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Tuesday, January 10, 2012

An Immodest Proposal: the Education Income Tax

Posted by on Tue, Jan 10, 2012 at 2:22 PM

Throughout last week's unanimous Washington State Supreme Court opinion, the justices repeatedly state that "ample funding for basic education must be accomplished by means of dependable and regular tax sources," a requirement that, so far, seems to have been glossed over in the comments of politicians and pundits. It's not just that the state is failing to meet its "paramount duty" to provide ample funding for basic education, it's that it has failed to provide a "dependable and regular" tax source to do so.

In other words, merely throwing more money at the problem won't satisfy the court's order:

The legislature must develop a basic education program geared toward delivering the constitutionally required education, and it must fully fund that program through regular and dependable tax sources.

It is through this requirement that the court had previously ruled out the use of local levies and federal grants as a means of meeting the state's paramount duty. But as the current fiscal crisis and corresponding K-12 education cuts have proven, our entire state revenue structure is arguably neither regular nor dependable as well. Which suggests that if the state is truly going to meet the court's demands, it must devise a new revenue mechanism to do so.

Which brings me to an immodest proposal: the Education Income Tax.

The proposal is simple. An income tax would be levied, dedicated solely to funding basic K-12 education, and that income tax would be the sole source of basic K-12 funding.

The Education Income Tax essentially takes K-12 spending out of the general fund and into its own budget with it’s own dedicated revenue stream, balancing a popular public service against a generally unpopular tax. And by walling off both K-12 spending—and the income tax that supports it—from the rest of the budget, it eliminates the possibility of budgetary tricks through the usual fungibility of funds.

How much would it raise, and what would it look like? Well, the state currently spends about $13 billion per biennium on K-12 education, a total the court suggests may be $2 billion to $8 billion short of what's needed. Split the difference and figure about $18 billion, a little more than half the projected revenue in the next biennium. This is no high earner's income tax, but rather a more broad based alternative that would reach well into the middle class.

But in return we could eliminate the state portion of the property tax (currently dedicated to education), slash the state sales tax from 6.5 percent to 3.0, and still have billions of dollars to target at further tax cuts or program enhancements, on top of the extra $5 billion for K-12. Plus, by replacing much of our highly regressive sales tax with a progressive income tax, the majority of Washington households would pay less in total state taxes, not more, as our most-regressive-in-the-nation tax structure (and by far) is substantially flattened in the direction of fairness.

Finally, no state relies more heavily on the sales tax than Washingtion—a tax that keeps pace neither with economic growth nor the cost of educating our children, whereas an income tax, over time, would reliably grow revenues commensurate with our needs.

Yes, there are downsides to such a proposal. Dedicated taxes seem to be popular with voters, but they violate basic principles of sound taxation. And a substantial rainy day account would have to be funded in order to buffer against the economic cycle. And yes, during a prolonged economic downturn like this one, legislators might ultimately be forced to raise tax rates and/or expand brackets in order to generate revenues sufficient to meet the funding requirements of our paramount duty. But, well, that's exactly the point.

If there's one thing that seems clear from the court's 79-page opinion, it's that basic education is not a matter of spending within our means. The minimal funding level necessary to make ample provision for the education of our children exists independent of the state's current fiscal health, and being the state's paramount duty, it is incumbent upon the legislature to make these provisions regardless of all other economic and political circumstances.

After extensive review over many years, state task forces and committees have concluded that the K-12 funding system is broken. The legislature itself abandoned its longtime funding model effective September 1, 2011. Following an eight-week bench trial, the trial court concluded that the State has failed to meet its constitutional obligations. Substantial evidence confirms that the State’s funding system neither achieved nor was reasonably likely to achieve the constitutionally prescribed ends under article IX, section 1. We affirm the trial court’s declaratory ruling and hold that the State has not complied with its article IX, section 1 duty to make ample provision for the education of all children in Washington.

We do not believe this conclusion comes as a surprise. Rather, the evidence in this case confirms what many educational experts and observers have long recognized: fundamental reforms are needed for Washington to meets its constitutional obligation to its students. Pouring more money into an outmoded system will not succeed.

An Education Income Tax, however unlikely the prospect may appear politically, would address the court's concerns, finally providing the dependable and regular funding source necessary to make ample provision for the education of all our children. Under this funding system, spending levels would be determined by need rather than projected revenue, and the only political decision left to legislators would be how to jigger the income tax rates and brackets in order to raise the necessary funds.

