I grew up in WA and as much as I enjoyed the lack of income tax, it's factual that until recently they held the title of #1 most regressive state tax system nationwide (recently bumped to #2 by FL). Income taxes are much better distributed among income brackets than consumption taxes are. I grew up just over the river from Portland, where there is no state sales tax; we got to enjoy the best of both worlds by crossing the state line to OR for large purchases and living in WA.
Ironically, my home for the last decade (MO) has recently moved forward with a bill eliminating the statewide income tax in favor of a higher sales tax. This is in a state where the two largest cities are situated on the borders of other states, so it's essentially a guarantee that this will backfire.
In Missouri, the current proposal is to put it up to a vote, so Missourians will decide what they want. There are safguards builtin where the income tax is only phased out if there is revenue to replace it. Its an interesting experiment setup.
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The way to make a consumption tax progresive is with a prebate, or if you want to be more complicated, a rebate. With a prebate, every citizen or resident would recieve a check each period for the amount of the consumption tax up to the spending level you set as the curve for regresiveess, such as the federal poverty line.
It would be difficult for Missouri to implement a prebate on its own due to the proximity of the population to other states! (Residents could take the prebate, then travel across state lines to spend it, resulting in a huge loss to the state).
Income taxes are complicated to collect, subject to massive violations of privacy, and generally provide more perverse incentives than consumption taxes.
Given the experience I've had with MO's legislature, I don't have a lot of trust in them to do anything that directly reflects the majority desire. Ultimately they have clearly shown a preference towards Republican dogma than democratic norms, so I fully expect the income tax removal to go through regardless of the balance sheet.
The "free" federal tax filing service I use in Florida, makes their money by charging for state filings. It will add an additional hour or two of effort to every resident of the state, even if they are below the state income threshold which is quite an externality.
>It will add an additional hour or two of effort to every resident of the state, even if they are below the state income threshold which is quite an externality.
Nope, that is false. The language of the bill only requires filing if tax is owed. There will be a handful of folks on the cusp who will need to calculate their AGI to determine their state tax liability but everyone else knows offhand if they need to file.
The language is "Individuals not owing tax under this chapter are not
required to file a return..."
This is one of those things that I question the legality of, but it will never get answered because nobody is going to the Supreme Court over sales tax. I can understand the argument of me sitting at home in State 1, buying something online, and having it delivered to me in State 1, and owing State 1 some sales tax on that.
It is absolutely no business of State 1's what I do when I travel into State 2. Whether or not I buy something and/or the value of that purchase should not enrich State 1 in any way. The only reasonable exception I can think of is if I'm buying things to bring back and resell.
> This is one of those things that I question the legality of, but it will never get answered because nobody is going to the Supreme Court over sales tax
Someone did go the Supreme Court over sales tax on property bought out of state. Henneford v. Silas Mason Co., Inc., 300 US 577 (1937). Text here [1].
Going from a high tax state to a low tax state to purchase goods is not substantially different than going from a state with strict anti-abortion laws to a state with very pro-abortion laws to get an abortion. One is economic, one is healthcare, both boil down to "I shouldn't have to tell the government what I do outside of that government's jurisdiction." I'd rather people have the freedom to vote with their wallets and feet.
Even taking states out of the equation, if I live in a city with a city-specific sales tax, that city doesn't suddenly get the right to lay claim to all my economic activity whether in that city or elsewhere.
> Also, I would be wary bragging about buying your goods in Oregon, you technically may owe WA use tax
In my experience, this is well-known around Vancouver and elicits nothing but eye rolls when mentioned. If there is any enforcement whatsoever for that rule (a big if), it's clearly toothless and people don't worry much about it. A Best Buy opened a couple miles north of the river in the late 2000s and didn't make it much more than a year because another one existed in Jantzen Beach, immediately across the state line. The Vancouver location amounted to a showroom before people decided if they wanted to drive the extra 15 minutes.
The great thing about sales tax is that everyone can bypass it. You don't need to be the kind of person who can hire a tax expert to coach you; all you need to do is drive over the state line!
