Wash. campaign seeks vote on ‘high-earners’ income tax coupled with property, biz tax relief

Wash. income tax measure seeks major tax overhaul

SEATTLE — Hoping to tap a populist surge following the Great Recession and corporate bailouts, liberal activists want to implement an income tax aimed exclusively at Washington state’s wealthier residents — couples pulling in $400,000 or more annually.

Washington is one of seven states without a personal income tax, and voters have rejected attempts to establish a personal or corporate income tax five times. But the last statewide votes were in the 1970s, and sponsors of this year’s campaign have clearly sensed a political shift.

The effort comes about three months after voters in neighboring Oregon upheld higher income taxes on couples earning more than $250,000. New York, Maryland and other states also have increased taxes on their wealthiest residents in recent years.

Sponsors of Washington’s proposed ballot measure are coupling their “high-earners” income tax with a 20 percent cut in the state property tax and an expansion of the credit for business-and-occupation taxes.

With that combination, Initiative 1077 will be marketed as a major tax overhaul that helps middle-class families and small businesses, while asking for a bit more from the rich — or, as prominent tax-reform advocate Bill Gates Sr. put it Wednesday, “the top 3 percent — who can afford to pay.”

“We’ve talked about the need for serious tax reform in this state for a good many years … and for years, nothing has been able to be done,” said Gates, father of the Microsoft Corp. co-founder. “So today, this day, we’re going to begin to do something.”

The campaign will need to collect more than 240,000 valid petition signatures by July 2 to qualify for the November ballot. Any organized opposition campaign could take time to develop, but criticism and predictions of failure were already flying Wednesday.

Conservative activist Tim Eyman, who showed up at the coffee shop hosting the income-tax announcement, said I-1077 would almost certainly make the ballot because of its wealthy supporters. But he didn’t think voters would go along with it, particularly following the recession and fresh state tax increases on beer, soda pop, service businesses and more.

“It is the Holy Grail for the progressive movement,” Eyman said. “They probably should have had this event at a church because it requires so much faith.”

Eyman said the drive for an income tax illustrates the need for his Initiative 1053, which would reinforce a difficult two-thirds threshold for the Legislature to raise taxes.

The proposed initiative sets out two tax brackets. The first tax rate would be 5 percent of the portion of joint income exceeding $400,000, or over $200,000 for individuals. The tax would increase to 9 percent on the portion of income that exceeds $1 million for couples or $500,000 for individuals.

Advocates said it would raise about $1 billion per year for education and health programs. The tax rates could not be changed without a public vote, although the Legislature would be technically able to amend away that requirement after the law has been on the books for two years.

Most of Washington state’s taxes come from two sources: The 6.5 percent baseline sales tax and the business-and-occupation tax, levied on a business’ gross receipts. Property taxes also are in the mix but have fairly strict caps on their annual growth — the consequence of another voter initiative.

Income tax measures have been attempted over the years in Washington with little success. A graduated income tax was first enacted by initiative in 1932, passing with about 70 percent of the vote. But it was thrown out by the state Supreme Court, which pointed to the state constitution’s call for uniform taxation on property.

Since then, some legal experts have said a modern court might overturn the 1933 ruling, arguing that the old decision is based on obsolete legal theory. Gates said he expects I-1077 would be upheld under those circumstances if it passes and is challenged in court.

On the Net:

I-1077: www.yeson1077.com

Eyman’s campaign: www.voterswantmorechoices.com