Ironically, my home for the last decade (MO) has recently moved forward with a bill eliminating the statewide income tax in favor of a higher sales tax. This is in a state where the two largest cities are situated on the borders of other states, so it's essentially a guarantee that this will backfire.
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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.
Also, I would be wary bragging about buying your goods in Oregon, you technically may owe WA use tax https://dor.wa.gov/taxes-rates/use-tax.
Nope, that is false. The language of the bill only requires filing if tax is owed. There will be a handful of folks on the cusp who will need to calculate their AGI to determine their state tax liability but everyone else knows offhand if they need to file.
The language is "Individuals not owing tax under this chapter are not required to file a return..."
It is absolutely no business of State 1's what I do when I travel into State 2. Whether or not I buy something and/or the value of that purchase should not enrich State 1 in any way. The only reasonable exception I can think of is if I'm buying things to bring back and resell.
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].
Even taking states out of the equation, if I live in a city with a city-specific sales tax, that city doesn't suddenly get the right to lay claim to all my economic activity whether in that city or elsewhere.
In my experience, this is well-known around Vancouver and elicits nothing but eye rolls when mentioned. If there is any enforcement whatsoever for that rule (a big if), it's clearly toothless and people don't worry much about it. A Best Buy opened a couple miles north of the river in the late 2000s and didn't make it much more than a year because another one existed in Jantzen Beach, immediately across the state line. The Vancouver location amounted to a showroom before people decided if they wanted to drive the extra 15 minutes.
I wonder if introducing income taxes will impact Seattle's tech hub status going forward. Sometimes people talk about how much these measures will lead to rich people moving away, but discouraging high-income people from moving there I think is a bigger long-term impact.
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.
Remains to be seen, as the next legislative session isn't until 2027.
Expecting companies, people etc to do the "right thing" when it's financially disincentivized usually doesn't work out.
Same will happen in regards to all these new taxes reinforcing existing population migration trends.
This is mainly caused by having a ridiculous number of tiny towns and tiny school districts, each with redundant services and employees.
TX: Average Effective Rate: Approximately 1.36% to 1.6% (some estimates range up to 1.8%) of a property's assessed fair market value. The typical homeowner in Texas pays a median annual property tax of $4,108
WA: Effective Rate: The average effective property tax rate in Washington is approximately 0.75% to 0.79% of the home's value. State mean the median annual property tax payment is roughly $4,361 to $4,729
For example my house is paid off. My total yearly spending comes out to under $25k/year. That omits irregular things like the occasional need to replace a broken appliance, or upgrade to a new computer/phone/tablet/watch, or get a new car.
Looking at how often those irregular things happen and how much they cost, another $7k a year reserved for that would be sufficient, assuming in any years where that is not spent the left over is carried forward.
That's $32k/year income needed to live comfortably in my house. My house is worth a little less than half a million according to Zillow. I'd guess a million dollar house would cost about twice as much to insure, and is bigger so costs more to heat or cool. Assuming 2x insurance and 2x electricity costs would add another $3k, suggesting $35k/year income needed for a million dollar house, at least if my standard of living is acceptable.
There is no way this meaningfully changes the income distribution of hires in any industry.
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.
It's a sliding scale tax. Someone making a million will barely feel it. Someone making 50 million will feel it a lot. Objectively, anyone making $50 million should feel it a lot and be taxed heavily. Nobody is making $50 million under their own power.
I know numbers are hard for the ultra rich. I've mostly only posted this for all the poor souls only making a mil a year. I want them to know this won't impact them.
This is not about the money at all, it's about getting an income tax on the books. In a year or two they'll lower the limit a few hundred grand. They're start removing exemptions, they'll add more brackets, and before you know it Washington will have California's tax structure and the people who live there will not be any better for it. But the government will be bigger, and the people will be poorer.
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.
Rich people don't like taxes or paying back into the systems they abused to get rich. Water is also wet.
You’ve got it backwards. The people making $50,000 are the ones who are dependent on someone else to provide all the infrastructure for their job.
It’s also like telling someone with just eighty bucks to their name and debt up to their ears that they can try to win the lottery.
We don’t live in a fantasy world simulation on a frictionless plane where anyone can be a billionaire if they just pull up their bootstraps.
Paying people for their work isn’t “rent seeking.” If I hire someone to replace my roof shingles, is that “rent seeking?”
Quoting supply and demand in labour is just insulting and indicative of someone maybe getting a bit too high on their own supply.
What is the mathematical or economic significance of this ratio?
Easy for you to say.
