What is it about taxes that makes people so stupid?
State lawmakers are currently wrestling with a budget deficit that will inevitably result in the evisceration of any number of essential state programs that will not only affect lives but cost lives.
Our unprecedented budget shortfall is almost entirely a product of the decline in revenues brought by our current economic meltdown.
But that meltdown is hurting more in our state than in most due to our quaint reliance on the sales tax as a primary source of state revenues and our near-unique abhorrence of any income tax, an abhorrence shared by only six other states.
(Four of those - Alaska, Texas, Nevada and Florida - have unique sources of revenue in oil, oil, tourism and tourism. The other two are the economic juggernauts of Wyoming and South Dakota.)
A PROBLEMATIC TAX STRUCTURE
Why is this a problem?
First, in economic downturns a sales tax is far more vulnerable than other taxes to exactly the sort of revenue collapse we're now seeing.
Second, retail sales, over time, have been a declining share of our state's economy, meaning as a function of economic activity, state government must shrink unless it constantly raises taxes.
And third, sales taxes are the most regressive type of taxation; as a percentage of income, the poorer you are, the more you pay. (By contrast, in general, the wealthier you are, the more government services and programs you benefit from.)
The gutting of our safety net taking place would seem to be the perfect time to talk about how messed up our state's tax structure is and what reforms might help provide a system that was both more stable and more fair.
But when Senate Majority Leader Lisa Brown recently suggested the possibility of imposing a state income tax on very high earners - a tax that would still be lower than what those folks would pay in most other states, and a proposal that was immediately DOA as the Legislature lurches toward asking voters for yet another sales-tax increase - you'd have thought she'd announced her secret Vegas wedding to Satan.
Reactions among our state's other political and media leaders ranged from the dismissive ("The people have long suspected that the real motive [behind an income tax] was to tax more," an evidence-free assertion from that populist champion, The Seattle Times) to the contemptuous (Senate Republican Leader Mike Hewitt called it "a dangerous path").
And the sad part is that Brown's proposal doesn't go nearly far enough; it's a baby step compared to what's really needed.
UNCONSTITUTIONAL WISDOM?
Under Brown's plan, a relatively tiny number of people would be affected, and while the resulting revenue would help save some essential programs from an even more dire fate, it wouldn't do nearly enough to either bridge the immediate shortfall or correct the long-term erosion of state revenues.
What would make far more sense is a much broader income tax combined with a reduction in our onerous state sales-tax rates, so that the net effect would be a tax reduction for all but, say, the top 20 percent of earners. That would solve all three of our chronic tax-structure problems.
It'd be more stable in a downturn, more pegged to where the wealth in our modern economy is actually generated, increase state revenues while decreasing the tax bills of the folks who can least afford it and it'd be a lot more fair. It would also bring us into line with how most other states do it.
But, says the conventional wisdom, not only would voters reject such a proposal, but it's unconstitutional. Well, it might be unconstitutional . That reading comes from a state Supreme Court ruling in 1933, in the early days of the permanent income tax.
The ruling that hasn't been challenged in decades and is similar to laws overturned by the courts in many other states, but the inevitable court challenge might well overturn that precedent here.
And the only reason voters are so potentially skittish about a proposal for a fairer, cheaper tax system is the hysteria of folks like Hewitt or Times owner Frank Blethen, who would start drooling spittle at the mere mention of the word "taxes."
As we watch our state's political leaders fall meekly into line behind its orthodoxy, it will cost the lives of those who can't afford to otherwise.
IN THE SAME VEIN
And the same sensibility is in play in Olympia's higher-education discussion this year, which is poised to raise tuition out of reach of most poorer and even middle-income families.
A fairer strategy? Raise tuition a lot more, then use the extra money to finance means-tested grants and loans for the folks who can't afford it.
That's the model private colleges and universities have been using for years. It keeps higher education accessible for far more of our state's residents.
But, as with taxes, our local political mandarins don't care about them - which is to say, us.
Eat the State! co-founder Geov Parrish can be reached at mptimes@nwlink.com.[[In-content Ad]]
