In what could be termed the “trying to get out of a hole with a shovel” department:

• Initiative 1107: Repeals mostly temporary taxes on non-essentials. Cost: $272 million to education and health care.

• Initiatives 1100 and 1105: Privatizes some or all of the state liquor system. Costs: $115 million-$123 million (I-1100), $513 million-$547 million (I-1105), for wide range of public investments.

• Initiatives 1053: Requires a supermajority to raise taxes or fees, making it more difficult to take a balanced approach to dealing with our priorities. Cost: Remember that projected $3 billion revenue shortfall? Probably most of that.

• Initiative 1082: Allows private insurers to sell workers compensation insurance. Cost: up to $202 million in lost premium payments from state employees, higher administrative and oversight costs.

And in the “actually fixing the hole” department:

• Initiative 1098: Creates a tax on high-incomes to help fund education and health care and cuts taxes for small businesses and property owners. Benefits: $1.6 billion for education; $686 million for Basic Health Plan, $393 million to lower property taxes, $259 million to lower business taxes.

• Referendum 52: The Budget and Policy Center doesn’t cover this one, so here’s the deal: R-52 will pay for itself via reduced energy costs, by fixing our schools to make them safer and more efficient. It’s estimated the measure will also create 30,000 jobs statewide.

You can read a short summary about each measure here, or follow the links above for more details.

John Burbank, Executive Director

When I think about our future, I think about Mikey, Liana, David, Sean and Stephanie. They are among the high school students I coach in cross country at Ballard High School. They are not the fastest kids. They couldn’t even run around Green Lake last summer. But now they are completing three-mile races, pushing their times down at each race.

So what do these kids have to do with us? Everything.

They are the future of our state. They will be our nurses, mechanics, engineers, teachers, organizers, thinkers, and doers. And they are my reference when I consider the upcoming ballot initiatives. Will our votes open up the doors of education, opportunity, and health for them — or will we let them close?

Initiative 1053 would require the Legislature to pass every single tax measure by a two-thirds vote of both houses. The math works like this: 17 out of 148 legislators could effectively hold up any measure for increasing resources for education and health care. That’s not new math — that’s bad math for our kids and their future.

Initiative 1082 would take apart a workers’ compensation system that has some of the best benefits for injured workers, financed through some of the lowest rates in the country. How did this happen? The Legislature took out private insurance — the middleman that adds no value but takes a big bite of receipts for administration and profit. So if you want to hand over our injured workers’ rehabilitation and quality of life to AIG, you should support I-1082. But if we are interested in the well-being of our kids as they join the workforce, we’ll turn this one down.

Initiative 1098 gives a tax cut to 95 percent of us, while finally getting the wealthy to pay their fair share. I-1098 will bring in over $1 billion a year to public schools, to lower class sizes, pay for mandated high school courses, and finance full-day kindergarten; and it will put more money into community colleges and universities so we can stop skyrocketing tuition increases. Plus it will provide health coverage for all 120,000 people on the basic health waiting list. I-1098 enables our kids to complete a high school education that opens the door to college. It knocks down the financial barriers to getting into college. It is truly a game-changer for education and opportunity.

Initiatives 1100 and 1105 are simply greedy grasps by retailers and wholesalers to become legal drug-pushers in the guise of selling alcohol. The weird thing about these two ballot measures is that we have a good system now for the controlled sale of alcohol. Why make alcohol more available at the local corner store or Costco’s warehouses? It will only result in our kids drinking more. Alcohol is a drug. It closes down the future. Ask anyone who knows an alcoholic. Vote no on 1100 and 1105.

Initiative 1107 is the attempt to fool people into thinking that the Legislature voted through a sales tax on food. That would be accurate if your diet consisted of Snickers, Reese’s Peanut Butter cups, Kiwi Jelly Bellies, and Coca Cola. But that just makes the point. Our youth are getting obese; type 2 diabetes is close to an epidemic, and we are objecting to a tax on the candy and soda that make them unhealthy? Whether or not we have a funding crisis in our state, this tax makes sense.

