If you follow the news from Olympia, you've probably heard of SB 6147, proposed by Senator Kohl-Welles as a one percent income tax.
The good news is this has no chance of passing this session.
The bill offers a standard deduction of one million dollars for people filing jointly, and half a million for singles, so few people would end up paying it, as written. As Kohl-Welles says on her web site, the measure would "impose a state income tax upon Washington's highest wage earners."
However, Washington State's Constitution requires that all taxes on property must be uniform (Article VII, Section 1), and the state's courts have consistently recognized income as property. So this form of tax would likely be stricken as unconstitutional, as it is clearly intended to be non-uniform.
If this bill were passed, and the Court did rule that provision to be unconstitutional, the bill's severability clause means the rest of the bill would remain valid, and it we would then immediately have a tax on every federal income tax payer, instead of just the wealthy.
Thankfully, this bill won't pass this year, but the sneakiness of it is what bothers me. Don't be fooled into thinking Kohl-Welles and her cosponsors don't understand how this would have worked out: they proposed what they knew would likely end up being an income tax on everyone, and sold it as a tax merely "on the highest wage earners."
Kohl-Welles and her buddies explicitly crafted this bill to try to get past the uniformity provision by making an extremely high "standard deduction," and knew full well that if that didn't survive, the severability clause would keep the rest of the bill alive, which means a tax on all of us.
(Thanks to the EFF's Mike Reitz on LibertyLive.org.)
Cross-posted on <pudge/*>.
Posted by pudge at April 21, 2009 03:07 PM | Email ThisThat being said, get OVER IT ALREADY. 30% increase since Queen Christine took office is MORE THAN ENOUGH.
In addition, I am sick of hearing this referred to as a deficit. It is no such thing, it is simply LESS REVENUE THAN BUDGETED.
There IS a difference...
Posted by: Enigmafan420 on April 21, 2009 03:40 PMDid you mean to describe an alimentary canal with an insatiable appetite a one end and no sense of responsibility at the opposite? I liked your comment!
Posted by: Fed Up on April 21, 2009 04:20 PMI believe that wealth should be re-distributed naturally, by the marketplace, not by government. Government's purpose is to provide, to the best of its ability, an environment where we can pursue our dreams. Unfortunately, our government has become just another special interest group, and I agree with Glenn Beck that it matters not because we are governed by fascist elements to include both the Republican and Democrat Parties.
Your philosophy has proven to not only not work, but to destroy the American economy. Lack of regulation of the banks has led to this fiasco.
We have a greater gap in this country between rich an poor than at anytime since the great depression (I wonder why?).
I guess all those CEO's who bankrupted our country deserve to make 300X the average worker - they used tomake 24 times the average worker back in the 60's.
This is all about greed and what people can get away with - it has nothing to do with merit or fairness.
You fools babble on with your "philosophy" and ignore the facts on the ground. I guess you support the huge bonuses and the exhorbitant salaries based on what principles?
The only principles you support are the principles of greed and avarice - and you forget what the deadly sins are.
Posted by: correctnotright on April 21, 2009 06:04 PMA few points:
Do you have any idea about the level of income mobility in our society that makes you "gap" statistic less compelling?
While greed and avarice are immoral and anti-christian (which, I suppose, should make them virtues to lefties), they do not happen to be illegal. That means it is not the government's place to confiscate their earnings for the purpose of giving them to others.
Are these execs worth that much? Probably not. Are the boards who give them that much foolish? Probably. Is A-Rod worth his contract? Is Tom Cruise worth his salary? No. Those are both social problems as well, not legal problems.
Your problem is that you look at what others get and are jealous. I think it is a mental disease with the left. No matter how good you have it, you are not content because you see the dog in reflection in the pool and think his piece of meat is bigger than yours. (Aesop's fables for those uncultured)
The left wants fairness in outcome, the right wants fairness in opportunity. We do not curse another's good fortune.
Posted by: Eyago on April 21, 2009 06:29 PMDid you forget that envy is also one of the deadly sins as well...
Might want to remove the 2x4 from your own eye before trying to remove the speck from someone elses...
How much more taxation should we put on the "rich"? The top 25% already pay 88% of all federal income taxes... Should they pay 100%? Should the bottom 75% of all wage earners have ZERO income taxes?
