Bill Gates Sr. and other advocates for changes in the Washington state tax system are expected to announce plans today to push a high-earners income tax onto the November ballot.
Sandeep Kaushik, a spokesman for the initiative effort, would not confirm that the group is moving ahead, but he touted the proposal’s benefits. It would be a bold move, testing what some consider the deadly third rail of Washington state politics.
Kaushik said Initiative 1077 would raise a net $1 billion a year in new revenues for education and health programs. It would slap a two-tiered income tax on couples earning more than $400,000 and individuals earning more than $200,000.
It also would cut the state share of property taxes by 20 percent and create a large business tax break for small businesses.
“The vast majority of people in Washington would get a tax cut out of this initiative,” said Kaushik, who was a spokesman for the labor- and health industry-backed coalition that fought for tax increases this year in the Legislature. “It would make our tax code fairer. And it would provide stability. … It’s time to find a way to stabilize the system in a way that benefits the middle class and working families across the state.”
Washington voters last approved an income tax in 1932, but the state Supreme Court set it aside on constitutional grounds the following year. Voters have spurned a tax on income several times since, most recently in the mid-1970s.
Republicans as well as many conservative groups fearful of higher spending spoke out against a high-earners tax this year during legislative hearings at the Capitol.
But Kaushik said the proposal carries good news for small businesses. He said I-1077 would raise the business and occupations tax credit from $420 to $4,800, in effect exempting 80 percent of taxpaying businesses from the gross-receipts tax. He asserted that retail businesses earning $1 million or less would be exempted entirely from the tax, and smaller exemptions would be provided for nonretail firms.
The tax would be 5 percent on the share of income above $400,000 for couples and $200,000 for individuals; a 9 percent rate would take effect on the share of income above $1 million for couples and $500,000 for individuals. The tax bill for a couple earning $1 million would be $30,000, Kaushik said.
Gates has long advocated a tax system that required the wealthy to pay a higher share, and he was the chairman of the state Legislature’s tax commission that recommended in 2002 that an income tax be considered as a replacement of other taxes that hit the poor and businesses more than the rich. The commission also recommended a rainy-day savings account, which voters statewide agreed to enact in 2007.
“It’s a very reasonable proposal that will only impact those who can well afford to pay it,” Kaushik said. “We’re confident from talking to legal experts that if this initiative passes and someone challenges it in the courts, it would be upheld.”
Brad Shannon: 360-753-1688