Washington State has the most regressive taxes of any state in the country. In Washington, poor people pay 17.3 percent of their income in taxes, while the filthy rich pay only 2.6 percent of their income in taxes. This is the result of our state’s heavy reliance on the sales tax, which accounts for over 50 percent of all state revenue. Imagine two families, one rich and one poor, going to the same store and buying the same basket of goods and subjected to the same sales tax. For the poor family, it’s a much heavier burden than for the rich family. The sensible way to even out the tax burden is to tax income, like most other states. But Washington doesn’t have an income tax. Never has. Hence our status as a national embarrassment—more regressive on taxes than even Texas or Georgia.

As the debate heats up over Initiative 1098, you’re going to be hearing a lot about “the taxpayers of Washington State.” But it’s a very small minority of high-income earners—only about 38,400 of them—who would be paying the new income tax. That’s because it’s a tax only on individuals who earn over $200,000 in a year or on couples who file a joint tax return that shows them collectively earning more than $400,000 in a year. (Meaning that if you’re half of a wealthy couple and together you earn $399,999 a year, you don’t have to pay any income tax under I-1098. Hence that segment of the pyramid, right below the top, where you see 72,858 tax returns from people who earn more than $200,000 per year but wouldn’t have to pay. Those are returns from couples who are well-off but don’t hit the $400,000-per-couple threshold.) The new income tax on the 38,400 wealthiest Washingtonians would bring in about $2 billion annually for education and health-care programs—programs that help working families and the middle class the most.

In Washington, people who earn an average of $11,000 a year currently pay 17.3 percent of their income in taxes, but people who earn $1.8 million a year pay only 2.6 percent of their income in taxes. It’s like a sliding scale that’s sliding in the wrong direction. Or trickle-up economics. Or a subsidy for moguls and CEOs. Washington currently has a $3 billion projected budget shortfall for the next two-year budgeting cycle—which means, just like in the last budgeting cycle, programs dealing with everything from health care to public education are going to be hacked away at. Perversely, those cuts will land hardest on those who already pay the highest percentage of their income in taxes.

Bleak numbers, but this initiative could help. In addition to adding a high-earners income tax, if I-1098 passes, the rich and poor alike in this state will get a 20 percent cut in their state property taxes. And 93 percent of all businesses would get a tax cut or an exemption from B&O taxes. Economic stimulus! (This despite claims by opponents that I-1098 is going to hurt businesses in Washington.)

The main argument from income-tax opponents is that I-1098 is just the beginning. Wait a few years, they say, and it won’t be just the filthy rich who are paying income tax—it’ll be everyone. How will this happen? The Democrats in the state legislature! They’ll expand the income tax! They can’t resist! The truth is, in the entire history of Washington State, the state legislature—whether controlled by Democrats or Republicans—has never successfully implemented an income tax. Politicians in Olympia are simply too cowardly to touch this idea. In any case, even if they did decide to destroy their careers by taxing more than just the filthy rich, citizens always have the last word. They can reverse an action of the legislature by initiative or, as they seem likely to do this fall, vote for an initiative like I-1053 (also on the ballot in November) that makes it harder for Olympia lawmakers to institute any tax increases in the first place by requiring a two-thirds majority for any such move.

Who’s behind the $1.5 million campaign against finally fixing the most regressive tax structure in the country? People like Matt McIlwain, the Seattle venture capitalist who was ranked 57th on the Forbes Midas List in 2009 and has personally donated $5,000 (while his venture capital firm has kicked in $50,000) to defeat I-1098. McIlwain sent his kid to private school and supports the anti-gay-marriage group Families Northwest. Wireless communications magnate John Stanton and his wife, Theresa Gillespie, one of the richest couples in America, estimated to be worth more than $1 billion, have put in $75,000 to defeat I-1098. And let’s not forget Seattle Times publisher Frank Blethen, who earned $1.13 million in salary and bonuses in 1999, according to the Wall Street Journal, and whose editorial page has led the rhetorical charge against I-1098. Let’s say Blethen now earns only $1 million a year (times are tough for newspapers) and files a joint tax return. Under I-1098, Blethen would be paying only 3 percent of his earned income in taxes. Let’s say times have gotten really tough and Blethen these days earns only $500,000 a year. In that case, he’d pay only 1 percent of his income in taxes under I-1098. Boo-hoo. The main mover behind I-1098, Bill Gates Sr., a famous lawyer and philanthropist and father, has put $500,000 of his own money into the campaign to pass the high-earners income tax. He is one of those people at the top of the pyramid, so he would pay the tax. Happily. recommended

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Eli Sanders was The Stranger's associate editor. His book, "While the City Slept," was a finalist for the Washington State Book Award and the Dayton Literary Peace Prize. He once did this and once won...

129 replies on “Tax the Filthy Rich!”

  1. “The new income tax on the 38,400 wealthiest Washingtonians . . . “

    I have no problem at all with making the tax structure more progressive in a manner that actually gets to the “wealthiest”. The problem is that the above sentence is absolutely wrong. What this tax will do is hit the 38,400 (or howver many) HIGHEST INCOME Washingtonians. Those are not the wealthiest — although there may be some overlap.