Tell us how much is enough. Please put some numbers on it...
Posted by: Shanghai Dan on April 21, 2009 07:43 PM"You fools babble on with your "philosophy" and ignore the facts on the ground. I guess you support the huge bonuses and the exhorbitant salaries based on what principles?"
I guess YOU are the one who supports the exhorbitance. The two lenders whose collapse kicked off the recession (thanks to their government-backed 51% market share in the $12 trillion domestic mortgage market), Fannie Mae and Freddie Mac, have an extensive bonus program not at all unlike AIG.
While everyone assails AIG for using less than 0.1% of the taxpayer-bailout money it received to meet contractual obligations in compensation through retention bonuses, another recipient of government largesses has its own bonus program in operation. According to their annual report, Freddie Mac has a generous retention bonus plan built into its operation for the next year. Eligibility includes all of the senior and executive VPs. It comes in four payouts, and only the last has any connection to company performance.
There wasn’t a peep from Congress about Fannie/Freddie’s bonuses. But now that the public is sick of the bailouts, and there’s no indication that the hundreds of billions of dollars we’ve invested into them is actually accomplishing anything of any benefit, the political elite need a scapegoat with which to distract the public.
The outrage over the bailouts is a feint. A contrived spectacle meant to distract from who gave AIG our money in the first place.
Posted by: pbj on April 21, 2009 08:23 PMIf these jokers in Olympia don't want to listen to the people, then it is time for them to start paying their "Fair Share"... After all, Joe Biden says it is "Patriotic".
Details are on Kirby's site:
http://www.kvi.com/onair/kirby/43274582.html
Audio is here:
http://www.kvi.com/onair/kirby
We are waiting for the 912 lawyers to check out the methods and constitutionality.
Other possibilities:
1. Taxing out of state contributions at a higher level.
2. A "progressive" scale to increase the contribution the longer an individual is in office, or greater rates as they raise more.
Of course:
1. Exempt small campaigns (say Ok-- we may have a new Initiative coming down the pipe. I contacted Kirby Wilbur over the weekend regarding the potential of an initiative IMPLEMENTING a tax on Campaign Contributions.
If these jokers in Olympia don't want to listen to the people, then it is time for them to start paying their "Fair Share"... After all, Joe Biden says it is "Patriotic".
Details are on Kirby's site:
http://www.kvi.com/onair/kirby/43274582.html
Audio is here:
http://www.kvi.com/onair/kirby
We are waiting for the 912 lawyers to check out the methods and constitutionality.
Other possibilities:
1. Taxing out of state contributions at a higher level.
2. A "progressive" scale to increase the contribution the longer an individual is in office, or greater rates as they raise more.
Of course:
1. Exempt small campaigns (say
2. Send the money to Education, Healthcare-- whatever-- just so they can't spend it.
Is it time to make the Political class suffer like any other business?
Can you cite a court decision that said this, preferably in the context of the constitutional requirement for uniform property taxes? It sounds very odd. Sure, income becomes property after it is earned, but the tax is imposed on the act of earning the income, not on the fact that it is property.
Perhaps you know something that I don't know (and that none of the news articles about the income tax have mentioned). If so, I'm sure you can support it with evidence.
Posted by: Bruce on April 21, 2009 09:11 PMLet's keep this to the state and consider this: I once figured out that my wife and I pay 800,000 times more property tax than the Bill Gates family as measured against our respective net worths.
We also pay massively more sales tax as measured the same way, although I don't have a ballpark for that.
So the state is hitting the middle class and poor pretty hard and leaving the rich virtually unscathed.
That doesn't mean I'm for the proposed income tax cited but there's definitely a big tax advantage to being very rich in this state vis a vis state government.
Thanks all,
New Left Conservative # 1
Yawn.
Bruce@16: Can you cite a court decision that said this, preferably in the context of the constitutional requirement for uniform property taxes?
Yes. Culliton v. Chase, 1933, which very explicitly rules that the Constitutional definition of property includes income and that therefore income taxes must be uniform. (And contrary to recent attempts at revisionism, the crucial evidence for Culliton was not since-overturned precedent, but the text of the Constitution itself.)
You can find the full text of the decision on MRSC searching for "Culliton v. Chase" (make sure to check "Washington Reports").
