Wednesday, December 14, 2016

Washington State Taxes

Governor Inslee anounced on Tuesday a plan to finally fully fund our K-12 schools here in Washington State. This is years overdue, and it has been unacceptable for our government to not do their job for so long. Washington currently has the most regressive tax structure in the United States, since we rely so heavily on our sales tax. The B&O is barely any better in its progressivity. We also leave capital gains untouched.

Inslee's plan as the Seattle Times announced will do the following:

  1. Increase the B&O Tax on select professions, accountants, attorneys, real estate agents,and others from 1.5% to 2.5%. This will raise $2.3 billion.
  2. A Carbon Tax of $25 per metric ton raising $2 billion.
  3. A 7.9% tax on capital gains above $25,000 for single filers and $50,000 for joint filers. Retirement plans, homes, farms, and forestry are exempt. It will only raise $821 million.
  4. Several other tax exemptions will be repealed, on water bottles and oil manufacturers.
I personally think the Carbon Tax and repealing exemptions for environmentally destructive activities makes a lot of sense and I wouldn't change them from Inslee's proposal.

The B&O tax is regressive towards small businesses and we are one of only 3 states in the country to tax gross receipts. This is a very regressive tax, and will hurt people starting out in these fields significantly. These are already professions which are heavily regulated and have to pay thousands of dollars to get licensed in order to practice in Washington State which can be prohibitive, as I have learned from experience.

A capital gains tax is a good idea, but this proposal like most capital gains taxes is a flat tax. It also ignores retirement plans which leaves a huge source of income untapped. It would be done better by treating all income equally and then taxing each individual's sum at a progressive rate.

Washington State's Tax Code is so backwards we need to redo a lot of it. I would propose the following:
  1. Income Taxes are done at a progressive rate with a range determined by a formula which I originally saw on Daily Kos and then modified. Taxes go as low as -4% (where you get 4% of your income back at the end of the year) and then go as high as 12% progressively. All income is treated the same under this income tax plan. The point where you switch from receiving money to paying money is at $100,000 per year. This will raise $15 billion per year.
  2. A Carbon Tax as proposed by Carbon Washington and Jay Inslee of $30/metric ton which will increase by $1/metric ton every year until it hits $50/metric ton. This will be scaled to inflation. Increasing the Carbon Tax will keep it from reducing revenue and help end carbon emissions sooner.
  3. Current property taxes raise $10 billion per year.
  4. Fund the Working Families Tax Credit.
  5. An Estate Tax of 10% on all inheritances above $1,000,000 per year per recipient.
  6. Other existing state taxes, (smoking, alcohol, etc.) currently raise $15 billion per year.
The B&O and general sales taxes are repealed in full.

This will balance the budget immediately. Eliminating the sales tax and B&O taxes will be a progressive shift in our tax structure which we desperately need and funding our schools is essential for our economic survival and human rights.

Inslee is on the right step here and this discussion needs to continue to happen. I hope he will succeed at funding our schools and taxing carbon emissions. I hope we will then continue the civic debate to look at our tax code and make it so that poor families stop shouldering the burden of funding our state's programs. Our current system is bad economics which must be fixed. This here is one full plan to do just that. is the spreadsheet including data for my proposals including the federal plan.

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