When I was a new grad moving to the US and deciding where to live and work, the biggest draw of Seattle was its lack of income tax. Of course this particular $1 million threshold wouldn't apply to me until I'm very late in my career, or have a lucky year, or get married to a high-income person (the $1 million threshold applies to married couples, not just individuals) but Seattle loses a lot of its appeal if it's not financially advantageous. Of the other tech hubs, SF beats Seattle on weather and jobs and New York beats it on urban lifestyle. Or if you want to avoid income taxes, why not go to Florida or Texas.
I wonder if introducing income taxes will impact Seattle's tech hub status going forward. Sometimes people talk about how much these measures will lead to rich people moving away, but discouraging high-income people from moving there I think is a bigger long-term impact.
Tax rates under 2% of property value should not "flabbergast" anyone. I prefer a state having a high property tax rate and cheap housing over an income tax. I'm sure most Texans do, too.
> Tax rates under 2% of property value should not "flabbergast" anyone
The national average effective property tax rate is, IIRC, below 1.5% for all property and below 1% for owner-occupied homes. It is really not surprising that people coming to Texas under the popular illusion that it is a tax refuge whose property tax expectations are set by the places they are coming from are flabbergasted by Texas’ property taxes.
They tend to size up when moving here and are expecting the rates from back home. Not saying it's a logical thing but what tends to happen. This is more of a comment on how people aren't really taking everything into account when just moving because "no income tax".
The current governor is proposing cutting property taxes in ~half by eliminating the school district portion and instead funding schools directly via the state's budget surplus.
Remains to be seen, as the next legislative session isn't until 2027.
I mean, most property developers are playing shell games to avoid the requirement of having to build school districts anyway in Texas from my experience living there. Build small developments up to just short of the line where it's required, then continue development as a different legal fiction with what turns out to be ultimately the same beneficent owners. Texas education system leaves much to be desired.
I don't understand your point or why you are sure of that? New Jersey consistently ranks as having the highest average property tax rate of any state, and it also has relatively high income tax rates.
This is mainly caused by having a ridiculous number of tiny towns and tiny school districts, each with redundant services and employees.
TX: Average Effective Rate: Approximately 1.36% to 1.6% (some estimates range up to 1.8%) of a property's assessed fair market value. The typical homeowner in Texas pays a median annual property tax of $4,108
WA: Effective Rate: The average effective property tax rate in Washington is approximately 0.75% to 0.79% of the home's value. State mean the median annual property tax payment is roughly $4,361 to $4,729
Take this into account. People move from places with high cost of living where their 2 bedroom house nets them easily $1mil. They sell that and move to Austin where they can afford a much bigger house. They think they win not paying income tax and then their property tax bill drops and they are paying $16k per year. Enter the flabbergast.
It's more nuanced than that. Say someone moves from California where their property taxes were based on the purchase price of the home, they then buy a home in Austin where it based on the property value and they size up. It is a sticker shock of the taxes. Not justifying it, it is just a reality of what happens here.
Who are the "good" immigrants? It's a topic that's been talked about a lot recently but most countries, and I imagine states too, prefer that people with more money or income potential move there versus people with less.
Raising income taxes for those making over $1 million while cutting taxes paid by people making under $1 million makes it cheaper (in employer cost for the same disposable income; looked at a different way, it provides more disposable income for the same nominal pay) to hire workers across most of the income spectrum of any industry (even in tech—most workers in the field aren’t making over $1 million/yr).
The only people making more than $1M in W2 income are in fields where nearly everyone is going to be making that. Highly specialized physicians come to mind pretty quickly but I'm sure there are "lots of" (relatively speaking) attorneys making that too, and probably some other fields where it's more doable than something like tech or sales.
There is no way this meaningfully changes the income distribution of hires in any industry.
I didn't say it changed the income distribution within thr industry, I said it made hiring for the vast majority of roles less expensive in terms of disposable income provided (or, holding nominal pay constant, provides greater disposable income at the same pay.)
That is, its not a negative economic incentive except for people who have a very large amount of income taxed as regular income where that income is not dependent on the ability to have other people with more normal incomes working in close proximity.
> The tax would apply only on the amount of income above the $1 million threshold, so a person making $1.5 million, for example, would be taxed on the final $500,000. It would apply to an estimated 20,000 to 30,000 households in the state, with collections beginning in 2029 on the previous year’s income.