> Objectively, anyone making $50 million should feel it a lot and be taxed heavily.
How is that objectively true? Why should they?
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.
Bigger impact im sure will be Seattle but the impact to Portland is not insignificant. I'm sure the WA tax would be less than the OR one though so I don't see the moves stopping, but probably akin to whats happened in CA where people moved to NV or AZ to escape some of the taxes (not a significant number but ive met enough to wonder). As people retire, they moved away to those places as they think they will be taxed less
Orig Income Rate Adj Income (2025 Dollars)
Up to $20,000 1% Up to $600,000
$20,000 to $50,000 2% $600,000 to $1,500,000
$50,000 to $75,000 3% $1,500,000 to $2,250,000
$75,000 to $100,000 4% $2,250,000 to $3,000,000
Over $100,000 5% Over $3,000,000
I don't have a dog in this fight and if it's what the people of Washington want, so be it.
(edited for formatting
Why is it when people are against a tax they typically talk about it in terms of historical context, unintended consequences, interstate migration, while people in favor of the tax almost exclusively appeal to emotional blackmail statements like "paying your fair share" (when something like 40% of the country pays no federal income tax whatsoever) or "good conscience" or assume anyone with any money got it through borderline illegal activities?
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.
> And even if the estimates are wrong
Nice, covering all your bases.
> Southern states are growing much faster
Yeah, smaller states grow faster than larger ones.
1. https://thearp.org/blog/apportionment/2030-apportionment-for...
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.
Many Democrats object to it in principle because the new income tax is unconstitutional on its face; they support an income tax but ignoring the constitution because it is inconvenient and blocking people from voting on it is gross. The supreme court in Washington won't be any help, they are have an unfortunate track record of rubberstamping whatever the party wants.
This is in addition to many years of tax increases exceeding growth, the regular introduction of new poorly designed taxes that are simultaneously wasted and expanded with no accountability.
Many Democrats fully expect a rugpull is coming because that is the recent history in Washington. Regressive taxes are never lowered or removed, they just stack new ones on top of them.
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.
Defense contractors, road works, entitlement fraud, politicians' unexplainable wealth, college tuition, learing centers, and the list goes on.
Manage the money properly.
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.
You want people to vote for a millionaire tax tie it with a constitutional amendment that requires a higher vote bar to ever increase it and have all numbers automatically inflation adjusted
“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.
This new tax regime makes no attempt to improve the tax structure or reduce taxes for anyone.
Then you have intellectual blinders on. There’s good reasons to have broad based taxes instead of singling out rich people. In Sweden, for example, the top tax bracket kicks in at 1.5x the median income. In Germany, the second highest 42% bracket kicks in around 70,000 euros and the top 45% bracket kicks in at 277,000 euros.
None of the countries that American liberals admire in terms of having a robust welfare state adopt a policy of “soak the rich.” The have policies based on solidarity where everyone in the top half or third take on a heavy tax burden.
In the 1%, average income in Germany is 272k usd. In California, it's north of 1mil usd. At 0.1%, it's 1.1 mil usd in Germany and 3.2+ mil in California.
The distributions between high and low income earners are much flatter in Germany because it is harder to abuse the system to get to such salaries. No so in America. Hence Germany also does not need such aggressive taxation schemes as what's proposed (they also have way more flat taxes as well).
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%.
Can't comment how total tax in Germany might compare to the current discussion.
Yes, but Washington’s proposed income tax is extremely skewed, while California’s is pretty flat.
Bourgeoisie blinders are on.
For now. The legislature refused to add an amendment forbidding the threshold from ever being lowered to guarantee that it only applies to a million and above.
The way the Washington state constitution works is income is treated as property, and property taxes must be uniform.
So this bill isn't just a millionaire's tax, it's a state-wide income tax of 9.9% with the first million exempt.
It's a good thing, for now, but it does set precedent and the fact they refused to add language to the bill forbidding that exemption from every being removed or lowered is telling. The income threshold will eventually be lowered.
Wouldn't such a change have to be made by the same legislature with a similar majority? Or was this some sort of constitutional change that required a more qualified majority, after which the threshold can be changed more easily than this could be introduced?
The WA constitution doesn't seem to have anything to say on income tax, just a lot about property tax?
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.
To modify the state constitution, you need 2/3 vote in both the house and the senate, and it also must be approved by a simple majority of voters in the next general election.
Since republicans are always unified against an income tax, dems only hold a 30-19 majority in the senate, and a 59-39 majority in the house, missing 3 and 7 votes respectively.
