Washington should have income tax for fairness, stability

We need to have a conversation about a topic that no one likes to talk about: taxes. Specifically, a state income tax.

The debate over a state income tax is complex and studded with technicalities and numbers. And even when, as it seldom does, the discussion moves beyond the details, there’s been the gut reaction that most of us have when we talk about paying taxes. No doubt about it, the road to tax reform passes over a lot of hills. But those of us who advocate it aren’t giving up, even when the going gets rough.

But right now, the going is easier. The state’s coffers have swelled with almost $2 billion. A big chunk of that will fill several funds we created last year in anticipation of need. Some will be set aside in a rainy day fund. Some will cover other costs. The point is this: If we don’t continue the discussion and push for real reform now, while we have money in the bank, it will never happen. None of us enjoys paying taxes. But we all enjoy the things that our tax dollars pay for: schools, roads, health care, pensions, clean water and safe communities. The issue is tax fairness: How can we level the playing field for all the taxpayers in Washington?

Beginning more than a century ago, we designed a system for an economy based on agriculture, manufacturing and locally based commerce. It worked well for years, but times changed. With our tax structure so heavily dependent on the sales tax, we have a double-edged sword. When times are flush, as they are now, we grow a reserve. When times turn lean — and make no mistake, they will some day — we face daunting budget choices.

Look, too, at what this means for families. Remember that the sales tax rate is the same for you and me and for everyone else in Washington, with very slight variations for local jurisdictions. Right now, those who earn less than $20,000 a year pay nearly 16 percent of their income in state and local taxes. On the other hand, those making more than $150,000 pay roughly 4 percent.

It’s unfair that those who are least able to afford to pay are paying at a higher rate than those who can. It was unfair 20 years ago, and it will still be unfair 20 years from now. I’m not the first one to point this out, but I’d sure like to be the last. Fairness aside, doesn’t it make logical sense to tax according to income and not consumption?

The Washington State Tax Structure Study Committee conducted a wide-ranging analysis in 2002 and recommended that we make fundamental changes in our tax structure. Every year since then, I have sponsored a bill on tax reform.

In a nutshell, this year’s measure, Senate Bill 5150, would lower the state sales tax to 3.5 percent. It would eliminate the state’s share of the property tax. And it would impose a graduated income tax on personal income of individuals, estates and trusts.

The bill would also cap regular property tax rates at 0.64 percent, reducing the current 1 percent lid by the amount of the reduced state levy. This would lower the property tax rates for homeowners and offer some much-needed relief. This is what is referred to as the three legs of the stool that stabilizes the state’s tax structure.

This bill is partnered with a constitutional amendment that would authorize the changes called for and would require that tax rates be changed only with a 60 percent majority vote of the people.

To build soundness and preserve equity in the new tax structure, the constitutional amendment would require that any tax changes, including exemptions, credits, preferential rates and exclusions, receive a 60 percent majority vote of the Legislature. It would take effect on Jan. 1, 2009.

I’ve been marching along the road to tax reform for a long time. I may not get to my destination this session, either. But if we continue to talk respectfully with clear minds, with taxpayers and with business about what’s fair and predictable and stable, we all can arrive at a better and stronger tax system.

Sen. Rosa Franklin, D-Tacoma, represents the 29th Legislative District and is president pro tempore of the Washington State Senate.

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