It's a sliding scale tax. Someone making a million will barely feel it. Someone making 50 million will feel it a lot. Objectively, anyone making $50 million should feel it a lot and be taxed heavily. Nobody is making $50 million under their own power.
I know numbers are hard for the ultra rich. I've mostly only posted this for all the poor souls only making a mil a year. I want them to know this won't impact them.
Nobody is making $50M a year in W2 income. Maybe a couple pro athletes? But if you're making $50M a year it's all stock and that doesn't fall under this, and once you have enough of it there are ways to actually realize it as income and never pay taxes on it.
This is not about the money at all, it's about getting an income tax on the books. In a year or two they'll lower the limit a few hundred grand. They're start removing exemptions, they'll add more brackets, and before you know it Washington will have California's tax structure and the people who live there will not be any better for it. But the government will be bigger, and the people will be poorer.
It's not about whether rich people should or should not feel it. It's not about whether they should or should not be taxed heavily. This isn't a normative question - it's about incentives and mobility.
It's about what their alternatives are, where they choose to be domiciled, what job-creating businesses they take with them, and what effect that has on the state's economy over the long term.
As it is, California and New York have the highest income tax rates in the nation, and are both experiencing large net domestic out-flows. Florida and Texas have no state income tax and have been the largest net recipients of domestic migrants for several years.
The person earning $50m a year is profiting on the labor of hundreds of thousands of people. Rent seeking on their labor and skills, relying 100,000x more on the infrastructure that made them rich. No one makes $50m a year in a vacuum, they do so by utilizing the economy they live in and rely on.
If that's the way you see it, you are also free to do so. Labor is a market and the laws of supply and demand are at play just like any other market. Go start a company and hire some people. This is Y Combinator's Hacker News after all. The world needs more founders.
Imagine for a second if supply and demand were actually the only forces at play for these businesses run by billionaires… - forgetting oligopolies, blatant antitrust, lobbying, the revolving door between government and the c-suites, legal tax evasion, etc.
We don’t live in a fantasy world simulation on a frictionless plane where anyone can be a billionaire if they just pull up their bootstraps.
You don’t clear $50m a year by paying people what they’re worth. The wages are unfair, by definition, if there is someone able to skim away that much at the top.
Your definition of “unfair” is quite peculiar. By your logic, the same salary for the same work can go from being “fair” to “unfair” depending on how many employees you have.
Ah yes, all the 50k makers are dependent on the very altruistic nature of the 50mil earners who all got there under their own power and without any systematic abuse, grifting, or generational wealth to get them going. Won't anyone think of these poor folks? They'll now have 49x0.099 mil less yearly income to charitably pay their indebted employees bonuses.
Well the tax is on income over $1M so yes someone making $1M will pay nothing. Technically that's easy for anyone to say, assuming they actually read the article at least.
Maybe that's a good thing? I miss the Seattle of the 2000s that was less overflowing with tech and more a mix of incomes.
I for one support the tax. The dichotomy of being a liberal state with a regressive tax structure needs to stop. Slippery slope argument aside this tax is a good first step. Income tax while imperfect seems to be the best system we have to tax the rich and not the poor.
Washington also has a capital gains tax now, 7% on long-term capital gains above $270k, and 9.9% on gains above $1 million, exempting real estate and retirement accounts.
I don't understand how anyone in good conscience can vote against this tax. As a reminder, this tax does not affect income under a million US dollars. From the article, if you earn a dollar over a million dollars, you owe 9.9% so you need to pay a dime in income tax.
The first set of US federal tax rates when it was allowed by the 16th amendment with adjustments for inflation on the the right:
Orig Income Rate Adj Income (2025 Dollars)
Up to $20,000 1% Up to $600,000
$20,000 to $50,000 2% $600,000 to $1,500,000
$50,000 to $75,000 3% $1,500,000 to $2,250,000
$75,000 to $100,000 4% $2,250,000 to $3,000,000
Over $100,000 5% Over $3,000,000
The point being that once you allow the tax, it has a tendency to become more and more. It's much easier to raise income tax than establish it.
I don't have a dog in this fight and if it's what the people of Washington want, so be it.
This is important context, and people forget that "taxation without representation," which started a war, was about a tax of about 1.5%.
