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Wednesday, September 26, 2012

A Brief History of Washington's Regressive Tax Structure

Posted by on Wed, Sep 26, 2012 at 8:58 AM

Our highly regressive and unsustainable tax structure? It's the Washington State Supreme Court's fault. And that's part of what pisses me off about yesterday's hearing on Initiative 1053's clearly unconstitutional two-thirds supermajority requirement for raising taxes.

From the founding of the Washington territory in 1853 until the depth of the Great Depression, the primary revenue source for the state was the property tax, a tax that became increasing ill-suited to our industrializing economy, and that rose ever higher as government services expanded to meet Depression-era needs. By 1930 the average property tax was 2.8 percent of property value annually (compared to less than 1 percent today). Faced with plummeting tax revenues and skyrocketing delinquencies, a tax overhaul was sorely needed.

In 1932 voters took things into their own hands by running and passing two statewide initiatives. The first capped the state property tax levy at 0.4 percent annually, a cap that remains today. The second implemented progressive personal and corporate income taxes, a measure that passed by a 70-30 margin.

But wealthy businesses challenged the income tax, claiming it violated the uniformity clause of the state constitution, and in a landmark 1933 decision a 5-4 majority of the state supreme court agreed, by interpreting income as property (rather than a transaction), an interpretation for which there remains no legal precedent anywhere in the US outside of Washington state. (Think about it: Washington's courts consider income to be property, but not revenue. Go figure.)

The income tax was tossed out, but the property tax-slashing initiative remained in place.

Faced with a revenue crisis, the 1933 legislature quickly cobbled together a "temporary" tax system based on the B&O tax and and a highly regressive sale tax. We've been living with this temporary tax system ever since.

There have been repeated legislative efforts to overhaul our tax structure over the past 80 years, but none have surmounted the constitutional hurdle erected in 1933. And now these two-thirds supermajority provisions make it legislatively impossible to even tinker with our existing tax code, because no tax increase can ever get the two-thirds supermajority required.

There is no question that I-1053 is unconstitutional on the merits. The plain language of the constitution makes that clear. But so far our popularly elected justices have weaseled out of making that unpopular decision by repeatedly ruling that the issue isn't justiciable—that no plaintiff has standing to challenge the initiative, or that issue isn't yet ripe. It is this judicial cowardice, not the so-called "will of the people," that has legally tied legislators hand for much of the past 18 years.

Considering its historical role in creating our craphole of a tax structure, the very least the court owes the state is a ruling that settles the supermajority question once and for all.


Comments (20) RSS

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TheMisanthrope 1
So, what you're saying is that the supreme court should once again overthrow the command of the public in favor of fucking over the poor.

Bra-vo. Bra-fucking-vo.
Posted by TheMisanthrope on September 26, 2012 at 9:23 AM · Report this
Goldy is pretty obsessed with taxes for a guy who doesn't pay any....
Posted by PunkAssedMoocherKing on September 26, 2012 at 9:25 AM · Report this

Property -- and today Intellectual Property and Financial Assets -- are the only things that should be taxed.

Income, sales taxes and other fees are intellectually bankrupt modes of tax.
Posted by Supreme Ruler Of The Universe http://_ on September 26, 2012 at 9:44 AM · Report this
If income is considered property in WA state, then why not just extend the property tax to that? My understanding is that the property tax could actually be used for a lot more than land and buildings. It could be used to assess a value on machinery, or vehicles. So why not income too?
Posted by TJ on September 26, 2012 at 10:24 AM · Report this
nos 5
Wait a minute.... Income is PROPERTY and not a transaction? So the ATM fees are literally robbery, right?
Posted by nos on September 26, 2012 at 10:28 AM · Report this
Original Andrew 6
Most people haven't recovered from the economic collapse, the schools are a total bedlam, and hunger has exploded, especially among children. Yet we're gonna blow hundreds of million$ on a narcissistic new stadium that we don't even need. The state supreme court isn't the problem--it's mass psychosis. Way to go, insane society!!
Posted by Original Andrew on September 26, 2012 at 10:41 AM · Report this
Will in Seattle 7
@4 you could also end property and real tax exemptions for non-profits and religious groups.

There are many ways to skin a cat.

Sometimes you need a chainsaw.
Posted by Will in Seattle on September 26, 2012 at 10:56 AM · Report this
Goldy 8
@1 No, what I'm obviously saying is that the Supreme Court should uphold the plain language of the constitution.

(Oh, and like you give flying fuck about the poor.)
Posted by Goldy on September 26, 2012 at 11:27 AM · Report this
@1: No what Goldy is saying is that a requirement for a three quarters super majority violates the state constitution, since you want the poor being taxed fairly you should be in favor of a progressive income tax.

@2: Since Goldy owns a house, drives a car, and buys things in Washington, he does indeed pay taxes.

@7: YES!! Tax churches and other non-profits

California requires a two thirds super majority to raise taxes, passed in 1979, since then California public schools have gone from the best in the nation to about the middle, in 1979 the recidivism rate for inmates leaving prisons in California was 15%, now its over 70%.
Of course since California prisons are badly over crowded, and the U.S. supreme court has ordered that crowding must end, the State will be releasing murders and pedophiles into society, (mandatory minimums prevent releasing non-violent drug offenders) So that now people can live next door to pedophiles, so that Paris Hilton can buy some more hand-bags
Posted by Merchant Seaman on September 26, 2012 at 11:39 AM · Report this
Courts do not (or they shouldn't) either uphold or contravene the "will of the people". They're courts of law, not opinion, and they're certainly not legislatures. An appeals court reviews already-enacted law, and they first have to decide whether what they've been asked to review is appropriate and ready to be reviewed (i.e., "ripe").

