We’ve had a lot of talk about the privilege of the top 1 percent, and how they are grabbing more and more of our national income. Once, productivity increases were proportionally shared between corporations and workers. Now they’re mostly grabbed by companies and their top executives, while workers are left with decreased retirement savings, increased health-care costs and depressed wages.

This shift in prosperity and prospects didn’t just happen. It’s the result of conscious policy-making, including tax decreases for the wealthy, government policy that turns a blind eye to corporate union-busting, and “free trade” agreements that export jobs out of our country.

The result may appear to be manna from heaven for the wealthy, but that too is an illusion, because the wealthy need a civil society to prosper, too. They need good roads and a rail system to deliver materials to factories, and to distribute the products of these factories. They need fully functioning ports to export raw materials to factories they’ve established in China and import consumer goods to sell to Americans.

The wealthy need skilled workers for high tech and remaining industrial production — so they need good schools, community colleges and universities that are accessible to middle class students. And because workers don’t work so well when they — or their kids — are ill or injured or sick, the wealthy benefit from health coverage for the many.

Gated communities, private planes and private elite schools don’t fit the bill. The wealthy might think they can live in isolation and privilege, but the reality is, they can’t escape from the downsizing of the middle class. It hurts them too. 

Building the foundation for our economy costs money — schools, health coverage, roads, rail, public health. That’s taxes. But with total income shifting more and more to the top 1 percent, and away from the middle class, tax collections have fallen. The middle class spends most of its money — that generates sales, and sales taxes. The wealthy are more likely to invest in Wall Street, engage in financial manipulations with the latest derivatives, and enjoy trips to the Riviera. None of this generates tax revenues here in Washington.

So here’s an idea. It’s not novel or exciting, it simply makes common sense. Let’s tax the wealthy. They need a civil society and the fundamentals of government — education, health care, infrastructure — as much as the rest of us do, maybe more so. The 1 percent should pay too!

That’s the intent of a bill in the Legislature to levy a 2 percent marginal tax on incomes above $1 million. Senate Bill 6482 also establishes the paramount duty trust fund into which the proceeds from the tax are placed.

Paramount duty? That’s our state Constitution’s command that we provide basic education to all children. That’s something the wealthy should want, if not just for good citizenship, then at least for a supply of good workers. Over the past few years school districts in Arlington, Edmonds, Lake Stevens, Marysville, Snohomish, Shoreline, Sultan, Stanwood-Camano, Sultan, and South Whidbey joined with others around the state and the League of Women Voters, the PTA and the Washington Education Association in a lawsuit charging that the state is violating its paramount duty. In January the state Supreme Court found, using the Legislature’s own school improvement plan as a yardstick, that yes, the Legislature is indeed violating this paramount duty by underfunding basic education.

Yet the Legislature, in contemplating how to cut another $1.5 billion out of the budget, is again eyeballing basic education. SB 6482 begins to reverse that disinvestment and make the state move toward fulfilling its paramount duty.

How much would this 2 percent tax on income above $1 million bring in for education? About $275 million a year. That’s enough to reinstate the class size reductions in K-4 classrooms that the Legislature suspended last year. It is a start for our kids.

Who would pay? About 6,000 households in the state — that’s two out of 1,000. For example: Howard Schultz, Seattle’s coffee baron, would pay pay about $1 million from his recently announced $65 million income from Starbucks in 2011, leaving him with close to $64 million. Plus, he gets to use the company plane.

Do we continue to coddle the wealthy and violate our paramount duty toward our children’s education? Or do we begin to set the table for a society and an economy that benefits all of us, including the 1 percent, but not just the 1 percent. In a democracy, there is only one answer.

Okay, that’s not exactly how they put it, but that’s the takeaway. While affirming the state’s nearly top-notch credit ratings of Aa1 and AA+, the analysts cited a steeper-than-expected housing downturn, one-time budget fixes, and cyclical trends in our aerospace industry as negatively affecting the state’s outlook. This come as no surprise – we’ve been hearing this since the start of the Recession.

But Moody’s and Fitch also specifically cite the state’s structural deficit as one of the principle drivers of the downward revision. What’s a structural deficit? From Fitch:

The state, with no income tax, relies on consumption-based revenues. This makes Washington particularly vulnerable to reductions in consumer spending and limits the prospects for quick revenue recovery.

In other words, Wall Street’s recovery and corresponding salary increases and bonuses for high-income individuals don’t translate into significant consumer activity in Washington – so sales tax collections have remained flat. An income tax would help that, by diversifying Washington’s revenue collection, and ensuring revenue collections matches overall economic activity.

As wealthy venture capitalist Nick Hanauer wrote in a recent article, the economy will not recover until consumer spending rebounds – which cannot happen if all the wealth is concentrated at the top:

The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

So goes the myth of trickle-down economics. Either we ask the rich to pay a bit more in taxes to support opportunity and middle class prosperity, or Nick Hanauer is going to have to start buying a hell of a lot more pants.

John Burbank, EOI Executive Director

Years ago there was a comic strip named “Pogo.” One of the most insightful strips was a distilled discussion of human foibles, in which Pogo announced, “We have met the enemy and he is us!”

When it comes to the national debate over the 99 percent vs. the 1 percent, we may not like the growing chasm between corporate elites and the rest of us — but we’ve sure made it easy for them to keep it that way.