Why is it when people are against a tax they typically talk about it in terms of historical context, unintended consequences, interstate migration, while people in favor of the tax almost exclusively appeal to emotional blackmail statements like "paying your fair share" (when something like 40% of the country pays no federal income tax whatsoever) or "good conscience" or assume anyone with any money got it through borderline illegal activities?
It took 100+ years of horribly repressive policies to start that war, including far worse tax schemes including things like straight up requiring burning half your tobacco or only selling it through monopolized channels that required paying tariffs to England before it could be re-exported anywhere else. Policies that resulted in mass starvation and death, sometimes resulting in failed rebellions (like Bacon's). So there's history of Americans being willing to spend decades starving to death to pay high taxes or economically destructive policies before they will successfully rebel against it.
I think you can in good conscious be opposed to new taxes. This tax is being introduced in a way that only affects the most privileged portion of the population but that's how the Federal income tax was introduced many years ago too. People who oppose the tax are looking forward to a future where the tax burden in Washington might be as oppressive as it is in California or New York.
Both California and New York have shrinking populations according to Wikipedia. And even if the estimates are wrong and they do have growing populations you still need to consider the fact that the Southern states are growing much faster.
Federal power is shifting south. If you like the politics of New York and California that's a long-term problem that needs to be resolved.
California has a "Neutral Decrease" in population and New York has a "Neutral Increase" according to Wikipedia. I'm gonna go with the 5 year trendline, which is up.
> And even if the estimates are wrong
Nice, covering all your bases.
> Southern states are growing much faster
Yeah, smaller states grow faster than larger ones.
I'm talking specifically about this phenomena[1]. I wasn't agreeing with the GP that these policies are "oppressive". I'm only informing you that these states are not experiencing "explosive growth" and the downstream effects of that fact.
CA and NY are both expected to lose 4 seats next census, based on current trends. Saw this in an HN submissions yesterday about gerrymandering and how it might be a losing strategy for Dems looking out into the 2030s.
Let's not quibble over the population growth rates of these states which provide welfare to everyone. Instead, let's talk about te tax base which provides this welfare and you'll notice that tax base does not grow nearly as fast and might in fact be shrinking - actual reliable numbers are hard to come by. How many of the newcomers to these states will end up being net providers to the tax base and how many will end up being net consumers? If you provide more benefits, more people will come. If you raise the net tax rates to provide those benefits to a growing number of consumers more net payers will leave. The total population may remain the same or may even grow but a larger fraction of that total population will never become net providers, remaining net consumers. What is the end game here? This is a question which has already been answered in many European countries with similarly structured social benefit systems. There the end game is called 'austerity measures', the reduction of state services to keep the state from getting even deeper in debt.
A cynical take on this situation is that the current crop of politicos in these states launch these ever-increasing benefit systems in the knowledge that this attracts voters from a few segments of the population as well as 'future voters' who will move to these places because they promise to provide them with (more) benefits than their current domiciles. Once the costs of the whole system become too high the system will no longer be tenable but the current crop of politicos will by that time have moved on to greener pastures, probably golf courses in some nice shielded and guarded areas. The 'other party' will end up winning the elections after having been out of power for a long time but this will end up being a Pyrrhic victory since they inherit a state on the verge of financial collapse. OK, they say, "we need to fix this mess and the only way to achieve that is to cut spending because we can not raise taxes above where they've been raised by our predecessors" - in fact this promise was one of the factors which made them win the elections. They do just that, lower benefits, lower some taxes - but not that much because they do need money to pay off all those debts and all the running contracts entered by their predecessors - and they manage to pull the state away from the brink of financial ruin.
At the next election round the party which put in place all those benefit programs portrays the current incumbents as "inhumane penny-pushers who only want to appease the rich" with organised - and paid - protests by all the right groups, long media campaigns about the threat of *-ism and *-phobia, the works. The current incumbents try to defend their record stating that they're just cleaning up the mess left by the previous leadership who are financially irresponsible spendthrifts but that message is not nearly as emotionally appealing as the video clips of poor single mothers who now have less to feed their poor children, about the cancelled school trips because the state no longer had the funds to pay for them.