Leftist@20:
I once figured out that my wife and I pay 800,000 times more property tax than the Bill Gates family as measured against our respective net worths.
And you also pay 800,000 times more (or so) for your Cheerios, and for your Internet service, and for your Mariners tickets. Whatever made you think that this was an interesting measurement?
there's definitely a big tax advantage to being very rich in this state vis a vis state government
No, there's not.
There is plenty of case law upholding this in the state constitution. Quit being a typical lazy liberal and look it up for yourself, Bruce.
The Washington Constitution (art. VII, § 1) requires that taxation of property be uniform, a clause that was added to the constitution in 1930 by Amendment 14:"All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected forpublic purposes only. The word 'property' as used herein shall mean and include everything,whether tangible or intangible, subject toownership
"To my knowledge, no one outside AIG has seen these alleged contracts. How do you know they even exist, let alone that they rigidly require a specific bonus level?"
So, what you're in effect saying Bruce is, the Democratic senate didn't read the details of the bonuses they were agreeing to in the massive swindle us bill they signed off on....which, ignored promised airing of it before the American people of 48 hours before a vote, and still decided to sign it though not one member even bothered to read it. Thanks for clarifying the shared stupidity of the Democratic party and their members and supporters within.
Crying about spilled milk when you tipped the glass over is the height of hypocrisy, Bruce.
Property taxes originated in the 1800s as a tax on wealth. In all states except (theoretically) West Virginia they shifted to being a tax on property for one reason and one reason only: It's easier for the tax collector to know how much property a person has than how much wealth they have.
If you think about it, there's no philosophically defensible reason to tax property as opposed to wealth. The property tax has the effect of taxing people who's holdings happen to be in land rather than portfolio assets, so it's fundamentally discriminatory, i.e. market distorting.
So actually it makes sense to compare tax burden to wealth.
Thanks all,
New Left Consrvative # 1
Posted by: new left Conservative # 1 on April 21, 2009 10:37 PMOnly if you believe people SHOULD be taxed on their wealth. Which is, of course, not what many of us believe.
I wish I shared your optimism. I would place a very high wager that this Supreme Court of WA would indeed say a progressive income tax was legal. I don't think precedent would matter a whit when it came to implementing a federal-style income tax.
Do you find the current court hews to precedent in other matters?
- Worried in Issaquah
Posted by: Hmmm... on April 22, 2009 04:57 AM"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not" -- Thomas Jefferson
Posted by: James Bunn on April 22, 2009 06:14 AMAnyone who believes a state income tax would top out at 1% could qualify to be Queen Christine's Court Jester.
Posted by: Saltherring on April 22, 2009 07:33 AMSo, what does that mean? I hate boats but I don't begrudge someone who has a couple or three huge yachts. Or a plane. Or a fancy car that cost three times as much as mine.
I have a home with a roof over my head that is heated in the winter. I have food and clothes. I shop at Goodwill and Clearance Sales. So do 99% of the so-called poor. So, what is the issue Mr. Right? For clarification we do not fit the "poor" category but I did previously.
Posted by: swatter on April 22, 2009 07:54 AMSo my tax would be an amount equal to a child's tax for example? Is that what you suggest some believe as to how we should be taxed? It should be the same tax that a retired person, or mentally challenged person, pays for example too?
Property taxes would be calculated how? Michelle above notes that Mr. Gates pays a considerable sum of money each year for his house - is that based on wealth and unacceptable? - or should do you think some believe there should be no property tax?
What do you think the tax system that you understand some believe is better looks like?
The million dollar exemption (or $500k) will be seen as "uniform" because all taxpayers have this exemption, including those who earn more than that. Of course, this won't explain the tax on income above that amount. Perhaps that argument will be if you earn it, it will be taxed for everyone. They will think of something creative here.
Posted by: Palouse on April 22, 2009 07:58 AMBA: sales tax is a flat rate on what you buy. Property tax is a flat rate against the value of your land. Neither of those is a tax on your wealth (certainly, not ALL your wealth).
Do you take exemptions and deductions when filing your personal income taxes?
Thought so...
Posted by: Shanghai Dan on April 22, 2009 08:12 AMHow about B&O taxes - they must be fair since they apply to gross receipts rather than profit...if this tax was on profit then it would be a tax on "wealth"?