An attorney friend told me last night that the court probably won't issue a decision until after the election. I wonder if the Court decides that 2/3rds is not constitutional, the opposition could/would appeal to the SCOTUS. ??
Posted by sarah70 on September 26, 2012 at 12:20 PM · Report this
@10: Not likely, this is a state issue
Posted by Merchant Seaman on September 26, 2012 at 12:23 PM · Report this
TheMisanthrope 12
@8 Being on the very low end of middle class with just a couple mistakes away from being poor, and having relatives that are actually poor (though not in this state), you better believe that I have a vested interest in what happens to the poor. More interest than you, since you're all for taxing the hell out of the poor. And, I have been rallying against regressive taxes and fees for years. So, stick that straw man up your ass until you bleed, and unfuck you very much.

Also, the flip side of what you're arguing is that we shouldn't revisit the supreme court ruling that we can't have nice things like a progressive tax structure. But, that the 2/3 majority law should be repealed so we can keep on increasing the regressiveness of our tax structure and maintain our status quo. If the lawmakers challenging this 2/3 majority actually had a plan to seriously revamp our tax structure into something progressive instead of merely adding on sin taxes, sales taxes, and other fees in order to maintain, then I might have a shot at supporting their challenge. As it is, they're not going to do anything but increase the taxes in the forms of small incremental taxes on soda, cigarettes, alcohol, and whatnot, where the rich will the only ones able to sin. Which is exactly what they did last time the 2/3 majority lapsed.

Also, you're the one who doesn't give a fuck about the poor. I've seen you rally for fees and tolls and taxes that are always regressive, and rarely ever see you support anything that doesn't line a millionaire's pockets. You are not a temporarily embarrassed millionaire Goldy.

@9 I believe I stated in the primary "Goldy should fucking quit" post that we should be challenging the Supreme Court ruling that income tax is protected under our constitution. I believe that I actually rallied for the last Initiative that created an income tax, and that I actually do support a revamp of the tax structure. What they constituents of the lawsuit are not challenging is the income tax ruling of 1933. What they are challenging is their inability to create more taxes to support the foundation of this state's completely fucked up tax structure.
Posted by TheMisanthrope on September 26, 2012 at 12:33 PM · Report this
Goldy 13
@12 Um... tax restructuring has been my number one issue since I stumbled into all this in 2003. I don't know anybody who has written more words advocating an income tax than I have.

But we don't have an income tax, or any other progressive tax at our disposable, so yeah, I've often supported using the tools we have rather than allowing our state to disintegrate into anti-tax dystopia.
Posted by Goldy on September 26, 2012 at 3:41 PM · Report this
TheMisanthrope 14
@13 You're wrong in supporting the fucked up tools we have as you're consistently ENABLING the fucked up structure we have. The people voted for the 2/3 initiative in part because we have a government that consistently puts the benefits of business over the benefits of the individual, and the harder we tell them to get the money from the rich, the more they may listen.

I-1053 passed by the same stats that I-1098 failed. A big big part of the scare tactics of anti I-1098 videos was the rather justifiable fear that once the 3 year Initiative term passed, the constitution will have changed and the legislature would only tax upwards. Given the then-immediately recent regressive tax hikes (some of which were being repealed on the same ballot [and succeeded in being repealed by the same proportions]), this was an immediate fear.

How about we get a not-lazy legislature to work together to come up with a tax system that doesn't just add new taxes as I-1053 did (it didn't lower any taxes), and one that completely revamps the system, and put that up to a vote? Or, just implement the fucker and let it ride against the ruling?

But, instead of all that work, its just easier for the lawmakers to come up with new taxes, and for you to champion those new taxes within the system that was created in 1933.
Posted by TheMisanthrope on September 26, 2012 at 4:17 PM · Report this
@14, I-1098 would have lowered the state property and B&O taxes.
Posted by zxcfvzsdqweoitu on September 26, 2012 at 4:24 PM · Report this
TheMisanthrope 16
@15 Ah, so it too would have benefitted the rich as much as it taxed them.

Fuck this state.
Posted by TheMisanthrope on September 26, 2012 at 4:34 PM · Report this
You don't think a highly progressive income tax is more progressive than property tax (which the poor do pay a lot of via rent) and B&O tax (which is sufficiently bizarre that I don't think you can call it progressive)?
Posted by zxcfvzsdqweoitu on September 26, 2012 at 4:37 PM · Report this
TheMisanthrope 18
@17 I think that the tax structure needs to be completely revamped, so the benefits can shift by class. Rents would never drop because we're saving owners money. Rents would, at best, remain flat. B&O tax is its own thing entirely. But, the adjustment wouldn't be passed down to those who need it.
Posted by TheMisanthrope on September 26, 2012 at 6:08 PM · Report this
TheMisanthrope 19
However, just because it was flawed doesn't mean that I didn't vote for it or advocate for its opening volleys in changing the structure.
Posted by TheMisanthrope on September 26, 2012 at 6:11 PM · Report this
Let's fix it all by just continuing to add to the sales tax. That's worked so well for the state so far.
Posted by Weekilter on September 26, 2012 at 6:51 PM · Report this

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