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News & ArtsMonday, August 30, 2010
News Labor Unions Write Another Round of Big Checks to Income Tax Initiative
Posted by Dominic Holden on Mon, Aug 30, 2010 at 1:38 PM
Although Bill Gates, Sr. made headlines in spring with contributions totaling a half-million dollars to Initiative 1098, the leading backer of the income-tax measure is now a union of service-industry employees. One of the country's most powerful labor groups, the SEIU has given $735,000 (from national, state, and local affiliates) since the campaign began, according to the latest filings with the Washington State Public Disclosure Commission.
Last week, the SEIU state council gave $215,000, records show, and local SEIU affiliates gave another $100,000. Meanwhile, the local UFCW, which represents grocery and other workers, gave $75,000. State employee groups have contributed $200,000 to the campaign so far. Union money is nearly half of the $2.3 million raised for I-1098.
The measure on this year's ballot would create—for the first time in state history—an income tax; it would apply to people earning more than $200,000 a year. The revenue would be dedicated exclusively to education and health care.
The Defeat 1098 campaign has raised $1.5 million, with its leading contributor, Joseph Barer, giving $100,000.
You can search all the initiative filings over here.
1
The problem with this initiative is that it, like many initiatives, it has great intentions but shitty execution. From what every tax accountant who has looked at this has said, this new law will not only tax income of high wage earners, it will also tax the profits of S Corps, whether they are paid out to the owners of the Corp or not.
The big problem with that is that many S Corps in Washington are small businesses, including several legacy companies you know and love. This tax will kill them. It means their costs go up, while their big C Corp out of state competitors' costs stay the same. It also means the owners of the S Corps not only pay tax on their income, but also money they might use to increase workers' pay, reinvest in the business, expand, open a new location, or keep on hand for cash flow.
This may not seem like a big problem. But it is, and will definitely harm local small businesses. Add to this the county sales tax increase, the increases in all sorts of fees and licenses, slower sales, and we're making Washington pretty tough for small businesses.
I am not against increasing taxes. But is now the time to do it? We're in a recession, and because our economy is down, our tax collections are down. Raising taxes now is like a restaurant raising their prices because sales are down. That's a pretty stupid move. Our focus should be on growing small businesses, and creating more jobs.
If we're going to raise taxes, we should hit high income earners, not small businesses. Let's do this right. I-1098 isn't right.
The big problem with that is that many S Corps in Washington are small businesses, including several legacy companies you know and love. This tax will kill them. It means their costs go up, while their big C Corp out of state competitors' costs stay the same. It also means the owners of the S Corps not only pay tax on their income, but also money they might use to increase workers' pay, reinvest in the business, expand, open a new location, or keep on hand for cash flow.
This may not seem like a big problem. But it is, and will definitely harm local small businesses. Add to this the county sales tax increase, the increases in all sorts of fees and licenses, slower sales, and we're making Washington pretty tough for small businesses.
I am not against increasing taxes. But is now the time to do it? We're in a recession, and because our economy is down, our tax collections are down. Raising taxes now is like a restaurant raising their prices because sales are down. That's a pretty stupid move. Our focus should be on growing small businesses, and creating more jobs.
If we're going to raise taxes, we should hit high income earners, not small businesses. Let's do this right. I-1098 isn't right.
2
"Now" is never the right time to raise taxes on the rich.
Here's how it works:
1) Ask yourself, "Is it now?"
2) Answer "Yes, it is now"
3) It's the wrong time to raise taxes on the rich
4) Give the rich tax cuts
5) Profit!
If asked when the right time is, reply, "Not now. Perhaps in [now-1] we could have because times were better, and maybe in [now+1] we could after times get better again, but now is simply not the right time."
Repeat ad nauseam.
Here's how it works:
1) Ask yourself, "Is it now?"
2) Answer "Yes, it is now"
3) It's the wrong time to raise taxes on the rich
4) Give the rich tax cuts
5) Profit!
If asked when the right time is, reply, "Not now. Perhaps in [now-1] we could have because times were better, and maybe in [now+1] we could after times get better again, but now is simply not the right time."
Repeat ad nauseam.
3
The problem with the initiative is that it doesn't give more tax cuts to the ultra rich, so that America's infrastructure will crumble and allow us to be invaded by China.
4
Tiktok - actually, what I'm saying is that now IS the right time to raise taxes on the ultra rich and even the upper middle class and the rich as this initiative does. BUT it is NOT the right time to raise taxes on small businesses who have already been hit by other tax increases lately.
Say a small business owner takes home $200,000 from a successful small business. Great, no new taxes under this plan. But they own an S Corp that at the end of the year made $400,000 in profit. The owner decides to take home and extra $100k, and and pay some of this new tax on it. All good. Just another $5,000 in State income tax. Not the end of the world and it helps pay for things we need. BUT, there is the hidden, non publicized part of I-1098 that results in that small business owner also paying 9% on the other $300,000, EVEN though they aren't taking it home. That means that business owner pays an additional $27,000 on that money if the plan is to keep the money in the business and reinvest. This is really stupid, and creates a disincentive for small business owners to use profits to plan for cash flow, expand, increase wages, etc. It's also unfair as out of state businesses don't have to pay this tax.