"[T]he K-12 funding system is broken," the Supreme Court ruled, a system that cannot be fixed without "fundamental reforms." The Education Income Tax would fix this funding system by replacing our over-reliance on a tax that cannot keep pace with the cost of educating our children, with one that does.

I suppose there must be other alternatives to fixing our K-12 funding system, but so far I've yet to hear one coming from the powers that be in Olympia. And so I'm offering the Education Income Tax as a starting point for further discussion.

 

Comments (26) RSS

Oldest First Unregistered On Registered On Add a comment
Will in Seattle 1
I agree but it has to be an income tax on all income over $1 million that a person collects - from any source, salary, bonus, capital gains, dividends, deferred income - in a calendar year with ZERO exemptions.

Technically this is constitutional if you do it that way.

And progressive.
Posted by Will in Seattle http://www.facebook.com/WillSeattle on January 10, 2012 at 2:43 PM
Sargon Bighorn 2
More money makes kids smarter, it's proven. There fore the more money one spends on schools the smarter the kids are. See how that works? Of course we all know that poor countries NEVER EVER produce people that graduate speaking 2 or 3 languages, plus knowing good math and decent science. Nah can't be true. Infact, if enough money is spent, ALL the kids will be little geniuses.
Posted by Sargon Bighorn on January 10, 2012 at 2:46 PM
3
How about we stop spending 29% of the budget on personal entitlements that aren't education. That would free up $20 billion to cover education.

@1 - Go ahead, watch the $1 million + folks leave the state, as has happened in every other state that has implemented such a stupid policy.
Posted by delbert on January 10, 2012 at 2:51 PM
Will in Seattle 4
@3 and go where?

No, seriously, all the states for 3 states deep away from here have ... wait for it ... HIGHER INCOME TAXES ON THE RICH.

They ain't goin' nowhere. The whiny little bitchez.
Posted by Will in Seattle http://www.facebook.com/WillSeattle on January 10, 2012 at 2:54 PM
TVDinner 5
Uh, is there a tl;dr version of this post?
Posted by TVDinner http:// on January 10, 2012 at 2:55 PM
6
Good idea. Politically it's a non-starter. Voters have no trust in Olympia, fearing the sales tax will start creeping right back up again.

Never gonna happen.
Posted by bigyaz on January 10, 2012 at 2:55 PM
7
Perhaps dedicated funding will produce English teachers whose lessons stick, too? I'm looking at "soul source" here. Also "it's" used as a possessive, and "broad based" lacking the required hyphen for a compound adjective preceding the noun. Just using SpellCheck isn't enough. Yes, I'm cranky about grammar and spelling.
Posted by Calpete on January 10, 2012 at 3:00 PM
ryanayr 8
"that income tax would be the soul source of basic K-12 funding"

STOP STEALING THE SOULS OF OUR CITIZENS FOR YOUR SOCIALIST POLICIES
Posted by ryanayr on January 10, 2012 at 3:01 PM
ryanayr 9
@7 - damnit, you beat me.
Posted by ryanayr on January 10, 2012 at 3:05 PM
Supreme Ruler Of The Universe 10

Here's a better idea...one that already is in the Legislature.

Education Asset Tax

Education has always been funded, in part, by property taxes.

But property...land...no longer reflects wealth. Financial assets do.

That's why HB2100 proposes to tax financial assets...the revenue can be used for education.
Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on January 10, 2012 at 3:07 PM
11
@3,

Which states have implemented that policy?
Posted by keshmeshi on January 10, 2012 at 3:08 PM
Goldy 12
@7, @8: I write a thoughtful, well argued, thousand-word policy piece, and all you can focus on is a single typo?

So, um, eat me.
Posted by Goldy on January 10, 2012 at 3:15 PM
Scalpel 13
Goldy, as someone who would probably end up paying a decent amount in income taxes, I like this idea. Any chance The Stranger could hire a lobbyist to deliver this stuff straight to the legislature? I've heard that most of them were edumated in Washington and don't read good.
Posted by Scalpel on January 10, 2012 at 4:00 PM
ryanayr 14
@12 - Is that what you tell your editors?