The elections are won by the party which put in place the programs which nearly bankrupted the state, the new leadership undoes part of what the previous leadership did to save the state from financial ruin and as a result the process is set to repeat in a few years. Enough years at least to make sure they get to retire to greener pastures, probably golf courses in nice shielded and guarded neighbourhoods. They don't have to worry about such silly things as financial responsibility, they know they can get the other side to clean up the mess and they also know they'll be able to use the measures the others need to take to clean up the mess to launch a campaign against them which is nearly sure to regain them the leadership in one or two election cycles.
As the label on the shampoo bottle says: rinse, repeat.
Washington is a one-party State where not even Democrats trust the Democrats on tax issues.
Many Democrats object to it in principle because the new income tax is unconstitutional on its face; they support an income tax but ignoring the constitution because it is inconvenient and blocking people from voting on it is gross. The supreme court in Washington won't be any help, they are have an unfortunate track record of rubberstamping whatever the party wants.
This is in addition to many years of tax increases exceeding growth, the regular introduction of new poorly designed taxes that are simultaneously wasted and expanded with no accountability.
Many Democrats fully expect a rugpull is coming because that is the recent history in Washington. Regressive taxes are never lowered or removed, they just stack new ones on top of them.
The time to talk about these things is when we spend them,
not when we need to pay for them though.
Logically speaking, the solution is clear going forward:
1. Higher taxes
2. Reduced government spending
However, we are not willing to have these difficult conversations and are focused on appeasing people.
Also, lets put things in context -- here is a summary from Claude. Over the last decade, federal income taxes went down for nearly everyone in rate terms, but the percentage benefit was larger for high earners and corporations.
It’s a beachhead that will expand. The history of income taxes shows that. Once you have established an income tax, the next fight will be to raise it, or lower the income limit, and over years, it will end up covering everyone. The government is incentivized to over spend and then try to dig their way out be expanding taxes, but there is a limit
to what you can tax.
You want people to vote for a millionaire tax tie it with a constitutional amendment that requires a higher vote bar to ever increase it and have all numbers automatically inflation adjusted
If that means curbing the comparatively high consumption taxes in WA, then it's for the best. The lowest income brackets pay an outrageous percentage of their income to taxes compared to the upper brackets because of them.
> If that means curbing the comparatively high consumption taxes
“Most of the roughly $4 billion a year the tax would bring it would be devoted to the state’s general-fund budget to pay for government agencies and services. A 5% chunk would be earmarked for early education and child care.
Democrats also say they’d use some of the money to fund free school lunch and breakfast for all kids in K-12 schools, though Republicans pointed out that money is not legally earmarked in the income tax bill.
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The bill would also exempt more businesses from paying the state’s business and occupation tax. It also would eliminate the sales tax on purchases of diapers, and personal hygiene products such as toothpaste, antiperspirants and shampoo.
It also would expand the state’s Working Families Tax Credit, which sends annual rebates of up to $1,300 a year to lower-income working families. Ferguson had pushed for the expansion of the program and said the revised bill would make 460,000 households eligible for the payments.”
What about this law makes you think any of the revenue is going to be used to curb consumption taxes? Because that's not what any of this money is being earmarked for. Most of it is basically a government slush fund.
> I don't understand how anyone in good conscience can vote against this tax
Then you have intellectual blinders on. There’s good reasons to have broad based taxes instead of singling out rich people. In Sweden, for example, the top tax bracket kicks in at 1.5x the median income. In Germany, the second highest 42% bracket kicks in around 70,000 euros and the top 45% bracket kicks in at 277,000 euros.
None of the countries that American liberals admire in terms of having a robust welfare state adopt a policy of “soak the rich.” The have policies based on solidarity where everyone in the top half or third take on a heavy tax burden.
The income disparity between Germany and California is gargantuan as you approach the top percentiles.
In the 1%, average income in Germany is 272k usd. In California, it's north of 1mil usd. At 0.1%, it's 1.1 mil usd in Germany and 3.2+ mil in California.
The distributions between high and low income earners are much flatter in Germany because it is harder to abuse the system to get to such salaries. No so in America. Hence Germany also does not need such aggressive taxation schemes as what's proposed (they also have way more flat taxes as well).
You’re comparing to California, but we’re talking about this proposed Washington tax. California’s tax schedule is actually much more like Germany’s than this proposed Washington income tax.