Posted by: BA on April 22, 2009 08:31 AMAt best, this measure is typical of the leftist brand of class warfare. At worst, it's precisely what Pudge says it is: a scam designed to gain it's proponents the figurative Leftist Nirvana, so we, too, can become economic powerhouses like, well, Oregon and California.
After all, implementing an income tax has solved all of THEIR problems... right?
What's that? They're abysmal fiscal train wrecks with unemployment rates 20 or 30 percent higher than ours?
And we WANT to become like that?
Sigh.
Posted by: Hinton on April 22, 2009 08:42 AMSurely you are not saying with a straight face that income=property; even you or pudge would admit they have different meanings. (My car is property, not income; hence income does not = property.) The question is whether income is a type of property.
Income is the change in property, like velocity is the change in position. (Sure, property value can change for reasons other than income, but you get the point.) The concept of an income tax is to tax the proceeds of an action (acquiring property); the concept of a property tax is to tax accumulated wealth.
It is obviously true that income, after it is earned, becomes the property of the earner. But I think the term income is commonly viewed as the flow of property, rather than the property itself. And the point of an income tax is to tax the flow.
I asked pudge for a citation because it seemed odd that a court would equate two different concepts. Pudge, who is always well-educated in technicalities (and I mean this as a compliment), implied he had some data about a court decision and was kind enough to educate those of us who haven't been following this issue as closely as he. I now understand (at least somewhat) the court's reasoning and I understand (at least somewhat) why many constitutional scholars think the court should and would (two different questions, of course) rule differently today. We'll just have to see (though, I suspect, not this year).
Posted by: Bruce on April 22, 2009 09:16 AMHave you heard the the Mayor of SF is running for Gov of CA.
Think their in a mess now, if they elect this fool. That state will have a credit rating of DDD.
Posted by: Medic/Vet on April 22, 2009 09:20 AMare you suggesting then that some folks see a fairer system as eliminating income taxes entirely and relying instead on just sales tax and property taxes?
I do.
How about B&O taxes - they must be fair since they apply to gross receipts rather than profit
I never said "not relying on wealth == fair." Obviously, I believe the B&O tax has problems other than "not relying on wealth."
Taxing profits seems to be a tax on wealth, just as an income tax is. Taxing gross receipts, certainly isn't since profit or loss is irrelevant.
So, taxing a business simply on gross receipts seems to be as fair as taxing property at a flat percentage rate - since then neither has an direct relationship to income and wealth...
I suppose an even fairer solution is to just tax every business at the same amount, the drive-through coffee shop pays the same tax as Boeing for example?
Posted by: BA on April 22, 2009 09:51 AMWell, here's a point that hasn't gotten much play. When the government stepped in and imposed pay ceilings on banks involved in the bailout, European banks saw it as an opportunity and have begun "poaching" our best and brightest here.
The problem isn't that the best and brightest are earning huge salaries - people who make organizations win big will alwys make whatever the market will pay. The problem is when the also runs start asking for similar pay structures.
Posted by: Johnny on April 22, 2009 09:55 AMSurely you are not saying with a straight face that income=property
Correct, I would not equate the two. Rather, I would say income is a subset of property.
Income is the change in property ... I asked pudge for a citation because it seemed odd that a court would equate two different concepts.
Income is commonly referred to as what you have earned. But there is also the act of the exchange of property -- in this case money -- that can be taxed. This is often referred to in the law as an excise tax, which is what a sales tax is: a tax on an event rather than on a state of being.
Many people have argued that income tax is an excise/event tax, but the Supreme Court of Washington ruled that an income tax in our state is NOT an excise tax, but a tax on property.*
The court did not equate different issues, it took a position on a side of the line differently from how you think it should have.
*Snippets from the decision:
Lane & Thompson, amicus curiae, contended, interalia, that the proposed tax is an excise tax and not a property tax ... Harvey W. McCormack and R.W. Maxwell, amici curiae, contended that this income tax is an excise tax. ..."Unless the income tax constitutes a tax on property, the uniformity clause of the state constitution is not violated. If income taxes "... are to be deemed a property tax, constitutional limitations applicable to property taxes must be applied. ... If they are excise taxes, such limitations are not applicable."...
