Everyone pays a state income tax under Initiative 1098

September 16th, 2010 by Ken

While Bill Gates Senior touts the benefits of Initiative 1098, on television, no where does he mention the word “income tax.”

The political commercials have been running non-stop on the major television channels for more than two weeks.  Gates talks about raising billions to help government, but no where do the words “income tax” even appear.

And the reason is, that everyone in Washington state would be paying an income tax, if voters are ignorant enough to listen to Bill Gates Senior.  That’s right – – every taxpayer in Washington state will be paying the new income tax pushed by Initiative 1098.

Washington is one of only four states that has no income tax.  Supporters of the tax see this as a reason to put the measure before the voters once again, even though its been turned down at the polls several times.

And, last year, voters in Oregon increased their income tax on top earning taxpayers giving Washington supporters of a state income tax reasons to believe that Washington voters would be willing to do the same.

Initiative 1098 would institute a state income tax.  Period.   The first $200,000 of income is exempt.

It is expected that such a tax would bring in $1.7 billion in new revenue every year.

At the same time the bill includes a modest reduction in state property taxes and gives small business owners a new tax credit on their business and occupation tax.

When broken down it’s apparent that the initiative gives very little relief from state property taxes.  It will reduce your state  property tax bill by about four percent.  It doesn’t do anything to decrease your local property taxes that you pay for schools,  the port, the  library or the city and county.

And, while supporters like Bill Gates Senior boast that the measure will give a B&O tax credit for small businesses, it reduces  the amount by only about 10 percent.

In the meantime, business will find that their portion of the new state income tax will include income from all revenue sources such as S corporations and LLC’s.   Businesses, particularly small business,  will pay more if Initiative 1098 passes.

A married couple filing jointly will have a $400,000 exemption.  If the tax passes, they will pay 5 percent on all income over $400,000 and 9 percent plus $30,000,  on all income greater than a million.

Where will the money go?

Initiative 1098 creates a new state account called the Education, Health Services and Middle Class Tax Relief Trust.

New state income tax revenue will be transferred into this fund.  Some 70 percent is to go to the education legacy trust fund and the other 30 percent is to be used to fund basic health care.

In addition, the state treasurer is to siphon off the cost of the B&O tax credit and the property tax reduction and send this amount to the state’s general fund.  Early estimates are about $600 million.

Who benefits?

Bear in mind that personnel cost are 80 to 85 percent of all government budgets.  So the quick answer of who benefits is easy – – state employees – – but more accurately, government unions who are funding Bill Gates Senior’s political commercials.

The Service Employees International Union and the Washington Education Association have said they will spend what ever it takes to see that the new state income tax becomes a reality.

Will it be approved?

The short answer right now is YES.  Government unions are spending millions to get people to approve an income tax without mentioning that they are approving an income tax.   Currently, polls show those in support of a new income tax at 42 percent, with 42 percent opposed.  That means that 18 percent can still be swayed, and the government unions are pulling out big bucks to convince voters that only the rich will pay.

But bear in mind, the state legislature can change the initiative after two years.  And, it’s only a matter of time before they lower the exemption, first to $100,000, then to $50,000 and then shortly take any exemption away completely.

Supporters argue that the measure contains language that makes it impossible for the legislature to change the law, but legal experts say that doesn’t hold up and that the state constitution allows the legislature to make any changes they wish, two years after a voter approved initiative.

If initiative 1098 is approved, it will institute a state income tax on all residents of Washington state.  Period.    Any exemption is at the whim of the state legislature.

Posted in Business, Government, History, Informational, The Real News

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