Take our own state. It will become $25 billion wealthier over the next two years. (That’s how much our economy will grow.) And yet for some reason, we can’t seem to find enough funding to keep up with public priorities. So we will likely see annual tuition at Everett Community College break the $4,000 mark, and the University of Washington will probably charge more than $12,000. Class sizes in elementary school will top 30 kids or more. More people will be kicked off of Basic Health, right at the time when even more low-wage working people need health insurance.

Because of our over-reliance on the sales tax, we are hurting the vast majority of middle class and low-income families, and we are leaving a lot of money on the wealthy’s already overflowing table of riches.

How did we get here? In 2010, the people approved Initiative 1053, written and sponsored by Snohomish County’s own Tim Eyman, and voted into place by nearly a two-thirds margin statewide. By requiring a two-thirds vote for revenue increases, voters ended majority rule in the Legislature, making it possible for a minority of legislators to block the closure of tax loopholes or the implementation of taxes on the wealthy to fund public services.

By tying the hands of the Legislature, we prevent them from even meeting the state’s paramount duty to fund basic education for all children. But it would be nice to see some leadership anyway. Why not attempt to close corporate tax loopholes, and in so doing ensure that at least some corporate profits stay here in Washington (rather than be stashed away overseas) and be put to good use educating our kids?

The attempt to move such a bill through the House and Senate would require our elected officials to show their true stripes. Are they willing to tax out-of-state banks to fund basic health? Are they willing to close the Microsoft royalty loophole to fund higher education?

Legislators might not succeed in mustering the mandated two-thirds majority to close these loopholes. They might not even get the simple majority necessary to put this question to the people in a referendum. But they would enable the people to judge for themselves: Who is working for the citizens of our state and who is working for the out-of-state banks and the wealthiest corporations in the world?

There’s a reason such legislative behavior would be atypical. Legislators are supposed to act in the best interests of the people. But they are faced every day with a bevy of lobbyists for these banks and corporations. They are friendly, sincere and determined. They hold a lot of sway in Olympia, with both Republicans and Democrats. And they hold a lot of sway in campaign financing. So they pack fear into legislative deliberations, fear that overcomes decision-making for the greater good.

The upshot: While we have a proliferation of wealth in our state — the Seattle metropolitan area alone has almost 1,000 individuals with at least $35 million each in wealth — we also have a proliferation of poverty and a cratering of middle class hopes and dreams.

We built a cage for our legislators that confounds our own expectations. We have met the enemy, and he is us. But unlike Pogo, we have the ability to re-think our previous decisions. Legislators may hide behind Initiative 1053, but we are hiding behind our legislators. It is time for us to come out from the shadows and rebuild our future. No one else will.

If we shirk from taxing the most privileged residents of our state — the wealthiest and most powerful corporations residing here — then we’ll have to content ourselves with patching and filling our way to a low-road economy and an unpromising future for our parents, our kids and ourselves.

Most states have an income tax that makes their tax system more equitable across all incomes and better ensures public revenues keep up with population and economic growth. That means other states have been able to invest in their people and public structures, while Washington has fallen behind. Washington’s rank in K-12 spending fell from 34^th to 45^th compared to state personal income from 1998 to 2009, according to the U.S. Census Bureau.

If Washington’s budget had grown at the same rate as personal income in the state over the past decade, the 2011-13 budget would be $13 billion higher – that would pay for a lot more teachers, lower college tuition, and better protection of the most vulnerable.

While the legislature deals with budget gaps by cutting public schools, home health care for vulnerable seniors, preschool for low-income kids, and access to college, 100s of tax breaks for profitable corporations go unexamined. Not all tax breaks are bad, but when basic services are on the chopping block, tax breaks need to be prioritized.

Ending out of date and low priority tax breaks both addresses the current revenue shortfall caused by the recession and, once the economy recovers, can help fund educational and other improvements to keep our people and state healthy and competitive.

Washington’s tax code guarantees future revenue shortfalls

Because of Washington’s heavy reliance on the sales tax, budget revenue doesn’t match growing needs for education, health care and other public priorities. People are spending more on services, which are mostly not taxed, and buying more over the internet, mostly tax-free. Even as population and incomes go up, sales tax revenue does not keep up with the need for state services.

The recession has taken a big toll on jobs and family incomes – and on public revenue. The state has mostly cut services, not raised revenue, resulting in $10.5 billion in cuts. (Note: Federal aid in 2009-10, rainy day funds, and fee increases prevented deeper cuts.)

Cuts from 2009-11 include:

• K-12 education: Elimination of student achievement funds & teacher cost of living adjustments; 7,000 fewer K-12 employees.
• Higher ed: 4-yr college funding reduced 40%, 2-yr reduced 20%, with large tuition increases.
• Health care: 60,000 cut from Basic Health.
• Children’s services: Fewer children receiving health, childcare, and other services.
• Elder care: Reduced home-care hours for vulnerable seniors and disabled.
• Cuts to state agencies: Consolidation of state agencies, elimination of jobs.
• State employees: Mandatory furloughs and higher contributions for health insurance.

Taken from Washington State Budget 101

Every 2 years the legislature and Governor adopt a budget.

The General Fund Budget is based on state tax revenues.

In addition to the General Fund, the state receives money from the federal government for specific services, such as Food Stamps, Medicaid, and children’s health.

The state also has separate budgets for transportation, funded by gas tax, and capital construction.

Where does revenue come from?

Sales tax funds half the budget. The state collects 6.2% on sales of most goods, construction and repair services. Local governments collect additional sales tax.

Businesses taxes include the Business & Occupation (B&O) and Public Utilities Tax (PUT).

Property taxes mostly fund services in local communities, but about 20% goes to the state to support public schools.