WA income tax clears House after 24-hour debate

> This is one of those things that I question the legality of, but it will never get answered because nobody is going to the Supreme Court over sales tax

Someone did go the Supreme Court over sales tax on property bought out of state. Henneford v. Silas Mason Co., Inc., 300 US 577 (1937). Text here [1].

[1] https://www.law.cornell.edu/supremecourt/text/300/577

What’s the reasoning? If you were a business, would your opinion change?

They get less money from the poor but it's a higher percentage of that person's income. There is a difference.

> Tax rates under 2% of property value should not "flabbergast" anyone

The national average effective property tax rate is, IIRC, below 1.5% for all property and below 1% for owner-occupied homes. It is really not surprising that people coming to Texas under the popular illusion that it is a tax refuge whose property tax expectations are set by the places they are coming from are flabbergasted by Texas’ property taxes.

They tend to size up when moving here and are expecting the rates from back home. Not saying it's a logical thing but what tends to happen. This is more of a comment on how people aren't really taking everything into account when just moving because "no income tax".

How about a high property tax rate and expensive housing? Because that's what you'll get in all the desirable areas of Texas.

I mean, most property developers are playing shell games to avoid the requirement of having to build school districts anyway in Texas from my experience living there. Build small developments up to just short of the line where it's required, then continue development as a different legal fiction with what turns out to be ultimately the same beneficent owners. Texas education system leaves much to be desired.

And I'm sure we can find places with higher property taxes than those New Jersey examples.

Take this into account. People move from places with high cost of living where their 2 bedroom house nets them easily $1mil. They sell that and move to Austin where they can afford a much bigger house. They think they win not paying income tax and then their property tax bill drops and they are paying $16k per year. Enter the flabbergast.

I'm just being snarky here but wouldn't you be concerned that the 3x neighbor would view you as you view the 1/3rd neighbor?

I didn't say it changed the income distribution within thr industry, I said it made hiring for the vast majority of roles less expensive in terms of disposable income provided (or, holding nominal pay constant, provides greater disposable income at the same pay.)

That is, its not a negative economic incentive except for people who have a very large amount of income taxed as regular income where that income is not dependent on the ability to have other people with more normal incomes working in close proximity.

> Florida and Texas have no state income tax and have been the largest net recipients of domestic migrants for several years.

Rich people don't like taxes or paying back into the systems they abused to get rich. Water is also wet.

The person earning $50m a year is profiting on the labor of hundreds of thousands of people. Rent seeking on their labor and skills, relying 100,000x more on the infrastructure that made them rich. No one makes $50m a year in a vacuum, they do so by utilizing the economy they live in and rely on.

Ah yes, all the 50k makers are dependent on the very altruistic nature of the 50mil earners who all got there under their own power and without any systematic abuse, grifting, or generational wealth to get them going. Won't anyone think of these poor folks? They'll now have 49x0.099 mil less yearly income to charitably pay their indebted employees bonuses.

Well the tax is on income over $1M so yes someone making $1M will pay nothing. Technically that's easy for anyone to say, assuming they actually read the article at least.

Washington also has a capital gains tax now, 7% on long-term capital gains above $270k, and 9.9% on gains above $1 million, exempting real estate and retirement accounts.

It took 100+ years of horribly repressive policies to start that war, including far worse tax schemes including things like straight up requiring burning half your tobacco or only selling it through monopolized channels that required paying tariffs to England before it could be re-exported anywhere else. Policies that resulted in mass starvation and death, sometimes resulting in failed rebellions (like Bacon's). So there's history of Americans being willing to spend decades starving to death to pay high taxes or economically destructive policies before they will successfully rebel against it.

Both California and New York have shrinking populations according to Wikipedia. And even if the estimates are wrong and they do have growing populations you still need to consider the fact that the Southern states are growing much faster.

Federal power is shifting south. If you like the politics of New York and California that's a long-term problem that needs to be resolved.

