(This guest Slog post is by Matt McIlwain, Managing Director of the Madrona Venture Group. The state voters' guide has more information on I-1098 here.)
Initiative 1098, which would impose a first-ever income tax on Washingtonians, is the wrong tax at the wrong time. It creates higher taxes, enables bigger state government, and hurts job creation and economic growth.
As former Governor Daniel J. Evans says, “I-1098 is bad policy….it is a tax increase, is not reform and should be defeated.” No one’s worked harder than Dan Evans to make our tax structure fairer. That Dan Evans opposes I-1098 — a measure championed by one of his closest friends, Bill Gates Sr. — is clear evidence why you should vote no on 1098.
What does I-1098 actually do? It creates an income tax on your salary, capital gains and the profits that flow through to owners of many small to medium-sized businesses (all S-corporations and LLC’s). No deductions are allowed for things like charitable contributions or a home mortgage. There is no indexing for inflation.
The five percent rate applies to adjusted gross income above $200,000 (or $400,000 for couples). And, for an individual earning $500,000 or more ($1 million for couples), the income tax rate goes to nine percent. Nine percent is the country’s 4th highest income tax rate and as an “excise tax” you cannot count on deducting it on your federal tax return.
If I-1098 were to pass, the legislature could extend the income tax rates in two years with a simple majority vote. Should we trust our state legislature with this new taxing power? Defeating I-1098 is vital to controlling government spending, creating new jobs and remaining the most innovative American state.
The non-partisan Defeat I-1098 coalition cares deeply about quality education opportunities for Washingtonians. The reality is that our state legislature has increased kindergarten through high school spending 70 percent in the past 12 years. We spend more than $10,000 per public school student per year — above the average private school tuition. University spending has increased at similar rates.
I-1098 advocates say they’re offering tax relief, but it’s minimal and subject to lawmakers’ whims. If passed, property owners would receive a four percent property tax reduction — about $10 a month - on the average home. The B&O tax credit would offer relief to very small businesses, however those businesses generate less than 10 percent of all the state’s B&O tax collections (and only contribute a small percentage of jobs). Nor would I-1098 provide relief from the state’s sales tax, generally viewed as a regressive tax.
Pro-income tax spokespeople call this tax increase “modest," when in reality it’s the largest tax hike in our state’s history. It will take around $2 billion out of the private sector in the first full year alone. It falls heavily on our economy’s most productive sectors, the very businesses and business owners creating jobs for our citizens.
So who do you trust to make investments in new jobs — new and small businesses or politicians?
You can learn more about why I-1098 is the wrong tax at the wrong time for Washington State at www.defeat1098.com.