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WA income tax clears House after 24-hour debate

seattletimes.com

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Re: WA income tax clears House after 24-hour debate

#61

Post by mil22 »

SecretDreams wrote: post #20
garbawarb wrote: post #6

When I was a new grad moving to the US and deciding where to live and work, the biggest draw of Seattle was its lack of income tax. Of course this particular $1 million threshold wouldn't apply to me until I'm very late in my career, or have a lucky year, or get married to a high-income person (the $1 million threshold applies to married couples, not just individuals) but Seattle loses a lot of its appeal if it's not…

> The tax would apply only on the amount of income above the $1 million threshold, so a person making $1.5 million, for example, would be taxed on the final $500,000. It would apply to an estimated 20,000 to 30,000 households in the state, with collections beginning in 2029 on the previous year’s income. It's a sliding scale tax. Someone making a million will barely feel it. Someone making 50 million will feel it a l…

It's not about whether rich people should or should not feel it. It's not about whether they should or should not be taxed heavily. This isn't a normative question - it's about incentives and mobility.

It's about what their alternatives are, where they choose to be domiciled, what job-creating businesses they take with them, and what effect that has on the state's economy over the long term.

As it is, California and New York have the highest income tax rates in the nation, and are both experiencing large net domestic out-flows. Florida and Texas have no state income tax and have been the largest net recipients of domestic migrants for several years.

Re: WA income tax clears House after 24-hour debate

#62

Post by limagnolia »

kimbernator wrote: post #19

I grew up in WA and as much as I enjoyed the lack of income tax, it's factual that until recently they held the title of #1 most regressive state tax system nationwide (recently bumped to #2 by FL). Income taxes are much better distributed among income brackets than consumption taxes are. I grew up just over the river from Portland, where there is no state sales tax; we got to enjoy the best of both worlds by crossin…

In Missouri, the current proposal is to put it up to a vote, so Missourians will decide what they want. There are safguards builtin where the income tax is only phased out if there is revenue to replace it. Its an interesting experiment setup.

**

The way to make a consumption tax progresive is with a prebate, or if you want to be more complicated, a rebate. With a prebate, every citizen or resident would recieve a check each period for the amount of the consumption tax up to the spending level you set as the curve for regresiveess, such as the federal poverty line.

It would be difficult for Missouri to implement a prebate on its own due to the proximity of the population to other states! (Residents could take the prebate, then travel across state lines to spend it, resulting in a huge loss to the state).

Income taxes are complicated to collect, subject to massive violations of privacy, and generally provide more perverse incentives than consumption taxes.

Re: WA income tax clears House after 24-hour debate

#63

Post by HardCodedBias »

Legally this is quite fascinating.

The state constitution is quite strange wrt. taxes:

https://law.justia.com/constitution/washington/constitution-...

There is a school of thought that the powers should be enumerated in the constitution. But this is not in favor.

Instead this argues that Culliton the ruling that classified income as property was incorrect. And once that door is opened saying that the claims within the existing constitution only apply to property and finally that there is a strong presumption of constitutionality.

Seems like a gauntlet. But it seems clear that given the composition of the supreme court that they will pass the gauntlet.

A constitution is but paper. It does not hold back the motivated.

Re: WA income tax clears House after 24-hour debate

#64

Post by _b »

Washington State’s constitution limits a tax like this to no more 1% and requires it to be uniform; this law meets neither requirement.

I am uncomfortable that supporters of the income tax are so unbothered by it being unconstitutional. So few are insisting we amend the constitution to allow or not do it at all, on the grounds that violating the constitution (or flexibility construing it to match our desired ends) is bad.

Re: WA income tax clears House after 24-hour debate

#65

Post by qup »

BeetleB wrote: post #37
collabs wrote: post #3

I don't understand how anyone in good conscience can vote against this tax. As a reminder, this tax does not affect income under a million US dollars. From the article, if you earn a dollar over a million dollars, you owe 9.9% so you need to pay a dime in income tax.

> I don't understand how anyone in good conscience can vote against this tax. For all the reasons you can vote against any tax. Taxation is not the default. The justification always has to come from the proponents. And I say this as a pro tax person who has voted for more taxes and lives in a high income tax state.

I say they get plenty of money already. The amount of fraud and grift is incredible anytime tax money is being spent.

Defense contractors, road works, entitlement fraud, politicians' unexplainable wealth, college tuition, learing centers, and the list goes on.

Manage the money properly.

Re: WA income tax clears House after 24-hour debate

#66

Post by [deleted] »

Jemaclus wrote: post #17
Neil44 wrote: post #4

In principle it sounds like a reasonable idea but the obvious problem is that people can become domiciled elsewhere, or structure their income to avoid this. It would be interesting to know what's been planned to mitigate that.

how can i structure my income to avoid income tax? asking for a friend.

[deleted]

Re: WA income tax clears House after 24-hour debate

#67

Post by hectdev »

pclmulqdq wrote: post #54
hectdev wrote: post #51

Earlier quoted context omitted.

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.

$16k per year in total taxes is very cheap for someone with a $1 million house and the income to support it.

It's more nuanced than that. Say someone moves from California where their property taxes were based on the purchase price of the home, they then buy a home in Austin where it based on the property value and they size up. It is a sticker shock of the taxes. Not justifying it, it is just a reality of what happens here.

Re: WA income tax clears House after 24-hour debate

#68

Post by HardCodedBias »

josefritzishere wrote: post #26

Progressive taxation is the most efficient and fair system of taxation. America was it's most prosperous when the top federal income tax topped 90%, 1944-1963. Modern wealth consolidation makes this structure even more logical.

I'm going to assume that you mean progressive INCOME taxation is the most efficient and fair...

Classically the ranking is :

  Least distortionary
  Land value taxes / recurrent tax on pure land rents
  Broad recurrent property taxes
  Broad consumption taxes (uniform VAT / sales tax)
  Tariffs / trade taxes
  Personal income / labor income taxes
  Corporate income taxes
  Transaction taxes 
  Most distortionary

Re: WA income tax clears House after 24-hour debate

#69

Post by thewebguyd »

phyzix5761 wrote: post #52
nicpottier wrote: post #22

Earlier quoted context omitted.

Maybe that's a good thing? I miss the Seattle of the 2000s that was less overflowing with tech and more a mix of incomes. I for one support the tax. The dichotomy of being a liberal state with a regressive tax structure needs to stop. Slippery slope argument aside this tax is a good first step. Income tax while imperfect seems to be the best system we have to tax the rich and not the poor.

The rich don't tend to have much income to tax (proportionally). The bulk of their wealth increase per year comes from capital gains.

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.

Re: WA income tax clears House after 24-hour debate

#70

Post by [deleted] »

ambicapter wrote: post #10
garbawarb wrote: post #6

When I was a new grad moving to the US and deciding where to live and work, the biggest draw of Seattle was its lack of income tax. Of course this particular $1 million threshold wouldn't apply to me until I'm very late in my career, or have a lucky year, or get married to a high-income person (the $1 million threshold applies to married couples, not just individuals) but Seattle loses a lot of its appeal if it's not…

The assumption of course being that high-income people moving in is good for everyone.

[deleted]
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