California and New York are the opposite of growing, and Washington thus far hasn't taxed anyone, so this statement makes no sense

Let's not quibble over the population growth rates of these states which provide welfare to everyone. Instead, let's talk about te tax base which provides this welfare and you'll notice that tax base does not grow nearly as fast and might in fact be shrinking - actual reliable numbers are hard to come by. How many of the newcomers to these states will end up being net providers to the tax base and how many will end up being net consumers? If you provide more benefits, more people will come. If you raise the net tax rates to provide those benefits to a growing number of consumers more net payers will leave. The total population may remain the same or may even grow but a larger fraction of that total population will never become net providers, remaining net consumers. What is the end game here? This is a question which has already been answered in many European countries with similarly structured social benefit systems. There the end game is called 'austerity measures', the reduction of state services to keep the state from getting even deeper in debt.

A cynical take on this situation is that the current crop of politicos in these states launch these ever-increasing benefit systems in the knowledge that this attracts voters from a few segments of the population as well as 'future voters' who will move to these places because they promise to provide them with (more) benefits than their current domiciles. Once the costs of the whole system become too high the system will no longer be tenable but the current crop of politicos will by that time have moved on to greener pastures, probably golf courses in some nice shielded and guarded areas. The 'other party' will end up winning the elections after having been out of power for a long time but this will end up being a Pyrrhic victory since they inherit a state on the verge of financial collapse. OK, they say, "we need to fix this mess and the only way to achieve that is to cut spending because we can not raise taxes above where they've been raised by our predecessors" - in fact this promise was one of the factors which made them win the elections. They do just that, lower benefits, lower some taxes - but not that much because they do need money to pay off all those debts and all the running contracts entered by their predecessors - and they manage to pull the state away from the brink of financial ruin.

At the next election round the party which put in place all those benefit programs portrays the current incumbents as "inhumane penny-pushers who only want to appease the rich" with organised - and paid - protests by all the right groups, long media campaigns about the threat of *-ism and *-phobia, the works. The current incumbents try to defend their record stating that they're just cleaning up the mess left by the previous leadership who are financially irresponsible spendthrifts but that message is not nearly as emotionally appealing as the video clips of poor single mothers who now have less to feed their poor children, about the cancelled school trips because the state no longer had the funds to pay for them.

The elections are won by the party which put in place the programs which nearly bankrupted the state, the new leadership undoes part of what the previous leadership did to save the state from financial ruin and as a result the process is set to repeat in a few years. Enough years at least to make sure they get to retire to greener pastures, probably golf courses in nice shielded and guarded neighbourhoods. They don't have to worry about such silly things as financial responsibility, they know they can get the other side to clean up the mess and they also know they'll be able to use the measures the others need to take to clean up the mess to launch a campaign against them which is nearly sure to regain them the leadership in one or two election cycles.

As the label on the shampoo bottle says: rinse, repeat.

The time to talk about these things is when we spend them, not when we need to pay for them though.

Logically speaking, the solution is clear going forward:

1. Higher taxes 2. Reduced government spending

However, we are not willing to have these difficult conversations and are focused on appeasing people.

Also, lets put things in context -- here is a summary from Claude. Over the last decade, federal income taxes went down for nearly everyone in rate terms, but the percentage benefit was larger for high earners and corporations.

> If that means curbing the comparatively high consumption taxes

“Most of the roughly $4 billion a year the tax would bring it would be devoted to the state’s general-fund budget to pay for government agencies and services. A 5% chunk would be earmarked for early education and child care.

Democrats also say they’d use some of the money to fund free school lunch and breakfast for all kids in K-12 schools, though Republicans pointed out that money is not legally earmarked in the income tax bill.

ADVERTISING Skip Ad Skip Ad Skip Ad The bill would also exempt more businesses from paying the state’s business and occupation tax. It also would eliminate the sales tax on purchases of diapers, and personal hygiene products such as toothpaste, antiperspirants and shampoo.