Again, tax high wage earners. Don't tax small businesses who want to reinvest in their business. That will be bad for everyone.
Because of the way this initiative is written, many progressive small business owners who might otherwise support a tax increase on the upper margins of their incomes will come out against this when they realize that it also taxes their S Corp profits.
Say a small business owner takes home $200,000 from a successful small business. Great, no new taxes under this plan. But they own an S Corp that at the end of the year made $400,000 in profit. The owner decides to take home and extra $100k, and and pay some of this new tax on it. All good. Just another $5,000 in State income tax. Not the end of the world and it helps pay for things we need. BUT, there is the hidden, non publicized part of I-1098 that results in that small business owner also paying 9% on the other $300,000, EVEN though they aren't taking it home. That means that business owner pays an additional $27,000 on that money if the plan is to keep the money in the business and reinvest. This is really stupid, and creates a disincentive for small business owners to use profits to plan for cash flow, expand, increase wages, etc. It's also unfair as out of state businesses don't have to pay this tax.
Again, tax high wage earners. Don't tax small businesses who want to reinvest in their business. That will be bad for everyone.
Because of the way this initiative is written, many progressive small business owners who might otherwise support a tax increase on the upper margins of their incomes will come out against this when they realize that it also taxes their S Corp profits.
5
Technically, if you make more than $250,000 a year, you aren't a small business owner.
But, hey, live in your Beck/JoeThePlumber dreamworld ...
But, hey, live in your Beck/JoeThePlumber dreamworld ...
6
Meinert, you're just defining what an S-Corp is over and over again. If you own an S-Corp, then there is no difference (to the accountants) between the money you "take home" and the money the corporation makes in profit. Whether or not you transfer money from one bank account to the other, it's all still your money, and it's all income.
In your example, you are a small business owner who has made $200k in salary, plus your equity in your company has gained $400k? So your net worth has gained $600k in the past year. If my small business is doing that well, I'll be glad to pay state income tax.
In your example, you are a small business owner who has made $200k in salary, plus your equity in your company has gained $400k? So your net worth has gained $600k in the past year. If my small business is doing that well, I'll be glad to pay state income tax.
7
@4 - Mienert: How is that different from me taking my personal income and investing it in my house? Should that invested part of my income be exempt? I'm not following your logic.
The thing I hate about this tax is this: even though I don't make enough to pay this tax, I'll still have to fill out a state-income-tax form saying that I don't.
The thing I hate about this tax is this: even though I don't make enough to pay this tax, I'll still have to fill out a state-income-tax form saying that I don't.
9
@6 - it definitely gives incentive to take the money rather than reinvest it. re-investing in a business is different than pocketing the profit as income. If you don't know the difference, not much to argue about. Your argument is that we should tax equity in a business as income before it becomes earnings? Interesting.
We need to support small businesses. They are where job growth comes from. And they are what makes the City and State interesting.
We need to support small businesses. They are where job growth comes from. And they are what makes the City and State interesting.
10
@7:
Filling out that form will probably take all of five minutes; less if you use tax software.
I think I'm good with spending five minutes of my time if it means NOT paying a state income tax.
Filling out that form will probably take all of five minutes; less if you use tax software.
I think I'm good with spending five minutes of my time if it means NOT paying a state income tax.
11
@9:
Well, here's how I support small businesses, Dave - by having enough disposable income to allow me to spend some of it when I walk into them.
If my tax burden goes down I've got more money in my pocket. Some of that money will no doubt be spent buying pizza and beer in one of your establishments; money that I wouldn't otherwise have been able to spend there because I had to use it to pay for something else, like higher sales taxes.
Now, multiply the small additional amount I spend in your places times all the other people who will also have a little extra $$ to spend in your places and it's not unreasonable to imagine the net increase in your business income will offset the additional taxes you'll be paying; maybe not 100% (although perhaps more than 100%), but certainly enough so that the amount of additional outlay on your part will be fairly negligible.
Well, here's how I support small businesses, Dave - by having enough disposable income to allow me to spend some of it when I walk into them.
If my tax burden goes down I've got more money in my pocket. Some of that money will no doubt be spent buying pizza and beer in one of your establishments; money that I wouldn't otherwise have been able to spend there because I had to use it to pay for something else, like higher sales taxes.
Now, multiply the small additional amount I spend in your places times all the other people who will also have a little extra $$ to spend in your places and it's not unreasonable to imagine the net increase in your business income will offset the additional taxes you'll be paying; maybe not 100% (although perhaps more than 100%), but certainly enough so that the amount of additional outlay on your part will be fairly negligible.
12
Big surprise that public sector unions want higher taxes to avoid paying for the same share of their healthcare benefits that their countperparts in the private sector do, and bankroll retirement benefits that no longer exist in the private sector.
Cut medicaid, cut the welfare rolls, close the libraries, close the parks, etc, etc, etc, etc - just don't touch our COLAs, make us pay a cent more for healthcare, or make us finance our own retirements like the schmucks in the private sector. How "progressive."
Cut medicaid, cut the welfare rolls, close the libraries, close the parks, etc, etc, etc, etc - just don't touch our COLAs, make us pay a cent more for healthcare, or make us finance our own retirements like the schmucks in the private sector. How "progressive."
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