A Millionaires’ Tax

Russ Caditz-Peck

Washington state is broke.

Actually, it’s worse. We are now 9 billion dollars in the hole.

A study by the Washington Budget & Policy Center recently announced that our tax system is unsustainable and regressive. What happens now? The smart, just and pragmatic way to save our state is to enact a high-earner’s income tax. The logic is simple enough:

New revenue is necessary. Washington currently has no income tax. Only a few states: Alaska, Wyoming and South Dakota to name half: have no income tax. Millionaires in conservative Idaho pay a 7.8% income tax; 6.9% in Montana; over 10% in California etc.
Washington’s taxes are currently very regressive: millionaires are paying about a 3% tax rate, while the lower brackets are around 17%.
Last week Washington State Sen. Jeanne Kohl-Welles (D-36) introduced legislation to create a one percent tax on household incomes over $1 million. All revenue generated would be dedicated toward an “education enrichment account.”

Our state education system is 46th in the nation in class size and 45th in per pupil funding: this would put money where it’s needed most.

Washington Republicans are farcically anti-tax: they recently refused to support a 0.2% surcharge to support 911 services.   However, our Democratic Governor Gregoire has also announced she opposes this measure, and many in the state legislature are expected to follow suit. This indifference is unacceptable from the Democrats who were elected to protect the middle-class during the economic crisis.

It is becoming increasingly clear that many incumbent Democrats will make no effort to balance recent cuts: including over a billion dollars from education: with new revenue. With a solid majority and a wide lead in the polls, Democrats now seem less beholden to middle-class voters than the corporate interests that fund their campaigns. It is up to voters: through the upcoming primary, contacting their legislators, editorializing, donating etc.: to hold these lawmakers accountable.

The conservative arguments against this tax are based on a false assumption: that the ultra-wealthy will be unsupportive. This is a shaky argument. If the wealthy can be convinced the money will be spent wisely, history has shown they will support increases. For example, when Seattle last had an income tax on the ballot, the measure was supported the most by those whose taxes would be raised the most.

All evidence has shown that Washington’s wealthy have a sense of responsibility and appreciation for the society and public investment that helped make their good fortune possible. Conservatives insult the intellect and intentions of the wealthy when suggesting they would be unwilling to pay a little more.

Furthermore, a high-earner’s income tax will not drive business out. A local example of this is Boeing Co., who left low taxes in Washington to set up headquarters in tax-heavy Chicago, IL. In fact, in the past 10 years, the 10 “most tax friendly” states and the 10 “least tax friendly” states experienced exactly the same growth rates in personal income (Sims, Richard).

Conservatives grossly overemphasize a correlation between low taxes and economic growth. High levels of public investment: particularly in public education: increase productivity and attract wealthy families to a given area. In reality, the quality of the educational system is one of the first things business location consultants look to when advising businesses on re-location or expansion decisions, and is one of the top issues for residents considering moving to or buying a home in an area (Sims, Richard).

While cutting taxes is now a popular mantra for politicians of all persuasions, they have been shown to be a harmful way to combat a recession (Economic Policy Institute). President Obama and a consensus of economists have determined that the public sector must spend now––the government must fill the void left by decreased private sector funding.

The same logic holds true in Washington state. It’s now up to Democrats to pass this and, with the help of those still wealthy enough to afford it, get back on the road to recovery.