State income tax would fix school funding and much more

August 26, 2015 | John Burbank

John Burbank, EOI Executive Director

John Burbank, EOI Executive Director

Twelve days ago the State Supreme Court found that the Legislature is in “ongoing violation of its constitutional obligation to amply provide for public education.” It imposed a $100,000-a-day fine until a funding plan for this obligation has been satisfied. That adds up to about $3 million a month, which may seem like a lot, but is small potatoes in the big picture of the state’s $38 billion operating budget. If anything, the court let the Legislature off easy. A more effective remedy would have been to garnish the salaries of the legislators themselves. That would have gotten their attention!

Legislative leaders think they can just muddle through and do a minimal amount to meet the paramount duty for the education of all children. This is what they want to believe, so that they do not have to grapple with our tax system, which is the underlying reason for the perpetual underfunding of state services, including — but not solely — K-12 education. They want to manage the fiscal crisis. We need to vanquish it.

Our state government underfunds all over the place. Case managers for foster kids have a case load that is 30 percent higher than national standards, meaning they don’t have the time to devote to abused, neglected and disregarded foster children. College tuition, now running at close to $12,000 a year at the University of Washington, is almost double what it was ten years ago, even with the slight decreases put into place this summer.

How much will it cost to fully fund McCleary and the voter-approved but Legislature-delayed Initiative 1351? About $3.5 billion a year more than what the Legislature is funding now. What if we decrease higher education tuition by 75 percent, resulting in tuition levels of $1,500 for community college, $2,500 for the regional universities, and $3,500 for the research universities? That’s another $1.5 billion.

Image: Themeplus/Flickr Creative Commons

Image: Themeplus/Flickr Creative Commons

You can’t just muddle through that $5 billion. Economic growth won’t get us there, because our tax system is not tethered to growth in income. But it would also be incredibly easy to get this money, if we had the political leadership willing to do so.

How can that be? Look to Amazonia on South Lake Union or across I-405 to Redmond, or to the tony neighborhoods of Hunts Point and Medina. Note the new buildings, new cars, new remodels, new houses, and realize that is just the tip of the iceberg of new income and wealth in our state. The beneficiaries, indeed the takers, of this wealth, gain it thanks to our public legal system, public transportation infrastructure, public-owned utilities, public schools, public safety and public higher education. And yet, because we don’t tax income at all, we leave the biggest building blocks for education on the table. All of this income stays with the house. In staying with the house, it just makes worse the aggregation of income, privilege, power, and wealth to the top 1 percent, while undermining and under financing public services.

Legislative leaders turn a blind eye to the wealthy when considering how to fund McCleary. As a result, the Legislature violates the state’s paramount constitutional duty. These leaders are afraid of even mentioning a tax on income, yet that is the only solution for full funding of McCleary and for putting a brake on the accelerating accumulation of outsized income at the very top.

How much revenue would a progressive income tax provide for public services? First exempt $50,000 of income. Then put in place effective tax rates of 2 percent for a $100,000 household, 3.5 percent for a $200,000 household, 5 percent for a $500,000 household, 6.25 percent for a million dollar household, and 8.125 percent for a $2 million household. That would raise $7.5 billion.

Now let’s do the math:

$7.5 billion in new revenue,

Minus $3 billion for K-12 education,

Minus $1.5 billion for higher education tuition,

Minus $500 million for early childhood education.

That leaves $2.5 billion on the table. With that, we could take a bite out of our regressive tax system by dropping the sales tax by 1.5 cents. That would cost about $1.5 billion. And that leaves $1 billion a year for other public services and a reserve.

The expenditures for McCleary are certain and definitive. You can’t get around them. So let’s not try. Instead, it is time for a progressive income tax. We can’t afford to wait.

Original: Everett Herald »

Posted in Column, Tax and Budget, Tax Reform

Comments

  1. How do you get there from here?

    • Economic Opportunity Institute says:

      The Legislature could put this in place, if it so chose to do so. If not, the people could put forward an initiative to be voted on in November 2016. ~John

  2. Richard Reuther says:

    There is and has been historically an aversion by politicians to even mention “income tax.” We will need a lot of education to the public.

  3. karen503 says:

    Sales tax on everything but food in the city in Washington State I lived in before I left in 2002 was ~7% to 8%. It’ll be a killer to pay both local/state sales tax AND income tax.

    • Jeanne Large says:

      I would love to pay a state income tax. I feel so guilty not paying my fair share, especially when I read about how underfunded our education and other public services are. I’m not much of a shopper so I don’t pay very much in sales tax. How can we get people informed about how ineffective and unfair our current revenue system is? How can we get our elected officials to reform our tax system?

      • matt McCoy says:

        How about a progressive propert tax? It would be more stable while accomplishing the goals of progressiveness. Other benefits as well

        • Economic Opportunity Institute says:

          Property taxes are relatively neutral in regards to income and wealth, especially as opposed to sales taxes, which are highly regressive. What we need for property tax reform is lifting the current cap of 1% or the rate of inflation, whichever is lower, on annual increases.

          That cap was put in place through Initiative 747 developed by Tim Eyman, who, while having benefitted from public services (he is a WSU graduate to start with), wants to deny the funding for such government services for current students, among others. Initiative 747 was passed in 2001, and capped property tax increases at 1%.

          It was thrown out by the State Supreme Court in 2007 and immediately the Democratic Legislature and Democratic Governor Gregoire reinstated it. It reduced state revenues, all of which would have gone to fund K-12 education, by over $1 billion a year. Enough said.

          ~John Burbank

      • Economic Opportunity Institute says:

        Public officials are not public leaders in tax reform. They are afraid of the next election. So this impulse for progressive tax reform will have to come through local and eventually state initiatives to the people. As we connect progressive tax reform to slowing down the polarization of income and wealth and penalizing the distribution of income to the 1%, we can get more traction for such reform. ~John Burbank

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