I-1098: Would Legislature expand an income tax?
If voters approve I-1098, the income-tax initiative, some worry the Legislature would apply the tax to everyone after two years. But lawmakers know such a move would be politically risky.
Seattle Times Olympia bureau
I-1098 would create a tax rate of 5 percent on annual taxable earnings exceeding $200,000 for individuals and $400,000 for couples, and a 9 percent tax rate on earnings of more than $500,000 for individuals and $1 million for couples.
It would cut the state portion of everybody's property taxes by 20 percent and newly exempt 118,000 businesses from the B&O tax on gross receipts by increasing the state credit to $4,800.
The state estimates the tax would bring in more than $2 billion annually for education and health care by 2013.
OLYMPIA — A big question hangs over Initiative 1098.
Can state lawmakers be trusted to keep the initiative's promise to target only the affluent — those with income exceeding $200,000 for individuals and $400,000 for couples — and not extend the income tax to everyone?
The Defeat 1098 campaign says hell no, hammering the point through television and radio ads that argue lawmakers assuredly would broaden the tax. History, in fact, has shown lawmakers' willingness to tinker with initiatives when they can.
The Legislature can't touch an initiative in the first two years without a two-thirds vote in both houses — a political impossibility. After two years, a simple majority vote suffices. That's much easier to accomplish.
The real issue — if voters approve the initiative Nov. 2 — is whether lawmakers would be so determined to apply a controversial tax to everyone that they would risk voter backlash.
There are many examples of lawmakers changing initiatives after two years. They repeatedly suspended Initiative 601, a spending-limit measure approved by Washington voters in 1993, and eventually rewrote it.
They also suspended a subsequent initiative approved by voters to make it harder for lawmakers to increase taxes, as well as measures to increase spending, such as the class-size reduction measure, Initiative 728.
Increasing taxes has proved more difficult when it comes to proposals for higher broad-based taxes such as the state sales tax and business-and-occupation tax, or B&O.
The Legislature hasn't approved a permanent across-the-board increase in either of those taxes since 1983, according to the state Department of Revenue.
The Legislature this year did approve a temporary B&O tax increase for certain service businesses — increasing it from the current 1.5 percent to 1.8 percent. The increase is set to expire in 2013.
And Democratic lawmakers have talked about increasing the state sales tax. A temporary sales tax was batted around in the past session, but the proposals went nowhere.
Matt Barreto, a political-science professor at the University of Washington, said he doesn't believe the Legislature would act any differently if confronted with extending an income tax. "They don't like to do really hard things," he said. "They like to push that off on the voters because they know they're controversial."
The Legislature has been more willing to increase targeted taxes, such as on tobacco and candy, arguing those are expenditures that people can choose to make, or not. The gas tax also has been bumped a number of times to pay for road and bridge construction.
Yet, even those kinds of decisions are challenged at the ballot. Initiative 1107 on the November ballot seeks to repeal tax increases on candy, gum, soda, bottled water and certain processed foods.
Gas-tax opponents challenged a 9.5-cent-a-gallon hike in 2005 by initiative, but voters upheld the increase.
If the Legislature decided to extend an income tax to a broader segment of the population, Barreto said, the move likely would be challenged by a ballot measure as well.
Still, there's no guarantee the Legislature would not try and someday succeed in changing the initiative.
State Sen. Joe Zarelli, R-Ridgefield, contends Democrats have not been able to muster the votes for a sales-tax increase in part because they view it as a regressive tax that places a greater burden on low-income families than on the wealthy.
An income tax has been argued, by some Democrats and their supporters, as a way to make the state's tax system less regressive.
Given that ideology, Zarelli argues it would be easier for Democrats to justify broadening the income tax.
If an income tax ever gets on the books, said Zarelli, the ranking Republican on the Senate Ways and Means Committee, it will become "an open door to the Legislature to manipulate, change and adjust and structure that system of taxation however it sees fit. It becomes an easy way to find money."
Sen. Ed Murray, D-Seattle, chairman of the Senate Democratic caucus, said he could see his party touching the income tax only if such a move resulted in a fundamental change in the tax system.
"I'm a liberal Democrat who supports additional tax revenue," he said, "but I would be unwilling to extend any income tax, period, unless it was tied to constitutional lowering of the sales tax."
Andrew Garber: 360-236-8266 or email@example.com
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