  2. It’s pretty fucking stupid to say you’re not going to vote for this because “Olympia” might one day lower the floor, like they are our cruel overlords and can’t hear us over the constant screams and whippings. It is almost as though you all are using the inherent difficulties of democracy as an excuse to avoid ever having to actually do anything, opting instead to bitch and moan about your lot in life.

  3. Slippery slope arguments about the income tax are just dumb.

    If that were the case, why aren’t sales taxes 15 or 20 percent? Why isn’t the property tax rate 5 or 10 percent? It’s legislative suicide ya nimwits.

  5. @107
    It seems counterproductive to nitpick the difference between wealth and high income.

    When Frank Blethen was bitching about the estate tax a few years ago, he said, “It wouldn’t be so bad if the state taxed estates a little at a time, but to tax them all at once isn’t fair,” or words to that effect. Now, Ryan Blethen is saying an income tax is tantamount to “taxing success.” B.S. is B.S., however you frame it. They just don’t want to pay taxes at all.

    Progressive and regressive tax systems both have their problems. With progressive systems, the rich feel they are being used. With regressive systems, poor people find it genuinely hard to get by. A flat tax at a reasonable rate that everybody can abide would be best. Remember the tithe we learned about in Sunday school?

  6. @ 86: So go to Nevada already…You can’t have much of a “business” if you can pick up and go wherever to save a couple grand in taxes. Leave the sunroof off your next freakin’ car, and don’t opt for the gold-plating on your emblems from the dealership. Or trade the old PSV (Penis-Substitute Vehicle) for something logical to start with. (I seriously wouldn’t be surprised if you drove on of those things named after a blow-job). And, with a business so pack-up-and-go mobile, I doubt seriously you would ever break the 200K barrier in a decade, let alone a year.

    It absolutely AMAZES me the totally bogus, nonsensical crap people will pay for, but some bucks for education or health care???????

    First off, with a “business” so easily moveable it is obviously either drugs or some silly notion of “business.” The mom-and-pop corner store is a business, and they would get a serious tax break under 1098. And they aren’t going nowhere, BECAUSE THEY ARE PART OF THE COMMUNITY!!

    Second, the major cause of crime in this country is poorly educated youth. Period. Want proof? Go to New Orleans for a couple weeks, where education is given ZERO importance and has, voila, the highest crime and highest VIOLENT crime rate in the country. Seven years running, so don’t blame Katrina. Katrina gave the middle-class the opportunity to leave, which they did (to the tune of 187,000).

    Want to end homelessness? A large portion of the homeless aren’t homeless…they are houseless. BECAUSE THEY LOST EVERYTHING TRYING TO PAY MEDICAL BILLS BECAUSE THE MULTI-MILLION-PER-YEAR-EARNING-F-FACES WANTED TO ADD MORE TO THEIR BOTTOM LINE and often cutoff or severely reduced health benefits and even retirement accounts!!!

    ENOUGH OF SHEDDING TEARS FOR THE SERIOUSLY WEALTHY!!! AS THE FAMOUS LINE IN “CHINATOWN” SAYS: HOW MUCH BETTER CAN YOU LIVE???? (OH, AND YOU TRUST-FUND BABIES OUT THERE, REMEMBER IN NEW HAMPSHIRE INTEREST IS TAXED HEAVILY,AS IS ANY PROPERTY SUCH AS CARS AND BOATS. THAT’S HOW THEY MAKE UP FOR NO INCOME TAX.)

    TO HELL WITH THE “LET THEM EAT CAKE” ATTITUDE!

    PASS 1098 or still be looked at as a laughing-stock and an example of the poor-people-shoulder-and support-the-rich-and-are-kept-where-they-are-to-keep-doing-so. THIS ISN’T THE PRE-CIVIL WAR SOUTH!!!!!

    Maybe these freakin’ objectors (most of which are actually “wanna-be” rich guys and gals) should move to Europe, pay exorbitant taxes, but, be able to have seances with Marie Antoinette. Just call Nancy Reagan for a referral to a good medium.

    Trickle-down=Pissed-on.

  7. @majorpayne: Thanks for your comments to me a few days back, hope you like 112 as well, although I apologize for the language. Just got back from Providence, so I missed a few days. Oh, yes, people pay income tax there. But the nessecities of life aren’t sales-taxed and the other state imposed taxes are quite low.

    Is that why so many of the uber-wealthy are still in Newport?? I guess our uber-wealthy may want to look into moving there, or Hyannisport, or the Hamptons, where taxes are sooooo low! Oh puleeeeze!

  10. One argument that the opposition is sure to press is that there is no need to institute an income tax on the wealthy. We can close the budget shortfall without compromising the quality of public services solely by reducing spending. Let’s stop and think carefully about this line of argument. Reducing public spending means that some public sector jobs are very likely to be eliminated. After all the government doesn’t produce goods for consumption; it administers service. So to reduce government spending largely entails eliminating jobs in government, espeically if the spending cuts are not going to reduce the quality of public services.

