1. richard b. stoner says:

    If you want to change the tax structure, let’s look at the total tax picture for this state. I’m tired of people wanting to take money they haven’t earned from people who have. The federal government is just great for this and now you want to use it here in Washington. Once the politicians get this in, they just might lower the rate. Look how they took away the bill that said no tax increase without the peoples vote. You must trust them, I don’t.

    • Richard,

      People on both ends of the economic spectrum earn money, but the tax picture in Washington state is very different for each. As the Seattle Post-Intelligencer characterized it, “People earning less than $20,000 annually pay 17.3 percent of family income toward sales and excise taxes and property taxes, the report said. People making between $99,000 and $198,000 each year pay 7.6 percent toward their tax bill. Meanwhile, people in the top 1 percent of earners – those making more than $537,000 a year – pay just 2.9 percent, the report said.”

      Meanwhile, Washington state is failing to make important investments in public education and health that will keep us competitive in the years ahead. From the 1991-92 school year to 2007-08, Washington’s rank among all the states in funding K-12 education fell from 17th to 33rd on a per pupil basis. Among the 50 states, we rank 37th in awarding bachelor degrees and 39th in graduate degrees as a percentage of our young adult population. Compared to our key economic competitors – the “global challenge states” VA, MD, MA, CT, NJ, CO, CA, MN, NC – we in Washington are last in awarding graduate degrees and 7th out of 10 in B.A. degrees.

      Initiative 1098 is a step toward rectifying both of those problems. By reducing taxes on middle- and low-income households, eliminating the B&O tax for 80% of WA businesses, and implementing a modest tax on the most fortunate, we can make our tax system more fair and generate $2 billion a year for public investment in education and health that will help promote widespread economic opportunity for decades to come.

    • Peter says:

      Nobody “earns” money just on their own effort and resources. Unless you ship your goods using private airplanes, private airports, and private roads not monitored or maintained by the government (at taxpayer expense), the only way your business is successful is through your disproportionate use of public infrastructure.

      Doesn’t the Bible say something about the likelihood of a wealthy man making to heaven? Do good works while you’re on earth instead of hoarding your money like greedy bastards!

  2. Winslow P. Kelpfroth says:

    Actually, it makes perfect sense. It’s called the retail sales tax, and it’s it’s paid for, not by the business, but by the consumer who presumably is crafty enough to figure out if he/she needs that taxable item badly enough to pay the additional 8% or whatever it is now.
    Making your own spending decision = good. Having your income sucked away at the whim of the legislature = not so good.

    • The retail sales tax is actually a different tax that the Business and Occupation (B&O) tax to which Bill Gates Sr. and his co-authors are referring. Sales tax is paid on sales by the consumer; B&O taxes are paid by the business on their total earnings, regardless of expenses.

      Because Washington’s small businesses pay a higher percentage of their earnings in B&O taxes than large firms do, our tax system effectively penalizes the kind of innovation our economy needs to grow. Initiative 1098 increases the B&O tax credit to $4800, which will help ensure our small businesses can flourish and lead the way toward an economic recovery. The 20% reduction in the state portion of the property tax will also assist all businesses.

      As for making your own spending decisions, keep in mind that I-1098’s income tax only applies to income above $400,000 per household, and any changes to tax rates or thresholds must be approved by a vote of the people.

  3. David Haydon says:

    Heres an idea. How about they spend the money they get wisely for once? Like Richard said, we vote on something and they come along and overturn it if they don’t like it. Once they get their claws in us with an income tax, it WILL apply to everyone eventually. And they WILL reraise all those other taxes that may get lowered with this initiative. I guarantee it.

    • If I-1098 is passed by voters in November, any changes to tax rates or income thresholds must by law go to a public vote. If the legislature were to amend I-1098 after two years (as it can do with any initiative). History shows that in Washington state, the voter has the last word – this year’s ballot initiatives on tax increases on soda, candy and gum, as well as Initiative 1053, are evidence of that.

  4. Winslow P. Kelpfroth says:

    Thanks for clearing that up for me about the B&O tax, Aaron. Do you also think that the ’employer’s share’ of the social security payroll tax is paid for by the business or is it actually part of the total cost of labor? In other words, the final cost of an item is the market price plus the retail sales tax plus the B&O, which is paid for by the consumer. Business taxes are only passthroughs.

