What if there were a proposal before the Legislature this January that would:
Reduce property taxes between 20 percent to 30 percent, eliminating the state's portion of the property tax and limiting the amount local school levies could collect for basic education to 15 percent;
▪ Lower the state sales tax by 1 percentage point, from 6.5 percent to 5.5 percent;
▪ Reduce the business and occupation tax for service businesses to 1 percent from 1.5 percent and reduce the tax for all other businesses to the 0.29 percent rate that Boeing currently pays; and
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▪ Put before the voters a constitutional amendment that would require a 60 percent super majority vote in the Legislature to make any changes to major tax rates?
OK. Yes, there's a catch. But before we talk about that, consider the tax reforms above.
A reduction of the property tax would provide a great benefit to seniors and others on fixed incomes who are less able to absorb increases in their property tax bills.
Lowering the sales tax would benefit everyone, particularly lower-income families most affected by what is considered the most regressive state tax system in the nation.
Creating two basic rates for B&O taxes would simplify the system and take some pressure off small businesses and start-ups.
And a constitutional amendment regarding legislative votes on taxes would deliver the core principle of what Tim Eyman and those who have voted for many of his initiatives have sought for years: a higher hurdle for tax increases.
With those reforms on the plus side, state Treasurer James McIntire is hoping to continue a discussion he launched last spring that would implement a 5 percent flat tax on personal income. Under McIntire's proposal, the first $20,000 would be exempt for individuals, $40,000 for joint filers and then $5,000 more for each additional child, providing a $50,000 exemption for a family of four.
The latest wrinkle in McIntire's plan also has the advantage of helping the state solve its education funding problems. All income tax revenue would be dedicated to education: 75 percent for K-12, 25 percent for higher education.
The state Supreme Court has ordered the Legislature to amply fund basic education as a constitutional mandate, which would end the practice of local school levies being used to provide a significant portion of salaries and benefits for teachers and other staff. Statewide, about $3.5 billion from local levies goes to basic education. McIntire suggests wiping that from local levies and replacing it with an estimated $4 billion from a state income tax.
Taking in all the reforms, those making less than $58,000 a year would pay less tax as a percentage of their income; those making between $58,000 and $188,000 would pay more, with about 9 percent in total taxes; and those making more than $188,000 would pay about 10 percent in total taxes.
“We need a new system,” McIntire says, as much for improved tax fairness as to meet the state's education needs.
McIntire is realistic about his proposal's chances but believes that unless the Legislature shows significant progress in funding education, the state Supreme Court, which has already found the Legislature in contempt and is fining the state $100,000 a day, may help drive the conversation.
There is room and reason for adjustments here and there, but McIntire's plan has much to recommend it. It deserves a full discussion in the Legislature and by the public.