Referendum 52 will finance the retrofitting our schools so that we save energy costs in the long run, and in the short run create thousands of jobs for Washington workers. What we save will easily pay back the costs of borrowing the money for these retrofits. It makes sense for our kids, for our public infrastructure, and for jobs, now.

As for those students and cross-country running, well…it isn’t glamorous. It won’t make you rich. And the kids in the back never win. But you know what? Life, for most of us, is not a race to the top and a grab for the most millions. It is trying to finish the job well, being a part of our community, and working for — and voting for — a good quality of life. Not just for ourselves and our neighbors, but for the people we don’t even know. That’s what our democracy is all about.

Remember to vote.

By Don Barbieri and Marilyn Watkins

Don Barbieri, Chairman of the Board, Red Lion Hotels Corporation

Marilyn Watkins, Policy Director, Economic Opportunity Institute

Initiative 1098 provides the right reform mix to create a brighter future for Washington: new investments in education and health care, tax cuts for small businesses and property owners and a modest new tax for the most fortunate.

Main Street businesses struggling to survive this recession are among I-1098’s biggest beneficiaries. The initiative raises the small business B&O tax credit tenfold. Companies owing $4,800 or less annually will pay nothing and those owing up to $9,600 will see a reduction. I-1098 also cuts the state portion of the property tax by 20 percent. That totals a $400 million savings, money families and businesses can turn around and spend.

In order to invest in higher quality education and more comprehensive health care, I-1098 adds a tax that is strictly limited to adjusted gross incomes over $200,000 for individuals and $400,000 for couples.

According to estimates by Washington’s Office of Financial Management, 118,000 businesses will be newly exempt from B&O taxes, 39,000 additional businesses will see a B&O reduction, and only 38,400 out of 3.2 million filers will pay the new income tax.

From our own family histories of upward mobility, we both know that education is the key to individual opportunity. Education is also the cornerstone of community prosperity. Businesses need a well-educated workforce to operate efficiently and stay competitive in an ever-changing marketplace.

Yet Washington ranks a dismal 47th in K-12 spending relative to state personal income, according to the Census Bureau. We rank 37th in awarding bachelor degrees and 39th in graduate degrees as a percentage of our young adult population.
Our state’s inadequately resourced education system is leaving too many kids behind—any one of whom might have been the next scientist with a breakthrough discovery, or the entrepreneur with a brilliant new concept.

I-1098 will raise $2 billion annually dedicated to education and health care. Seventy percent will be invested in lower class sizes, early learning, increased rigor and graduation rates in high schools, and greater access to higher education. Without I-1098, education reform will remain an empty promise.

Thirty percent will enhance the Basic Health Plan, long-term care, and public health. Now, soaring health costs disadvantage companies competing internationally, small businesses cannot afford coverage, and the state budget crisis has cut 40,000 working Washingtonians from the BHP. I-1098 complements federal reforms, which provide new federal money and tax credits for health coverage. Businesses and communities will benefit from expanded health insurance options and lower social costs from the high numbers of uninsured.

With I-1098, Washington will join 43 other states that already have an income tax. With marginal rates of 5 percent on a couple’s income over $400,000 and 9 percent over $1 million, the average effective rate on the top 1 percent of Washington taxpayers will be just 4 percent. That will place us 26th from the top among 44 states. Our neighboring states of Idaho and Oregon, and most of our key competitor states, including California, New Jersey, North Carolina, and Massachusetts, impose higher effective rates on their wealthiest residents.

Opponents have made much ado over the fact that I-1098’s tax base — federal AGI — includes an individual’s business income. Most states tax that same income, however, and with much less generous individual exemptions. Moreover, business expenses, investments, and losses will all be fully deductible.

Opponents have also warned that after two years the Legislature could extend the income tax to all. But in Washington, the people always have the last word. We are witnessing this right now. This November, the voters will decide on most of the new taxes the Legislature passed last session to avoid cuts to vital services and a new two-thirds requirement for future tax increases. The voters will decide on any change to the income tax as well.

We want to keep Washington a great place to live, raise a family, and run a business. That’s why we and thousands of business owners statewide support I-1098.

First, Mike Kimmel at Presimetrics runs the numbers and determines there is “a clear positive correlation between the top marginal tax rate and the growth in real GDP per capita over the next four years.”

