Tax Alert!

House Democrats propose increase in sales tax!

Democrats passed House Bill 2377 out of committee on April 21. The measure would put 0.3 percent sales tax increase on the November ballot.

Senate Democrats propose creating a state income tax!

The majority party introduced a bill on April 1^st that I wish was just an April Fool’s Day joke. Unfortunately for taxpayers of this state, the Senate Democrats seem serious about a proposal that would create a state income tax.

While they argue that their one percent income tax would only fall on people making more than $500,000 a year, this bill is most likely a first step – a trial balloon – towards a universal state income tax that we will all be forced to pay. As Paul Guppy from the Washington Policy Center points out:

“This is exactly what happened in 1913 when the federal government created the income tax. The first income tax started at 1% and it applied only to the wealthiest people. Back then supporters of the tax said that most people would never have to pay it. As we know, within a short time paying the federal income tax became an all too common experience for Americans.  Even if Sen. Kohl-Welles' ‘millionaire's tax’ at first applied only to Bill Gates, you can be sure that in no time we would all be paying it.”

Democrats introduced a similar bill in 2007-08, which was expected to generate less than $100 million per biennium if the tax only impacted household incomes of $500,000 for singles and $1 million for couples. This wouldn’t provide enough money to solve our budget woes, but it would give the majority party a foot in the door to establish a state income tax for all of us.

Not only does this bill have several potential Constitutional flaws and threaten further harm to our economy, it also goes against the will of the people. Washington voters have repeatedly rejected state income tax proposals. The most recent income tax proposal was defeated by 77 percent of Washington voters! Given the current economic situation of many of the families in the 13^th district, I would not be surprised to see that number even higher today.

I will vehemently oppose any attempt by the state to take more money out of your wallet to bailout the majority party for its years of irresponsible, run-away spending.

Tax Watch

Bills to enact a new tax or a tax increase need a two-thirds vote of the Legislature. This super-majority requirement was enacted by voters through Initiative 601 in 1993, and re-affirmed in 2007 with the passage of Initiative 960.  On March 5, 2009, the Washington State Supreme Court dismissed a challenge by the Senate Majority Leader on the constitutionality of these measures. Therefore, since the majority party lacks a two-thirds majority in the Senate, any proposals to increase taxes will have to go to a vote of the people as a referendum.

Prior to the Supreme Court’s dismissal of the challenge, these tax bills were introduced by majority party legislators as new sources of revenue to address the $9 billion budget deficit or to enact new programs.

NEW SB 6189 - Sales tax on candy

NEW HB 2377 - Sales tax increase

SJR 8205/SB 5104 – State income tax

SB 5433 - Local option taxes

SB 5393 – New tax on homeowner insurance policies

SB 5432 – Raises I-747 limit on total property tax collections for some taxing districts

SB 5518/SHB 1614 – New tax on petroleum products (OFM estimates 10-year cost to taxpayers of $1.3 billion)

SB 5626 – New tax on cigarettes

SB 5607 – Hike in state property tax for school funding

SB 5747 – New tax on plastic manufacturing businesses

SB 5735 –  Governor’s “cap and tax” plan, potentially the largest middle class tax increase in history

SB 5679 – New payroll tax to support paid family leave

SB 5911 – B&O tax on farms, sales tax on farm auctions

SB 5960 – Authorizes county governments to impose a new utility tax and increase the local sales tax without a vote of the people

SB 5945 – New payroll tax to provide government sponsored universal health care insurance

SB 6029 – Sales and use tax on production of petroleum-based fuels and products other than biodiesel

SB 6096 – B&O tax on manufacture of bunker fuel for consumption outside of U.S. waters in foreign commerce

SB 6147 - 1 percent income tax on wealthy (for now)

SB 6119 - Reduces restaurant discount for wholesale liquor

Click here to view 2008 Tax Alert!