Dear Washington: You have a problem.
This deep-blue state raises its revenue in ways that grossly disadvantage low-income people to the benefit of those with means, to the point that the Institute on Taxation and Economic Policy refers to it as the least progressive taxation system in the country.
Activists and three Seattle City Council members sat down on March 1 to see if they could devise a better way to fund services. In addition to reliance on regressive taxes, Seattle could lose funding from the federal government in retaliation for not using local resources to facilitate mass deportation of undocumented immigrants.
Members of a coalition called “Trump-Proof Seattle” advocate for a 2.5 percent tax on unearned income for households making more than $250,000. “Unearned” means income that did not involve personal labor, such as the proceeds of a stock market trade or interest from a bank.
More conversations need to be had about the exact form of the tax, said Katie Wilson, general secretary of the Transit Riders Union, a local group that advocates for public transportation for low-income people. However, the proposal is an opening salvo in a larger conversation about Washington state’s cash flow problems.
“People are rightly tired of talking about the regressive nature of the revenue sources available to us and are ready to look at trying to identify some alternatives,” said Councilmember Lisa Herbold. She was joined at the table by councilmembers Kshama Sawant and Mike O’Brien.
Makini Howell, owner of Plum Bistro, put it bluntly. “We should tax the rich,” she said, to applause.
To put the issue in context, consider this: Washington has no income tax, no capital gains tax and limits the growth of property taxes to 1 percent each year.
Compare that to California, which, like Washington, has a thriving tech industry and quite a few wealthy people. California’s income tax? It maxes out at 12.3 percent. Capital gains tax, a form of unearned income that comes from the sale of shares on the stock market? 13.3 percent.
Basically, Washington is leaving money on the table while it is being fined for inadequately funding schools and leaving people in emergency rooms strapped to gurneys waiting for treatment from an inadequate mental health care system.
The proposed 2.5 percent tax would apply to between 5 and 10 percent of Seattleites, and would funnel almost $100 million to the city, according to the campaign.
The tax would help replace the up to $85 million lost if the Trump administration goes through with its threat to cut off “sanctuary cities,” places where the local government refuses to cooperate with ice officers trying to deport undocumented people.
There is already opposition to the concept. Rep. Matt Manweller, D-Ellensburg has proposed a bill that would make income tax illegal.
Gov. Jay Inslee has already signaled he’s willing to look at part of the problem. The budget proposal includes a 7.9 percent capital gains tax.
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