In other words, higher taxes on wealthy people correlate with higher rates of economic growth. Here’s the chart from Mike’s blog:

And yes, Mike went out as far as six years, and as few as one, and the result is the same. Read it for yourself.

Second, Steve Roth at Asymptosis uses data compiled by Eric de Place of Sightline about where millionaires live, and it turns out they apparently don’t care much about income taxes. Steve writes, “you’d expect to find a much smaller percentage of millionaires in places that have (high) income taxes. But you don’t.”

In other words, there is essentially zero correlation between a state’s effective tax rate and where millionaires live:

Again, there’s more in the original post, so have a look for yourself.

There has been and will continue to be a lot of talk about what I-1098 does  for the adults in Washington State – cuts state property taxes for everyone, eliminates or cuts B&O taxes for the vast majority of businesses in our state, and establishes a modest income tax on just 1.2% of taxpayers etc…

But what does it do for those who can’t vote and don’t pay taxes — our children?

By now you might have heard that the state Office of Financial Management estimated that Initiative 1098 will generate a net $2 billion plus per year. The initiative secures this revenue into a trust that can only be spent on education and health care (70% for ed. and 30% for health).

“Ok,” you say, but like a lot of us you naturally have few more questions:

• “What exactly does ‘education’ mean within the context of I-1098?
• Where would the money go exactly?
• Does it only go to K-12 and higher ed or does it cover early learning too?”

I am going to wade through all the legal language and the different account requirements to get clear answers to these questions – questions that matter to people who not only care about education in general, but also about the details.

Read more here

Moneytree is the payday loan company headquartered in Seattle, with 130 branches in the Western U.S. In Everett you can get your payday loan from Moneytree on North Broadway or on Casino Road, and if that doesn’t work, just visit a branch in Marysville or Lynnwood or Monroe.

But be careful, because when you write Moneytree a postdated check for $575 that they will cash on your next pay day, you automatically lose $75. That’s an interest rate of 391 percent!

Moneytree says it provides a service for low-income residents. Some service — it sucks the money from the least fortunate among us. That’s why Moneytree’s branches are in low-income neighborhoods. You can’t find a Moneytree in Mercer Island and other neighborhoods of the wealthy. But you can find the multimillion dollar mansion of Dennis Bassford, Moneytree’s CEO, hidden in a private forest there.

The Bassfords — Dennis, and his brother Dave and sister-in-law Sara — spend a lot of money in Olympia to make sure the Legislature doesn’t curb their ability to mainline from the limited assets of low income workers. Between 2005 and 2009, Moneytree employed seven lobbyists in three states to protect its payday lending practices. They gave over half a million dollars to both Republican and Democratic candidates.

In this election cycle alone they have made contributions to Reps. Barbara Bailey, R-Oak Harbor; Norma Smith, R-Coupeville; Marko Liias, D-Edmonds; Kirk Pearson, R-Monroe; Dan Kristiansen, R-Snohomish; and Mike Hope, R-Lake Stevens; and Sen. Paull Shin, D-Edmonds. They also contributed to Sen. Jean Berkey, D-Everett, who lost her bid to be re-elected.

But that’s not the only place Mr. Bassford is putting his money to work. So far, he has contributed $10,000 to the campaign to defeat Initiative 1098 — and his brother and sister-in-law threw in another $10,000.

What’s at stake for them? Initiative 1098 will levy a 5 percent tax on the Bassfords’ income above $400,000 — hardly usurious, especially compared to the 391 percent interest rate Moneytree charges on small loans to poor people. Apparently saving a few thousand dollars is much more important than I-1098’s tax breaks for legitimate small businesses, property tax breaks for home owners and businesses, funding for lower class sizes in our elementary schools, or funding to extend basic health coverage to unemployed workers who are now uninsured.

There’s a pattern here. The opposition to Initiative 1098 boils down to greed, greed, and more greed — and education and health care be damned.

