Washington's tax code has been ranked the most regressive in the U.S., meaning the poor pay a much higher portion of their income in taxes than the wealthy. An initiative that may be headed for the 2018 ballot would order the Legislature to equalize the tax burden by 2020.
Frustrated by Washington state’s famously regressive tax structure, a coalition of liberal groups is mulling an initiative that would command the Legislature to “balance the state tax code” by 2020 so wealthy people pay the same share of their income in taxes as middle-class and poor residents.
Drafts of the initiative filed with Secretary of State Kim Wyman’s office do not specify how legislators should accomplish the task.
Backers of the proposal, including union leaders and outspoken venture capitalist Nick Hanauer, have a history of support for a progressive state income tax to boost what the rich pay, while easing the burden on lower-income residents.
But Zach Silk, president of Civic Ventures, Hanauer’s political outfit, said the potential initiative does not promote a state income tax or any other particular solution. For example, lawmakers could focus more on lowering taxes for the poor as opposed to imposing higher taxes on the rich.
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“We don’t want to prescribe how to fix this,” Silk said. “We want to open up a responsible conversation about the upside-down nature of the tax code.”
Silk said a decision on whether to go ahead with the initiative will be made in a week or so. Backers could decide to pursue a public discussion and education effort instead of launching the initiative.
To qualify for the November ballot, initiative backers would have to submit signatures from at least 259,622 registered voters by July 6.
In a letter to civic and business leaders this month, Hanauer wrote that Washington has been “hobbled by a 20th-century tax system built to serve a 19th-century economy” and that he’d “never talked to a citizen who thought it was fair, a businessperson who thought it was workable, or an elected official who thought it was adequate.”
He wrote that the initiative, known as The Balanced Tax Code and Economic Growth Act, “can be an important first step to addressing this problem.”
Some details of the proposal remain in flux. One draft filed with the state would require households earning $1 million or more a year to pay the same share of their income as middle- and low-income residents. Another draft defines wealthy households as those earning $600,000 or more.
Washington’s tax system has been ranked as the most regressive in the nation by the Institute on Taxation and Economic Policy, a Washington D.C.-based nonprofit that advocates for progressive tax policies. The poorest fifth of residents pay about 17 percent of their income in state and local taxes, while the wealthiest 1 percent pay 2.4 percent.
That’s largely due to Washington’s lack of a personal income tax and its reliance on the retail sales tax. The state is home to the world’s two wealthiest men: Microsoft co-founder Bill Gates and Amazon’s Jeff Bezos, who have a combined net worth of more than $200 billion, according to Forbes. But with no income or capital-gains tax, comparatively little of their wealth makes its way to state coffers.
Despite repeated efforts to revamp the state tax code, most Washington voters have remained distrustful of trading in the system for an income tax. A graduated income tax was approved at the ballot box in 1932, but it was struck down as unconstitutional. Since then, voters have repeatedly rejected other income tax initiatives, most recently in 2010.
To assist the Legislature with a tax-code revision, the latest initiative would direct the state Department of Revenue to produce a detailed analysis by March 2019 showing what percentage of household income is paid by wealthier residents compared with middle- and lower income residents.
The initiative campaign, People for a Balanced Tax Code, has reported about $18,000 in contributions, mostly in-kind donations of staff time from liberal Seattle organizations including Fuse Washington, the Progress Alliance and the Washington Budget and Policy Center, according to filings with the state Public Disclosure Commission (PDC).
The campaign has taken on $93,500 in debt, including $75,000 owed to two polling firms. It also hired Gov. Jay Inslee’s political fundraiser, Tracy Newman, as well as Aisling Kerins, who managed Inslee’s 2016 re-election campaign.
Inslee has unsuccessfully pushed for capital-gains taxes in his budget proposals, but has said he does not support a general state income tax. However, he has declined to say whether he’d veto an income-tax bill if lawmakers delivered one to his desk.
SEIU 775, the influential home health-care workers union, has supported the budding initiative effort through a committee called All in For Action, registered with the state as a “grass roots lobbying” organization.
The committee, which lists one of its goals as “enhancing state revenue” in PDC forms, has paid consultants with connections to top Democrats, including Kerins, and Chris Langeler, who managed state House Speaker Frank Chopp’s 2014 re-election campaign.