OLYMPIA — A campaign to impose an income tax on the state’s wealthiest residents is likely headed to the November ballot, as supporters submitted boxes of petitions Thursday morning.
Bill Gates Sr., father of the Microsoft Corp. co-founder, and about two dozen other supporters of Initiative 1098 turned in 350,000 petition signatures Thursday in Olympia, many more than the roughly 241,000 required to get on the ballot. The campaign says it will turn in an additional 20,000 today.
Gates said that it was time “to make our tax code fair for the middle class and small businesses.”
“I suspect the people of the state are going to agree with that,” he said.
The income tax would have two brackets. The first is 5 percent of any income above $200,000, or $400,000 for couples. The second bracket is 9 percent on the income above $500,000 for individuals or $1 million for couples.
The initiative also would cut the state property tax by 20 percent and increase the business-and-occupation tax credit to $4,800.
Washington is one of seven states without a personal income tax. Advocates said I-1098 would raise about $1 billion per year for education and health programs.
The elder Gates has been among the state’s most prominent advocates of tax reform. He was chairman of a special state committee that in 2002 recommended a state income tax as a possible addition to Washington’s revenue stream.
Mark Funk, a spokesman for the opposition campaign, said that the initiative is “the first step toward an income tax on everybody.”
“People want to see government reform and cost savings, not an income tax,” he said.
Gates was joined by a few small- business owners who supported the measure, citing in part, the business tax break aspect of the initiative.
Jon deLeeuw, owner of Not a Number Cards &Gifts in Seattle said that a lot of businesses in his Wallingford neighborhood are struggling. “Any relief is welcome,” he said. “It will allow me to grow my business. If I pay less taxes I can actually hire more people.”
Most of the 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 relatively strict caps on their annual increase, a result of a voter initiative.
Washington’s economy has not been spared by the national recession, and Gov. Chris Gregoire and the Democrat-controlled Legislature balanced a shortfall of about $12 billion over the past two years, with spending cuts accounting for about 40 percent. The next budget is expected to be short by at least $3 billion.
Gates acknowledged that a high-earner’s income tax will not solve that problem. “We’re having a recession and there isn’t anything the voters can do about that,” he said. “The fact remains, we want at this time, regardless of the economic situation, to have a state in which we are amply funding our educational activities.”
Income tax measures have been attempted over the years in Washington with little success. A graduated income tax was 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.
Voters have defeated subsequent attempts to amend the constitution for a state income tax, most recently in 1973.
Since then, some legal experts have said a modern court might throw out the 1933 court decision that defeated the original income tax, arguing that the old decision is based on obsolete legal theory.
Earlier this year, 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.
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