Steve Ballmer, CEO of Microsoft and the 33rd wealthiest person in the world, is a $100,000 donor to the Defeat 1098 campaign. If 1098 was currently the law, on his income of $1.34 million from Microsoft this year he would have paid $60,600 — just four ten-thousandths of a percent of his $14.8 billion in personal assets. Jeff Bezos, CEO of Amazon, has also given $100,000 to defeat Initiative 1098. With 1098 as law, he would have paid $100,365 on his income of $1,781,840 from Amazon. Compare that to his $12.6 billion in wealth — that’s eight ten-thousandths of a percent.

Now consider what Mr. Ballmer has said about education: “Taxpayers in this state have to come to grips with the notion that says we need to invest more in our education system overall,” Ballmer said in 2003. Ballmer has also called for more investment in both K-12 education and research universities to fill the talent pipeline that Microsoft and other “innovation” companies need to expand here.

It seems that for Mr. Ballmer, education is important — but not important enough for him to pay a bit more in taxes. Maybe that’s for the little people?

Mr. Ballmer is not one of those. He is at the tippity-top of those who are doing quite well. In 1997, the top 1 percent of families averaged $930,000 for income. By 2007, their average income had increased by almost a half a million dollars. At the same the taxes they paid fell by almost half on capital gains, and by 12 percent on regular income.

Contrast that with the bottom nine-tenths of income earners in the United States, who averaged $33,666 per person in 2007. Including Social Security and Medicare taxes, their tax rate is now 32 percent. I-1098 won’t cost a penny for these folks. They will get lower class sizes for their kids, health care coverage through the basic health plan, and financial help for higher education.

That is, they catch a break, something they haven’t gotten for a very long decade.

Watch this TVW debate, where EOI Policy Director Marilyn Watkins joined Inside Olympia host Austin Jenkins to debate Initiative 1098 with Joe Barer. The debate first aired on 10/7 at 7:00 p.m.

The I-1098 debate is the second-half of the program, beginning at the 25:46 mark. Click here to watch.

You can also find more information about Initiative 1098 — and calculate how it will affect you — here.

A new assault on economic wisdom written by Arthur Laffer claims taxing the wealthy will stymie personal income and tax revenue — but it’s a textbook example of using selective data to support a predetermined conclusion.

Arthur Laffer is the originator of the “Laffer curve”, a theoretical premise that as tax rates decline, tax receipts will grow because the decline in tax rates will generate greater economic activity. This notion was used perhaps most famously by Ronald Reagan to promote his administration’s economic policies. But of course, quite the opposite happened when Laffer’s premise was put into practice.

When Reagan cut taxes in 1981, the economy went into a tailspin and tax receipts fell. Individual tax and corporate receipts, in constant dollars, did not reach the level they had been in 1981 until 1987, even accounting for population and productivity growth. By comparison, the Clinton tax increases on the wealthy in 1993 were followed not only by multi-year economic growth, but also by an increase in federal tax collections — so much so that the government was running a surplus at the end of the century.

The same pattern of declining tax receipts and stagnant economic activity followed after the Bush tax cuts in 2001 and 2003. Total income was $2.74 trillion less during the eight Bush years than if incomes had stayed at 2000 levels. Average taxpayer income was down $3,512, or 5.7 percent in 2008, compared with 2000. Had incomes stayed at 2000 levels, the average taxpayer would have earned almost $21,000 more over those eight years — almost $50 per week.

Given the actual history of tax increases and cuts, and revenue growth and decline, it’s no exaggeration to say the Laffer Curve has been thoroughly debunked. It is amazing that Arthur Laffer is still considered a reliable and predictive economist — though it helps to have a platform like the Wall Street Journal.

Laffer sums up his ideology with this statement: “(T)hose states with the highest tax rates, and those states that have introduced state income taxes, have seen standards of living (personal income per capita) substantially underperform compared to their no-tax counterparts.” Okay, so let’s compare, starting with those states Laffer highlights in his column.

They are Connecticut, New Jersey, Ohio, Rhode Island, Pennsylvania, Maine, Illinois, Nebraska, Michigan, Indiana, and West Virginia. It is an odd collection of states, those which have adopted an income tax in the last fifty years!