The plan for this tax is basically to have it challenged on purpose and leave it up to the state supreme court to re-interpret the constitution, and consider this an excise tax, which is the same way they were able to pass the state's capital gains tax.
Clever hack: they never stopped issuing bonds.
At least they've made it really easy for them to take your money. You don't need a toll tag, they'll scan your license plate, mail you, and charge you extra for mailing you. No coins needed.
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.
We have the same problem at the federal level in part because SCOTUS will not or cannot provide input or warnings on proposed legislation. How many federal laws would simply not exist if SCOTUS got a veto before it went to the President for signing?
Is it this?
> the aggregate of all tax levies upon real and personal property by the state and all taxing districts now existing or hereafter created, shall not in any year exceed one percent of the true and fair value of such property in money
Asking an AI (I know, I know) it suggests "Courts have ruled that income is property" which to me sounds like ruling up is down. I mean everywhere that has property tax separate from income tax or only one or the other would object...
There was initiative 2111 which seems it wouldn't even be necessary if income tax was against the constitution to begin with? Also I assume this law basically nullifies initiative 2111?
This is exactly what happened with the national income tax, which initially only applied to <1% of the population. Of course the snare was set, and after WWI broke out the snare then sprung. It took less than a decade to go from <1% to >33% of households.
It is very easy politically to target those over the top 2-5% of income, but you better believe those tranches will be expanded in the future.
Would you mind saying a little bit more about your thinking here? A million a year doesn’t just sound like a lot, it is a lot. FRED reports the median income in Washington at just shy of $100,000 [0]. We’re talking about households that make 10x the median.
Also, what does it matter the length of time they earn it? If they don’t earn more than $1m, they don’t pay it, right?
Correct, and for the times they do earn more than $1m, with this tax they are only taxed on the income over $1m and pay nothing for income of $999k and below. If you make a million and one dollars, you owe 10 cents.
If I was in that type of role and I could routinely expect to make $1.5-$2M/yr it would absolutely make me consider places like Florida or Texas more, especially with the marriage penalty mentioned in the article (although I'm curious how many households have two people both earning more than $1M/yr).
Canada is significantly better in this regard. We are picking between Ontario and Alberta with a possibility of Quebec if they issue an invitation.
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.
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 distortionaryEven 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 would love to pay my taxes if I had seen reasonable outcome. So far all I see is a corrupt state government with no accountability and transparency.
Also isn’t this illegal? I thought the state constitution says it is illegal.
The state constitution treats income as property, and states that property taxes must be uniform.
So the bill is actually a state-wide, uniform 9.9% income tax but with the first million dollars exempt.
It is expected to be challenged almost immediately in probably a long court battle so we will see what the arguments are. I'm in support of the tax, but I'm a bit miffed that they refused to add language that prohibited lowering the threshold.
Well that's because the entire point of this is just to get a tax on the books so they can later increase the amount and lower the thresholds when all of a sudden this $4B windfall isn't enough.
This is absolutely going to be a lions-eating-faces situation a few years from now when we're talking about a 14.9% tax with a $250,000 exemption.
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.
If nothing else, from a rhetorical/argumentative perspective I am actually really interested in hearing a coherent argument that your 1,000,001st dollar is a difference class of property than your 999,999th.
Or is it just a punish the rich type of support?
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.
That depends on how much they are consuming within the state and paying sales tax. If they are W2 earners, they aren't contributing via B&O tax like businesses do, and so essentially they just contribute the same as anyone else in the state, via all the other regressive taxes, just proportional to how much money they spend.
Well they're not businesses so that makes sense.
> "just" proportional to how much money they spend (emphasis mine)
Yeah, which for most of them is going to be a lot more than someone earning a fraction of what they earn, so they do actually contribute more in absolute terms, even if for some reason you think that their contributing less on a percentage basis is for some reason bad.
Good luck finding someone making $2M/yr who isn't spending a lot more in the local economy than someone earning $40k/yr.
In absolute terms, yes, of course someone making $2M/year will spend a lot more money than someone earning $40k, but they don't spend 50 times more. They don't need 50 times more food, or 50 times more gas, etc.
For the $2M earner, any surplus likely isn't spent locally but is invested instead, which leaks the money out of the state into global markets.
And that's the problem with regressive tax codes in general, the tax base is disconnected from the state's actual wealth growth. Washington's regressive tax system makes the state fund itself using only money from the working class while the state's largest pool of potential revenue remains locked away in global markets.
States don't issue social security numbers. Your complaint is with the Feds.