This fall Washington voters will likely again be asked to pass a state income tax. Voters have previously rejected a state income tax four times.
This initiative imposes a tax of 5% on people with yearly adjusted gross incomes over $200,000 and on couples with incomes over $400,000. The rate would rise to 9% at the $500,000 and $1 million levels. The initiative is not indexed to inflation, so it would automatically hit more people every year. The initiative affects approximately 3% of earners. However, as with most taxes in Washington state, one can expect the base to lower over time and rates to increase (i.e. the gas tax, sales tax and property taxes were all modest at inception).
Supporters have until July 2 to collect 241,153 signatures. With backers such as Bill Gates Sr., they will almost certainly make the deadline. The
initiative would reduce the state
property tax by 20% and increase the Business & Occupation (B&O) tax credit to $4,800 a year (the proponents assert this would exempt the smallest 80% of Washington businesses from the B&O tax).
The state portion of property taxes makes up about a quarter of property tax bills, so with the 20% reduction, the resulting net reduction in property taxes would be only 4%. Average homeowner savings would be $180 a year or less. The initiative represents a net $1 billion tax increase, with 70% going to schools and 30% to health care.
New Jersey has an income tax and found that between 2004 and 2008 the household wealth of out-migrants exceeded that of new arrivals by $70 billion. "If you tax them they will leave," is how their new governor put it. The Hill newspaper reports, "... studies show top earners - the 1% of taxpayers paying 40 percent of income tax - are fleeing the Garden State."