OPINION: Jayne: Let's talk about millionaires tax
Is it bold? Obviously.
Smart? Maybe.
Legal? That remains to be seen.
But as Washington residents debate this year's passage of a "millionaires tax" and as questions of "fairness" arise and as it becomes likely that the state Supreme Court will be the ultimate arbiter, there are some benefits to an issue that has roiled policy pundits - mostly, that we are talking about it and that tax policy spent much of this year's legislative session in the headlines.
This is an improvement over the typical "taxes are bad" or "tax the rich" conversation, which typically passes for discourse these days. And hopefully, it will generate some nuanced examinations of tax policy in this country.
In case you missed it, the Legislature and Gov. Bob Ferguson this year approved a tax on annual individual earnings of more than $1 million. That probably seems incongruous when the state Constitution specifically prohibits income tax and when voters have rejected a state income tax on 10 occasions.
If I were a lawyer, I probably would have warned lawmakers that the tax will not pass legal scrutiny. But I'm not a lawyer; Ferguson is, and he undoubtedly understands the legal arguments better than I do. Besides, if the state Supreme Court could determine in 2023 that a capital gains tax is an excise tax and not an income tax, well, the justices probably can find some wiggle room in a millionaires tax.
Which brings up the first issue surrounding the inevitable court fights. Five of the nine positions on the state Supreme Court are up for election in November. The court that finally hears the income tax issue might be much different from the one sitting today in Olympia.
Supreme Court candidates won't tell you ahead of time if they believe the tax is an income tax. Nor should they; arguments must be heard before decisions are rendered. But the November election will determine the fate of the tax, even if we don't know it yet.
In the public square, however, the arguments already are taking place. And the passage and eventual fate of a state tax on high earners should shine a spotlight on national tax policy.
That brings us to one of our favorite policy factoids from American history: From 1951 to 1963, the highest marginal federal tax rate on individuals was 91 percent or 92 percent; today it is 37 percent. That is the marginal rate - the amount paid on income above a certain level - and its precipitous decline reflects decades of propaganda regarding taxes. The theory, which requires a metric ton of cognitive dissonance, is that tax cuts pay for themselves by generating economic growth.
A lot of people believe this - even those who otherwise think America was at its greatest in the 1950s. And while those tax rates have routinely been slashed, the national debt has grown from less than $1 trillion when Ronald Reagan took office in 1981 to more than $39 trillion today.
That is a debt of about $113,000 per citizen, a problem that most of us choose to ignore. But here is one way to look at it: If the average citizen could take $113,000 and pretend that they won't have to pay the money back, we all could buy a new car and remodel the house and take a fancy vacation or three. The appearance of prosperity would mask the underlying truth.
And that is the overriding problem with discussions about tax policy - a willingness to ignore the truth.
At the state level, for example, the Legislature over the past decade has instituted a carbon tax and a capital gains tax and now a tax on millionaires, routinely highlighting the "needs" of a ballooning state budget and conflating those with "wants."
Yet despite common complaints about these increases, the latest analysis from WalletHub suggests that the tax burden for Washington residents ranks 25th among all states - probably right where we should desire to be.
All of this should play a role in any analysis of the millionaires tax. Whether or not it is smart policy or legal policy, at least it has us talking.
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