Income tax question will be asked again, soon

Published 4:09 pm Tuesday, April 7, 2009

Despite the resurgence of income tax proposals in Olympia, there’s no chance that an income tax will ease the state’s current budget shortfall. The timing doesn’t work.

Even if lawmakers could get it on the ballot in November and voters approved it — two highly unlikely events — the tax will face a sure constitutional challenge that could tie it up for months. Then there’s the mountain of administrative detail to plow through before implementation.

But, for all its near-term irrelevance, I think we’re closer to an income tax vote than we’ve been in years. November would be too soon, but if the recession lingers, the fevered exhalations of frustrated progressive populists could easily inflate the trial balloons now floating over the state Capitol.

Several things are different today. A powerful state senator has taken leadership on the issue. The outrage over the federal bailout, multimillion-dollar bonuses and golden parachutes has made income redistribution more popular than it’s been in years. State budget cuts have hit popular programs. And at 9.5 percent in much of the metropolitan Puget Sound, the sales tax is just about maxxed out.

No income tax effort will succeed without a passionate advocate. Senate Majority Leader Lisa Brown, D-Spokane, has claimed the mantle. Brown, an undeclared 2012 gubernatorial candidate, titled a recent blog post, “Who is going to stand up for Washington’s middle class?” She stops short of nominating herself.

She advocates a “high earners” income tax dedicated to the public schools and higher education. (While Sen. Jeanne Kohl-Welles, D-Seattle, has sponsored a bill imposing a 1 percent tax on the wealthy to “buy back” budget cuts, Brown has bigger things in mind.)

Like the members of the 2002 tax committee chaired by Bill Gates Sr., Brown sees the issue as one of fairness.

“Introducing a new tax that 19 out of 20 people,” she writes, ” ¿ would NOT (sic) have to pay is one way of making our system more fair.” She contends the wealthy are not paying their “fair share.”

(Oddly, no one ever mentions this Gates committee finding: “¿ when evaluating the total tax system — local, state and federal — all states have progressive taxes and the differences among states are not as great.”)

Ordinarily, I’d say that most folks in our state reject the “rob Peter to pay Paul” school of tax reform. Too many of us see ourselves in Peter’s shoes one day. That may be changing.

Brown cites approvingly a plan by New York Democrats to solve that state’s budget problems by reaching deeply into the pockets of high earners, a proposal the New York Times describes as the “largest state income tax increase in recent history.”

Although it’s a long way from here to Wall Street, the Street’s greed adds momentum to the share-the-wealth push. The inexorable tax drift, however, will be to increase rates and expand bases. It doesn’t take long for a millionaire’s tax to touch everyone.

The state budget shortfall requires nearly $4 billion in program cuts. So this time around income tax backers are candid about their search for more money.

The sales tax is the quickest source of cash to “buy back” program cuts, but it falls heaviest on the poor. Brown says she’ll support a sales tax bump only if it comes with a “rebate for working families.” There’s a larger political hurdle, though. With the half-cent Sound Transit sales tax hike taking effect last week, the tax bumps against the hard-to-penetrate dime-on-a-dollar threshold.

In the last 20 years, we’ve seen income tax flutters falter before reaching the ballot. In his gubernatorial campaign in 2004, King County Executive Ron Sims promoted an income tax to replace the state sales and business taxes. His primary opponent, Chris Gregoire, trounced him. Gov. Gregoire has restated her opposition to an income tax. She has also said she “hates” this year’s budget cuts.

Lawmakers who have spent the last four years boosting spending beyond revenues have run out of options. One way or another, they’re going to ask for an income tax sometime soon. And, despite the changed dynamics, I think we’ll again decline the request.

Richard S. Davis writes on public policy, economics and politics. His e-mail address is richardsdavis@gmail.com.