We have no constitutional provision authorizing taxation of income as one thing and property as another. We have only the constitutional provision that property "shall mean and include everything, whether tangible or intangible, subject to ownership." Until we have such a constitutional amendment, the hands of the people, as well as the legislature, in enacting laws, are tied. ... It is asserted that a state income tax is an excise tax. That is not correct. The cases cited to sustain the assertions all involved corporate franchise tax laws and the like. ...
After the decision by this court in the Aberdeen Savings & Loan Assn. case, supra, deciding that income was property for the purposes of taxation, the people adopted the fourteenth amendment, supra, which made it a part of the fundamental law of the state.
I think the last part is perhaps the most convincing. In Aberdeen (June 1930), the state ruled income is property for the purposes of taxation. In November 1930, later the same year, the voters approved Amendment 14 to the Constitution, which gave us Article VII as we know it today, with the broad definition of "property" and the requirement that such taxes be uniform. The Court in 1933 took this, as I think it absolutely should have, as an assertion by the people that income was to continue to be included as property and that any income tax should be uniform.
And as the Court said, given the history here, the only real remedy is another constitutional amendment.
Of course, we never know for certain what a given Court will do, but this precedent has such a clear history and has been reaffirmed and relied upon so many times that the Court members really would be taking an extraordinarily activist act in overturning it, and likely every justice ruling in favor of such an overturning would fail re-election.
Yes.
Taxing gross receipts, certainly isn't since profit or loss is irrelevant.
Yes.
So, taxing a business simply on gross receipts seems to be as fair as taxing property at a flat percentage rate
No.
Again, I did not say any tax that is not on wealth is acceptable. The B&O tax, while not on wealth, has other problems that make it unacceptable.
That said, is your thinking that taxes should be limited to sales and property taxes? Are there other taxes that are acceptable, or should there only be a sales tax and no property tax?
Should the sales tax be only on goods, or goods and services?
Should food be exempt? Why?
Posted by: BA on April 22, 2009 10:26 AMOf course Boeing should pay more tax then a coffee shop, after all those tax giveaways and special infrastructure the government built for them.
And of course, Boeing pays MUCH more than a coffee shop, thanks to the B&O tax. On a $100 million plane, Boeing would pay around $54,000. Unless that coffee shop is selling a million dollars a month in coffee, they're not paying even what the B&O is for a single plane.
Posted by: Shanghai Dan on April 22, 2009 10:30 AMJust because you are uninformed doesn't mean that isn't a valid support of your argument but rather an admission of your own ignorance.
The AIG retention plan is available online.
Posted by: pbj on April 22, 2009 10:53 AM"To my knowledge, no one outside AIG has seen these alleged contracts. How do you know they even exist, let alone that they rigidly require a specific bonus level?"
Posted by: pbj on April 22, 2009 11:02 AMJust for the record, I am insignificant financially to this state but I do pay B&O tax as a business owner and employer.
Actually, I agree with some of the sentiment being expressed here and I am against this income tax--the toe-in-the-door analogy seems perfectly apt.
But in attacking a new tax, the income tax, it appears that some people are inadvertently or vertantly (!) defending an old tax, the property tax.
Why tax property? It's one type of wealth, that's all. When we tax property, we distort the market against holders of real property and in favor of holders of all other types of wealth not covered by this arbitrary tax.
It's taxing apples but not oranges.
When the property tax was created, it was a tax on wealth, both conceptually and in reality. In those days the guy with the big house on the hill who owned a lot of land often was the richest guy in town, more or less.
Now Bill Gates, the richest guy in the world, owns a paltry 5 acres, and we have a tax that hurts the land-rich poor, farmers, timber-lot owners, railroad companies, and people who happen to own land--say they inherited it from their family--that they may love and not want to sell. They wouldn't be forced to sell stocks they "loved."
(Btw, the last point is not self interest, my wife and I don't own land beyond our tiny city lot with a house on it.)
Why should a person who has a $ million in stocks and bonds pay nothing while the person with a $ million in land gets socked every year?
Politically it may well make no sense to fight the property tax, but that doesn't mean that it should somehow be elevated into a good or just tax in anyone's mind. It's only there because of the pragmatism of tax-needing governments.
And it does distort the market in favor of the portfolio-wealthy and against the middle class and poor, i.e., it's a regressive tax that increases our differences in financial status.
