How important are the votes of just five judges to 7 million Washingtonians? The votes of five state Supreme Court justices could make all the difference between Washington keeping its advantage of not having an income tax and repealing eight decades of legal precedents by imposing, for the first time, a state tax on family income.
First some context. Washington is one of nine states that currently do not impose an income tax. The importance of this policy to our state can be found on the state Department of Commerce’s “Choose Washington” website that is used to promote the state to businesses. Commerce officials boast, “We offer businesses some competitive advantages found in few other states. This includes no personal or corporate income tax.”
Under a 1933 state Supreme Court ruling, imposing a graduated income tax in Washington would require a constitutional amendment. In recent years, however, supporters of imposing an income tax have been seeking to find a test case in the belief that the current state Supreme Court would overturn established case law and allow a graduated income tax without a constitutional amendment. Bills introduced this year, SJR 8204/HJR 4207, would take this tax policy decision out of the hands of five justices and make it crystal clear that our state constitution does not allow a personal income tax.
Along with making the state’s current ban on graduated income taxes clear, SJR 8204/HJR 4207 would remove the threat of a flat 1 percent income tax that is currently allowed under the 1933 ruling. Also notable is that these proposals focus on individual income and not business income. This means that adoption of a flat 1 percent corporate income tax would still be allowed.
Washington state voters have rejected an income tax nine times (1934, 1936, 1938, 1942, 1944, 1973, 1975, 1982 and 2010). Interestingly, proponents of three of those rejected income tax proposals said money from the tax would be dedicated to education spending (1973, 1975 and 2010) and voters still turned it down.
A local income tax proposal in the city of Olympia was rejected in November 2016, the first time in two decades a tax increase has failed in the city. What made the Olympia income tax proposal noteworthy was its supporters said their real goal was to create a test case to see if the Supreme Court would rule to repeal Washington’s graduated income tax ban. Similar concerns relate to recent proposals for a capital gains income tax (none of the states without an income tax impose a tax on capital gains income). Rumors are already circulating that income tax supporters may target Seattle next to try to create a test case.
SJR 8204/HJR 4207 are designed to take the policy question of whether Washington should impose an income tax out of the court’s hands. This is exactly what happened recently in Tennessee. Lawmakers in that state wanted to make sure citizens and businesses could have the peace of mind that imposition of a state income tax was not just one legislative session away. They asked voters to approve a constitutional amendment banning income taxes.
The sponsor of the 2014 Tennessee income tax ban explained: “This is going to help us bring in jobs to Tennessee. We can say not only do we not have an income tax, but we’ll never have an income tax.” In 2014, the proposal was approved with 66 percent of the vote, and Tennessee’s constitutional provision banning a state income tax went into effect.
Lawmakers in our state should send SJR 8204/HJR 4207 to the voters so the people can make our state’s ban on an income tax crystal clear and guard it from being overturned by a surprise court ruling that ignores well-established legal precedents. Judging from nine past elections, Washingtonians clearly oppose a state income tax and SJR 8204/HJR 4207 would allow the voters to ensure the state remains income tax free, to maintain what state officials say is one of our important “competitive advantages found in few other states.”
Jason Mercier is director of the Washington Policy Center’s Center for Government Reform.
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