    So it follows that the opposition to 1098 is willing to allow for the elimination of jobs in WA state as the correct public policy. That is, unless the opposition hopes to convince us that all the spending cuts will eliminate mere “inefficiencies” without eliminating any jobs. But that is highly doubtful. What’s peculiar is that the opposition to 1098 also seems to think that enacting 1098 will kill jobs. It thus seems that the opposition to 1098 does not want to kill jobs, and at the same time is willing to kill jobs. If so, then the opposition’s position is incoherent. The real truth is that there doesn’t seem to be any way to move forward without killing some jobs, unless perhaps if voters enact I-1098 into law. For the funds from I-1098 will surely make it possible to, at worst, save some existing public sector jobs, and at best, create some new ones.

  11. One argument that the opposition is sure to press is that there is no need to institute an income tax on the wealthy. We can close the budget shortfall without compromising the quality of public services solely by reducing spending. Let’s stop and think carefully about this line of argument. Reducing public spending means that some public sector jobs are very likely to be eliminated. After all the government doesn’t produce goods for consumption; it administers service. So to reduce government spending largely entails eliminating jobs in government, espeically if the spending cuts are not going to reduce the quality of public services.

    So it follows that the opposition to 1098 is willing to allow for the elimination of jobs in WA state as the correct public policy. That is, unless the opposition hopes to convince us that all the spending cuts will eliminate mere “inefficiencies” without eliminating any jobs. But that is highly doubtful. What’s peculiar is that the opposition to 1098 also seems to think that enacting 1098 will kill jobs. It thus seems that the opposition to 1098 does not want to kill jobs, and at the same time is willing to kill jobs. If so, then the opposition’s position is incoherent. The real truth is that there doesn’t seem to be any way to move forward without killing some jobs, unless perhaps if voters enact I-1098 into law. For the funds from I-1098 will surely make it possible to, at worst, save some existing public sector jobs, and at best, create some new ones.

  13. #1 Sgt. Doom– Please reference these GAO studies, I would be interested in reading. I see from GE’s annual report, that they did not pay income tax in 2009 due to losses from their financial services division, but it should be noted that they paid $5.2 billion in income taxes over the previous two years. http://www.ge.com/ar2009/pdf/ge_ar_2009_…

    ExxonMobil paid over $15 billion in income taxes in 2009 and over $66 billion over the previous two years. http://thomson.mobular.net/thomson/7/309…

  14. I don’t want to sound odd here, but from the perspective of a foreigner, not having an income tax seems…well, really, really strange. Income taxes on all wages are the norm in most nations, even states of the US I believe.

    Just be thankful you don’t have a flat tax, so both the rich and the poor pay 20% of their income in tax…

  15. The rich. They earn, then they spend it. Sales Tax and Property tax is paid by them also. Those rich guys are buying mansions, they pay a tax. If your state has nothing to sell to them, why force them out. Tax them and they go away. That has happened to some of our biggest companies. They went international to not get taxed. Before they would gladly make money elsewhere and bring it to USA. Now they just keep it in Hong Kong.

  16. How about we just eat the rich? There’s a popular saying: “democracy is 20 wolves and one sheep all asking what’s for dinner”. In fact, whenever there’s an unpopular minority, we can just tax or regulate them so they’re just like the rest of us. Hooray for egalitarianism! I’m not jealous, I just want to spend rich people’s money as if it were my own.

  19. The data in this article is misleading. The tax % paid figures only look at the slice of taxes paid to the state, not the overall tax burden experienced by any given individual. If what matters (in terms of fairness) is how much money people get to spend v. forfeit at the end of the day then overall taxes are the only relevant data to consider. Those numbers will look quite a bit different.

    I’m very much of two minds about this initiative but one thing that really doesn’t help anyone who wants to make an informed decision is misrepresentation like this.

  24. If the stopped sending our jobs overseas, that would help our states economy. We send jobs overseas so money is going out and never coming back in.

    We need to return the jobs back here, where money spent is put back into the state.

    There should be an outsource tax placed on companies by the gov’t to make up for lost revenue 😉

  27. Very thought provoking! My problem with the entire argument is that it’s mostly people making under $200,000 who are writing articles and of the opinion that those over $200,000 should pay more taxes. It’s always “Can’t someone else do it?”. I make under $200,000 and I say 38% flat tax rate for all making more than $50,000. No mortgage break, no health break, no investment break, just a flat tax. No IRS, just our employer writing a check to us for 62% and the Fed for 38%. No April 15th.(BTW I make more than $50,000 so it includes me). and all government assistance is tax free. Who’s in?

  29. I still say just a simple tax rate for everyone, no write offs (except charitable donations that are real charities) …. including taxing us in the poverty level. Right now I don’t pay anything but sales tax, but to be fair I’d pay an income tax if it would help. With an income tax my housing cost would adjust itself (basically giving money to myself I know but meh) so it would be balanced out. While I’m okay with not paying income taxes at all, to be fair I would. Everyone should pay the same percent.

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