Thanks all,
New Left CONSERVATIVE # 1
Posted by: New left conservative # 1 on April 22, 2009 11:49 AMThe problem isn't that the best and brightest are earning huge salaries - people who make organizations win big will alwys make whatever the market will pay. The problem is when the also runs start asking for similar pay structures.
Posted by: Johnny on April 22, 2009 09:55 AM
They can ask, but who says they're going to get it? The free market will pay the going rate for the talent.
Posted by: Crusader on April 22, 2009 12:05 PMWhy should a person who has a $ million in stocks and bonds pay nothing while the person with a $ million in land gets socked every year?
Find me a person with a million in stocks and bonds who does not pay, directly or indirectly, a lot in property taxes.
Now Bill Gates, the richest guy in the world, owns a paltry 5 acres, and we have a tax that hurts the land-rich poor, farmers, timber-lot owners, railroad companies, and people who happen to own land--say they inherited it from their family--that they may love and not want to sell. They wouldn't be forced to sell stocks they "loved."
You're being ignorant. A 20 second Google search brought up the fact that Bill Gates paid over $1 MILLION in property taxes on his house, because of the value of the house.
How many people do you know that are the poor, barely-scraping-by kind of people you're trying to portray, paying $1 MILLION a year in property taxes?
It seems to me that Bill Gates pays quite a bit more for property taxes than most people. I know the place I had in Edmonds ran around $2500 per year for property taxes (value was just over $300K), and I will guarantee I made more than 0.25% of the annual income Bill Gates made (unless he had taxable income beyond $48 million, which I don't think has ever been the case).
Posted by: Shanghai Dan on April 22, 2009 03:17 PMIf he earned $48m every year since he was born, he's would have earned only about $2.6b dollars - a bit short of his actual worth before he gave considerable sums away and presumably lost some in the market with everyone else.
Shanghai Dan I presume you're thinking that he has a huge unrealized capital gain not yet taxed?
Posted by: BA on April 22, 2009 03:53 PMAs for social safety net stuff, that should be kept at a bare minimum. The bulk of that money going towards programs to get people off of state assistance through education, counseling, etc.
The gap between the rich and poor is increasing because of government regulation, taxation, and unionization driving all higher wage, semi-skilled labor jobs (e.g. manufacturing) overseas. Since we are unable or unwilling to switch to a right-to-work state to check union power, the only other option for the state is to reduce regulation and taxation to attract better jobs.
The impulse to raise taxes to "even out wealth" is exactly like when physicians used to bleed patients who were sick. It doesn't work. Ireland over the last 10 years has proven me right.
Posted by: blindman on April 22, 2009 04:36 PMI assume you understand that an unrealized gain is just that - unrealized? And that he will be taxed when he realizes that gain?
Taxing wealth is idiotic enough; taxing "potential" unrealized wealth is truly insane.
Gates made around $1M a year when CEO of Microsoft, meaning his property taxes were about equal to his income. In order to pay those taxes he used capital gains (realizing his gains), and paying capital gains taxes on that income.
Posted by: Shanghai Dan on April 22, 2009 05:04 PM@Pudge wrote:
"Find me a person with a million in stocks and bonds who does not pay, directly or indirectly, a lot in property taxes."
Pudge, i can't cuz you didn't identify what a lot is, but as one of those people i can tell you i pay ZERO WA tax on my financial property in WA.
@59 Michele, nobody in WA pays cap gains on bond income.
All, I successfully minimize my total (Fed + State) tax liability in regards to WA property tax by holding my income earning WA property in REITs. If there were a WA income tax, i'd pay more tax.
Posted by: MikeBoyScout on April 23, 2009 10:05 AMIt also has nothing to do with his property taxes - just as it has nothing to do with building the house. He didn't build the house from his salary alone either.
I mentioned unrealized gains in my first post - so, yes, I understand what they are.
Posted by: BA on April 23, 2009 10:52 AMSo is your point we should tax wealth, or should we tax income? Is taxing wealth just multiple taxation of income, since it takes income to build wealth?
Posted by: Shanghai Dan on April 23, 2009 04:36 PMBring it on Dems, Bring it on! I Dare you!
Posted by: GS on April 24, 2009 09:26 PM