The first thing to note is that most of the states Laffer calls out — Ohio, Rhode Island, Pennsylvania, Maine, Illinois, Nebraska, Michigan, Indiana, and West Virginia — have something thing else in common besides an income tax:  a manufacturing sector in long-term decline that has also been hammered by the nationwide recession. In fact, manufacturing jobs make up more than 10% of the total payroll in those states – a fact Laffer rather conveniently overlooks.

Laffer also fails to recognize that two of the states he mentions — Connecticut and New Jersey — have quite high average personal incomes relative to the rest of the country. Connecticut has best per capita income in the country, topping $54,000. That’s $19,000 more than in our own state. New Jersey is not far behind, at over $50,000. It doesn’t seem that an income tax significantly dampened the standard of living there.

Nor has it in other states with an income tax. In fact, accounting for state population size, the average per capita income of those states with the highest effective tax rates of 6.5% or greater on the top one percent of taxpayers — California, New Jersey, and New York — is $45,000. The average income of the seven states without an income tax — Alaska, Nevada, Florida, Wyoming, South Dakota, Texas, and Washington — is $38,000.

So the top tax states generate $7,000 more in personal income than the no-income-tax states. That’s 18% more personal income. That’s nothing to sneeze at, or to bury with false data.

How about the rich people — where do they live? Proportionally, there are almost twice the number of rich people in Connecticut and New Jersey than in our state. And that is not because of the weather! These states’ effective income tax rates on the top one percent are 4.9% and 6.5%. Ours is zero now, and will be 4% with Initiative 1098 in place.

In fact, millionaires tend to favor the states with the highest per capita state and local tax revenues. According to Phoenix Marketing International’s most recent report, the states with the highest concentrations of millionaires in 2010 were Hawaii, Maryland, New Jersey, Connecticut, and Massachusetts. Effective state income taxes for the top one percent of taxpayers in these states are 5%, 5.8%, 6.5%, 4.9%, and 4.2% — all higher than I-1098’s effective tax rate of 4%. And all five of these states are among the top ten states for highest per capita state and local tax revenues.

Perhaps millionaires might – all things being equal – like to pay lower taxes; but it seems they’d rather not to give up the great schools, high-quality public amenities like museums and parks, and sound infrastructure that our taxes make possible.

UPDATE: Sightline’s able analysts also take on Laffer’s column – it’s worth a read: Wall Street Journal Flunks Math. Again.

By Donald K. Barbieri

I am proud to be chairman of Red Lion Hotels Corporation and former CEO, but my thoughts on the importance of Initiative 1098 are my personal observations. However, it is the 40 years helping build and lead a company that forms my conviction on why we really need 1098.

Simply put, Red Lion and my predecessor companies weren’t a success because of my leadership. They prospered due to the great associates with whom I worked. It is their lives and their children’s futures that are at stake.

They have allowed me and my family to be financially secure while many of them are at risk and falling behind. Their hope of the American Dream, of a healthy family with college education is dimming while I prosper. How can that be right?

Read more from the Spokane Spokesman-Review »

Despite continued population growth, inflation, and increased needs caused by the recession, Washington’s 2-year General Fund budget for 2009-11 is barely above the 2005-07 level and $2.7 billion below the amount originally budgeted for 2007-09 – an 8% drop.

Washington’s “Near General Fund” Biennial Budget, 2005-11

More budget cuts are being made. Recovery from the national recession slowed over the summer. As a result, state tax receipts have continued to fall below expectations. Revenues for the 2009-11 budget, which runs through June 2011, now are projected to be $770 million less than expected last spring.  The state will have to cut – or raise – an additional $516 million in the current budget to prevent a deficit.  Governor Gregoire has asked all state agencies to prepare to implement further across-the-board cuts of 6.3% October 1, 2010.

The 2011-13 budget which the legislature will adopt when it returns to Olympia in January 2011 is expected to have a hole of $4.5 billion in addition to all of the reductions already made.

Want to read more, view citations, or see full size graphs? You can find the full brief (from which this post was excerpted) here: Why I-1098 is Right for Washington ».

Looking for more information about Initiative 1098? Visit the Economic Opportunity Institute website.

More reasons why I-1098 is right for WA: 1 | 2 | 3 | 4 | 5 | 6