Too good to be true-- Income tax plan is discriminatory

This editorial appears in the April 27, 2010, Yakima Herald-Republic.

Sponsors of a proposed state income tax believe times have changed since the 1970s, when voters last turned down such a measure. They see a greater willingness to support a tax aimed squarely at Washington's wealthier residents. Oregon voters approved such an initiative earlier this year when they increased existing income taxes on the rich, so why not Washington?

At first blush, the income tax being proposed by such luminaries at Bill Gates Sr., father of Microsoft's co-founder, appears to have a lot going for it. Under Initiative 1077, the top 3 percent of earners in the state would be taxed starting at $400,000 for joint incomes and $200,000 for individuals. A couple earning $1 million would pay about $30,000.

In concert with the income tax, the ballot measure would reduce the state property tax by 20 percent and increase the business-and-occupation tax credit.

Proponents claim this measure would result in a sweeping overhaul of Washington's tax system, benefiting middle-income residents and small businesses, and would result in $1 billion per year in new revenue that would be set aside specifically for education and health programs.

Sounds almost too good to believe. Of course, that's when the alarms should go off and questions should be asked.

First, can the tax brackets be lowered?

Backers argue the measure's tax thresholds can't be changed without a majority vote of the Legislature and submission of the changes to a public vote. It looks good on paper, but recent events don't support that contention.

True, lawmakers can't alter an initiative for two years after passage. But when that two-year limit has been reached, any initiative can be amended. Consider what happened this past session, when legislators brushed aside Initiative 960's two-thirds requirement for tax measures and approved, through simple-majority votes, nearly $800 million in new taxes. Don't ever underestimate the powers of the Legislature with respect to initiatives.

But what about the 20 percent cut in property taxes? That certainly has broad appeal. The trouble is in its scope. The cutback affects only the state's portion of the property tax -- which averages just 21 percent of an individual's property tax bill because most of the tax is local. In other words, property owners would get only a 4 percent tax break.

However, these problems don't really matter when faced with the constitutional hurdle of enacting a graduated income tax. This is the measure's Achilles' heel. The Washington Supreme Court has taken a firm stand against a graduated income tax, concluding that it flies in the face of Amendment 14.

Added to the constitution in 1930, the amendment reads: "All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership."

Again, proponents argue the high court will look differently upon the new tax proposal and conclude times have indeed changed.

This is wishful thinking at best. The income tax being proposed under I-1077 is not uniform as required by the state's constitution. It discriminates against a class of residents. The fact that they are the state's wealthiest may sound appealing, but it still doesn't make it right.

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