    • Sure enough. As for your question/comment about tax incidence: Initiative 1098 will eliminate the B&O tax for 81% of Washington businesses, and reduce B&O tax for another 10%. If you believe producers “pass on” the entirely of the B&O tax to consumers, then I-1098 will benefit consumers through lower prices; if you believe the incidence of the B&O tax falls completely on producers, then I-1098’s tax cut will improve business profits. (Most likely it’s some of each, but I’ll leave it to the economists to parse out exactly how much.) Either way, I-1098 will be a boon to Washington’s economy.

  5. John Thomas says:

    One of the reasons that I moved my business to Washington (and created over 200 jobs) in 1996 was this state’s lack of an income tax. In California, I was paying 11% State Income Tax on top of Federal Income Tax, Property Taxes, and a Sales Tax with a rate similar to what we have here in Washington.

    Rather than argue the statistics, I can simply tell you that I will leave this state if an income tax is imposed. And those jobs will eventually follow.

    • One of the reasons people like to live, work and run their businesses in Washington is our high quality of life, which is supported by the investments we all make (via our our shared tax dollars) in public structures like education and health care, as well as roads/transit, public safety and a clean environment. If Initiative 1098 passes, you may indeed move — but as noted here and here, there’s little evidence that many people would follow you.

    • tera powers says:

      Oh, yeah, and as a reporter I heard every other year that the next increase in minimum wage would make them “shut down permanently.”

      12 years and 8 hikes later, I see they are still in business. Threats are not very effective. If you want to move to Nevada, go for it.

  6. David Haydon says:

    lol, where did those 17.3, 11 and 2.9% numbers come from? First of all, a person making less than 20k a year is not going to own a home, so there will not be any property tax, secondly, even if they spent every penny of their money on taxable items, it would only come to about 10%, the highest sales tax we have here. However about half of that money is going to be non taxed by the state since it will be going toward food and rent. So that leaves about 10k to spend toward taxable items. And 10% of 10k is 1k, 1k is 5% of 20k so about the most they will be paying in state and local taxes is about 5% of their income. Simple math. And even if those numbers are right, the person making over 500k a year is still going to be paying about 5 times as much actual dollars than the person making 20k a year.

    • David,

      Those numbers come from the Institute on Taxation and Economic Policy – you can see their methodology here. In brief:

      The ITEP model’s federal tax calculations are very similar to those produced by the congressional Joint Committee on Taxation, the U.S. Treasury Department and the Congressional Budget Office (although each of these four models differs in varying degrees as to how the results are presented). The ITEP model, however, adds state-by-state estimating capabilities not found in those government models.

      Your calculation leaves out a couple of important factors. First, people who don’t own a place to live generally rent one. If the property owner is charging market rates, rent will include the cost of property taxes. So renters do pay property taxes, though indirectly. Second, people with high incomes are able to save a greater share of their income, rather than having to spend it on basic goods and services needed for daily life (and have it subject to tax). That is why high-income households in Washington enjoy a lower effective tax rate than low-income households do.

      By the way, in accordance with our comment policy, I’ve snipped the last paragraph of the comment you originally submitted. Feel free to resubmit it with some factual backing if you like; I’ll post it, and we can discuss it further.

  7. Brent says:

    It is astounding to me that anyone is against 1098. The basic part of it is that we all should be paying our equal share. Equal share does not mean everyone pays $10 (random number representing sales tax) a year as our current tax system requires. Thing is this: what you have is what you should be taxed by, not what you need. Washington state, for as remarkably cool as it is in so many ways, really needs to reevaluate where and how it gets its revenue. As is so painfully obvious at the moment, we’ve been doing it wrong for quite some time. The wealthy folks should (and do) have the time to think this thing through; the rest of us are just trying to get by. Bill Gates, Sr., thank you! Even if this doesn’t get through, you showed us that wealthy folks can still have hearts. [Last sentence snipped per our comment policy.]

  8. Donna says:

    Why hasn’t Bill Gates Jr weighed in on this?

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