet the state still seeks education dollars.
The bill also states an intent to revise the regressive sales- tax burden on everyday people. The legislation does in fact roll back certain new sales taxes and Business & Occupation (B&O) taxes imposed last year and increases a working family tax credit for lower income folk. But an amendment to actually reduce our state sales tax by 1.5% across the board was rejected. So again, this bill primarily layers on a new tax rather than reducing a regressive tax system.
The bill states the “ intent” to collect income tax on only those earning greater than a million dollars annually. The bill provides that if your “income is less than zero for a taxable year” no tax is due. Less than zero, not less than $1 million. The $1 million dollar triggering threshold is instead recited as a standard deduction. There was an attempt to amend the bill to clearly codify that the income tax could not be imposed on those earning less than a million dollars, and this was also rejected. So what is to stop this tax from being expanded downwards when our state’s insatiable need for revenue next beckons?
The bill includes a marriage penalty by providing only a single standard deduction to married joint filers. It does not feel good to know the state government may drive people’s nuptial decisions.
Which brings us to perhaps the largest problem with this income tax bill, in addition to being contrary to our state’s constitutional prohibition of nonuniform taxes on property of any kind. It is my expectation that this latest antibusiness measure will be very harmful to our state’s economy. The trickle of businesses and high net worth individuals out of our state due to tax policy continues to grow and I fear will turn into a flood. It started with Jeff Bezos and Fisher Investments. Now Howard Schultz coincidentally announced his move to Florida within 24 hours of the legislature passing the income tax bill, and Starbucks is opening a huge new headquarters in Nashville. As reported by the Seattle Times editorial board on Feb. 15, Las Vegas realtors are seeing a flood of migrating Washingtonians, and 44% of Washington business owners surveyed are considering moving their residences out of the state.
Calls for “ revenue equity” are based on wealthy individuals paying a lower percentage of their income in taxes. But if we chase them out of our state we won’t lose just significant revenue from their individual taxes on excess consumption and lavish homes. We will more importantly lose the businesses that many of them create or support with investments, which generate both significant B&O revenue to the state as well as jobs that are so necessary to our state’s economy. If the governor signs this income tax bill it will be April Fools on all of us.
Marcia Kelbon is an attorney and engineer based in Quilcene. Contact mkelbonpolitical@gmail.com.