A state income tax.
Now that he has your attention, state Treasurer James McIntire hopes that everyone in Washington, not just lawmakers, might give the idea some thought over the next year.
Much of the reason that legislators are now struggling to find agreement on how to fully fund education — and why they’ll now need a special session to do it — is easily traced back to the state’s revenue system.
It’s why lawmakers are in contempt of the state Supreme Court for not acting more quickly to fund education. It’s why the state has allowed school districts to turn to property tax levies to make up the difference between what the state provides and what is necessary to pay teachers. It’s why our state’s reliance on sales tax revenue has saddled residents with the most regressive tax system in the nation, where lower-income families pay a greater share of their income as taxes than more affluent families. It’s why the business and occupation tax has made Washington 33rd in the nation on the list for business competitiveness. It’s why our tax base is shrinking and will continue to wither relative to the state’s economy.
The math, McIntire said earlier in the week, does not add up.
“It’s mathematically impossible for us to sustain an adequate investment in education on a shrinking tax base,” he said Monday in Olympia.
Beyond the next two to six years that the Legislature is working to address this session, McIntire says the state will need an additional $4 billion for education by the 2019-21 biennium. Relying on the current tax system, that would require a 1 percentage point increase in the state sales tax to 7.5 percent; a 15 percent increase in the B&O tax; and an increase in the state’s share of property tax of $1 per $1,000 of assessed value to a rate of $2.90.
The nation’s most-regressive tax system would become more so, and the state’s competitiveness ranking would drop even further to 41st in the nation.
McIntire, instead, wants to make a “grand bargain.” In exchange for a constitutional amendment that would require a two-thirds majority of the Legislature and a majority vote of the public to change state taxes, McIntire proposes a flat 5 percent state income tax with deductions that for a family of four would amount to $50,000. The revenue generated by the income tax would: allow for the elimination of the state’s portion of the property tax and lower limits for excess local school levies; allow the B&O tax to be lowered 1 percent for service businesses and to 0.29 percent for all other business, the same rate Boeing enjoys; and allow for the reduction of the state sales tax by 1 percentage point to 5.5 percent.
The result, says McIntire, is more money for education, a fairer tax system for residents and a more competitive business climate, raising its ranking to 15th in the nation.
McIntire, who wants to take his proposal on the road over the next year prior to a vote in 2016, says the plan isn’t perfect and adjustments can be made, but it’s a place to start a conversation.
In the interests of our students, our economy and income equality, it’s a conversation we can’t afford to delay any further.