It also would expand the state’s Working Families Tax Credit, which sends annual rebates of up to $1,300 a year to lower-income working families. Ferguson had pushed for the expansion of the program and said the revised bill would make 460,000 households eligible for the payments.”

TL; DR It’s not materially curbing the sales tax.

What about this law makes you think any of the revenue is going to be used to curb consumption taxes? Because that's not what any of this money is being earmarked for. Most of it is basically a government slush fund.

There are no plans to reduce consumption taxes in any meaningful way. This is one of the reasons so many Democrats are against it.

This new tax regime makes no attempt to improve the tax structure or reduce taxes for anyone.

You’re comparing to California, but we’re talking about this proposed Washington tax. California’s tax schedule is actually much more like Germany’s than this proposed Washington income tax.

In California, the big jump comes at $72,000, where the 9.3% rate kicks in. The $742,000 rate is only a little higher, at 12.3%. That’s similar to Germany where 42% kicks in at 70,000 euros (top 15%) and the top rate is only a little higher at 45%.

> Wouldn't such a change have to be made by the same legislature with a similar majority?

Yes. The legislature voted on the additional language and it did not pass.

> The WA constitution doesn't seem to have anything to say on income tax, just a lot about property tax?

Washington state treats income as property, and property taxes must be uniform and flat within a specific property class.

Technically, this law does run afoul of that because having an exemption makes it not uniform, and per the state constitution property tax is capped at a total aggregate levy of 1% per year.

The state will use the argument that this is not a property tax, but an excise tax on the privilege of earning high income from the state's economy. They used a similar argument for the capital gains tax, and won in the WA supreme court.

So if one has income tax and property tax separate (which I guess happens now) then presumably one has also codified that income is _not_ property (which I guess is the more common state of affairs )?

This is incredibly tech-specific, where most workers make a small fraction of $1M a year.

Physicians don't get options, attorneys don't get options. This is a fairy tale answer not grounded in reality.

Are drugs in high schools really a problem in WA? Where are you in Canada and how does it compare?

Is someone earning $1.1M more economically or socially harmful than someone earning $980,000?

Even if it is, and even if your point is true, that's not what the GP said. They said taxing rich people a higher percentage than poor people is "more efficient" (whatever that means in this context) and a "[more] fair system," and immediately followed it up with the 90% anachronism.

> I'm also genuinely curious how the exemption doesn't by definition make it no longer uniform. How does any exemption at all not violate the uniformity requirement?

That's the part that I'm assuming is going to get fought out in court when this is inevitably challenged. The state will likely try to argue that it's not a property tax, but an excise tax. They used that argument in support of the capital gains tax, and won (Quinn vs. Washington State, 2023), stating that the tax was an excise tax on the privilege of selling assets. The WA supreme court ruled that the tax was a permissible excise tax and not a property tax, so did not run afoul of the constitution.

They'll likely argue that the millionaire tax is an excise tax on the privilege of participating in the state's economy.

Alternatively, they may try to define high income as a new class of property. Property taxes only have to be uniform within a specific class of property, so if they create a new class, then it would be uniform for that class.

Should be an interesting court battle.

Yes. Washington desperately needs infrastructure improvements, our state has not kept up with population growth, especially in areas outside of the Seattle metro. Go north into the Skagit valley or Whatcom county, we have two lane roads over capacity with many fatal accidents each year, power lines still above ground that get taken out year, after year every time we have a wind storm (happens a lot, especially in the fall).

There's a reason it's a long standing joke that our state bird is the traffic cone.

Near where I live there's still remains and pot holes from a landslide a year ago that has not been cleaned up or repaired.

I'm not a "punish the rich just for the sake of it" type person, but I do believe that you shouldn't get to move here, use the state's economy to extract wealth, and then not contribute back into it's development, infrastructure and people.