Budgets flow red and the cry goes out: 'The taxes are coming'

This editorial appears in the Feb. 18, 2010, Yakima Herald-Republic.

If the famed patriot Paul Revere were alive today, no doubt he would be warning fellow Americans: "The taxes are coming, the taxes are coming." And from the looks of it, these taxes are coming from all directions.

First, we have the state Legislature finagling with the voter-approved requirement that all tax measures be passed by a two-thirds majority. That high hurdle would be lowered to a simple majority if lawmakers, led by a strong Democratic plurality, get their way.

Gov. Chris Gregoire offered Wednesday her own suggestions for higher taxes, totaling some $605 million. They would increase costs for such items as bottled water, pop, candy and cigarettes.

If that isn't bad enough, now we have before us a measure introduced by Democratic state Rep. Maralyn Chase that would double the state's estate tax. Under House Bill 3184, tax rates for estates valued at more than $2 million would rise from 10 percent to 20 percent. It would keep rising from there, with the highest rate going to 38 percent for estates valued higher than $9 million.

Half of the revenue from the higher estate taxes -- some pro-tax advocates estimate it would eventually bring in as much as $65.8 million annually -- would be earmarked for a special "education legacy" fund that would be used for grants to Washington high school students who go to a community college or a four-year university. The other half would presumably be funneled into the state's general fund.

The impetus for this extra revenue is the $2.8 billion budget shortfall that lawmakers are facing. Also, the bill's sponsors are, no doubt, emboldened by what Oregon voters accomplished last month when they approved raising income taxes on households earning $250,000 or more.

But don't be fooled. This doubling of the estate tax is ill-advised and would have little impact on the budget shortfall in the short term. In fact, the Washington Policy Council offers some compelling evidence that states with an estate tax are worse off than those that don't have such a tax. In 2008, the Connecticut Department of Revenue Services found that 26 states with no estate tax created twice as many new jobs from 2004-07 when compared with the other 24 states, which had estate taxes.

Furthermore, wealthy residents tend to move out of states with estate taxes. Connecticut discovered that 52 percent of its tax planners said the top reason their wealthiest clients had left the state was due to the estate tax.

The tax picture gets even grimmer when viewing what's going on in Congress where it appears the federal deduction for Washington's sales taxes may be, once again, on the chopping block.

While the federal deduction may still see the light of day when lawmakers hammer out the final details of a jobs bill in the Senate, it's still a worrisome development, especially since nearly 1 million individual taxpayers in Washington claimed the sales tax deduction in 2007.

Yes, taxes are coming. No wonder we are filled with fear and anxiety whenever the state Legislature and Congress are in session. We have little reason to react otherwise.

* Members of the Yakima Herald-Republic editorial board are Michael Shepard, Bob Crider, Spencer Hatton and Karen Troianello.