Also, that's "well-argued", not "well argued". Sorry.
Posted by ryanayr on January 10, 2012 at 4:07 PM
15
It's a good idea, but hell will freeze over before it happens in this state. Washingtonians don't just not like the idea of an income tax, it's part of our identity not to have one.

The sad part is that it takes a couple of decades for the real negative impacts of underfunding education to set in, and by that time, it's too late, you're Mississippi.
Posted by Westside forever on January 10, 2012 at 4:09 PM
ryanayr 16
@15 - Or more aptly, Colorado 1992 - 2005. There's plenty of economic discussion of TABOR (Think I-1053) and it's effects on Colorado's education system. That only took 10 years before the effects on education were well established. They had a pretty similar situation to what is beginning to happen here.
http://blog.ednewscolorado.org/2010/03/1…
It's funny, the policies that Republicans put in place cripple public education, and because of the poor state of schools, the same Republicans complain that public education is a failure, and propose private schools, vouchers, and charter schools as a replacement. It's almost as if they planned it!
Posted by ryanayr on January 10, 2012 at 4:28 PM
17
This piece is absolutely spot on -- exactly what we need to ensure future prosperity.
Posted by westseattlealki on January 10, 2012 at 4:48 PM
18
This idea would not only make our tax system more fair and stable, but it would introduce a massive stimulus via the sales tax cut right when we need it most. Also I think the politics of calling it an "education income tax" are better than your think. Since the legislature is unlikely to act on this due to Eyman's 2/3 threshold, where do we sign up to get it on the ballot?
Posted by westseattlealki on January 10, 2012 at 4:54 PM
19
The problem with Goldy's ideas (and it seems like ALL of his ideas) is that they attack one of those many thousand points of confusion, instead of examining the real problem head on.

America has long had, with brief interludes heading in the direction of merit or meritocracy, a capitalist educational system, which taxes property values and provides monies for local schools, etc.

Obviously, the most intelligent and truly meritocratic system would be actually based on meritocratic concepts, i.e., a uniformly funded and structured system across the nation allowing equal opportunity for all.

Anything else is just so much bullshit.....
Posted by sgt_doom on January 10, 2012 at 5:41 PM
20
@12 - I was interested in the intent of your piece and it makes perfect sense from a policy standpoint but if you're going to write about teachers, for heaven's sake, someone in your organization should demonstrate that teachers do some good already. Being the alternative newspaper for the Seattle area doesn't mean you get to flout grammar and spelling rules. There were not one but three errors that a person who passed freshman English in high school should not have made, much less either a journalist or a copy editor. Come on, Goldy. The Stranger can do better, and you know it.
Posted by Calpete on January 10, 2012 at 9:11 PM
Goldy 21
@20 - You know what? No. I can't do better. I wrote and posted maybe 2,500 words today, plus all the research and reading and thinking that goes with that, and my process makes it very difficult for me to proof my own work.

I wish we could afford to copy edit Slog, but we can't. So my suggestion to readers is that you either ignore my occasional typos, politely and helpfully point out my errors when I make them, or fuck off.
Posted by Goldy on January 10, 2012 at 11:18 PM
22
@4
In 2008, Maryland creates a millionaires tax bracket
2008 - 3,000 $1million + incomes
2009 - 2,000 $1million + incomes
net revenue loss $106 million

Ignoring the Laffer curve doesn't mean it won't hold true.
Posted by delbert on January 11, 2012 at 7:19 AM
Posted by delbert on January 11, 2012 at 7:52 AM
ryanayr 24
@20+21 - We'are the editor's. Point out the mistakes in the comments ant the righters ALWAYS fix them in there text. Although you've can gave the writer shit fur mistakes, it doesn't meaning the content is suspect.
Posted by ryanayr on January 11, 2012 at 8:56 AM
ryanayr 25
@22 - and what is your control group? Can you compare the cohort of millionaires of a similar state that does not tax wealth above a threshold? Are you claiming that the recession had no impact on the number of millionaires in Maryland?
Posted by ryanayr on January 11, 2012 at 8:58 AM
26
@25 - What? It is a bedrock principal of the Left that the rich are getting richer and the poor are getting poorer. There's no way the rich haven't be making out like bandits despite the Obama economy. How dare you challenge the orthodoxy...

Posted by delbert on January 12, 2012 at 7:25 AM

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