In California, the big jump comes at $72,000, where the 9.3% rate kicks in. The $742,000 rate is only a little higher, at 12.3%. That’s similar to Germany where 42% kicks in at 70,000 euros (top 15%) and the top rate is only a little higher at 45%.
Those are numbers. They are not reasons. Modern social democracies are just a capitalist compromise. They are still capitalist dominated. Hence why these Euro social democracies have rich people.
If you are truly incapable of even imagining the objections (that you might disagree with!) you should probably get out of your bubble and expand the content you consume.
> As a reminder, this tax does not affect income under a million US dollars.
For now. The legislature refused to add an amendment forbidding the threshold from ever being lowered to guarantee that it only applies to a million and above.
The way the Washington state constitution works is income is treated as property, and property taxes must be uniform.
So this bill isn't just a millionaire's tax, it's a state-wide income tax of 9.9% with the first million exempt.
It's a good thing, for now, but it does set precedent and the fact they refused to add language to the bill forbidding that exemption from every being removed or lowered is telling. The income threshold will eventually be lowered.
> The legislature refused to add an amendment forbidding the threshold from ever being lowered
Wouldn't such a change have to be made by the same legislature with a similar majority? Or was this some sort of constitutional change that required a more qualified majority, after which the threshold can be changed more easily than this could be introduced?
The WA constitution doesn't seem to have anything to say on income tax, just a lot about property tax?
> Wouldn't such a change have to be made by the same legislature with a similar majority?
Yes. The legislature voted on the additional language and it did not pass.
> The WA constitution doesn't seem to have anything to say on income tax, just a lot about property tax?
Washington state treats income as property, and property taxes must be uniform and flat within a specific property class.
Technically, this law does run afoul of that because having an exemption makes it not uniform, and per the state constitution property tax is capped at a total aggregate levy of 1% per year.
The state will use the argument that this is not a property tax, but an excise tax on the privilege of earning high income from the state's economy. They used a similar argument for the capital gains tax, and won in the WA supreme court.
Republicans in Harris County sold voters on the Beltway 8 toll road in the 80s based on the idea that when the bonds were paid off the tolls would go away.
Clever hack: they never stopped issuing bonds.
At least they've made it really easy for them to take your money. You don't need a toll tag, they'll scan your license plate, mail you, and charge you extra for mailing you. No coins needed.
Living in Portland I meet SOOOO many tech people that live across the river in Vancouver just because of the income tax - WA has none - OR has a healthily number of them (5 lines worth of various taxes show up on my paystub).
Bigger impact im sure will be Seattle but the impact to Portland is not insignificant. I'm sure the WA tax would be less than the OR one though so I don't see the moves stopping, but probably akin to whats happened in CA where people moved to NV or AZ to escape some of the taxes (not a significant number but ive met enough to wonder). As people retire, they moved away to those places as they think they will be taxed less
On Nextdoor here (Puget Sound area but on the other side of the water from Seattle) there are a lot of people who (1) post a lot about how property taxes and gasoline taxes are too high, (2) complain about any cuts to government services, and (3) oppose any effort to tax income even if the threshold is way way way higher than anything they or anyone they know will ever come near on the grounds that at some future time the threshold could be removed.
> (3) oppose any effort to tax income even if the threshold is way way way higher than anything they or anyone they know will ever come near on the grounds that at some future time the threshold could be removed.
This is exactly what happened with the national income tax, which initially only applied to <1% of the population. Of course the snare was set, and after WWI broke out the snare then sprung. It took less than a decade to go from <1% to >33% of households.
Washington State’s constitution limits a tax like this to no more 1% and requires it to be uniform; this law meets neither requirement.
I am uncomfortable that supporters of the income tax are so unbothered by it being unconstitutional. So few are insisting we amend the constitution to allow or not do it at all, on the grounds that violating the constitution (or flexibility construing it to match our desired ends) is bad.
Until there are severe personal penalties for an elected official violating their oath of office with regard to unconstitutional laws, they will simply ignore it. This is doubly true in formerly purple but now uniparty states like Washington where the Supreme Court is completely beholden to the party elite.
We have the same problem at the federal level in part because SCOTUS will not or cannot provide input or warnings on proposed legislation. How many federal laws would simply not exist if SCOTUS got a veto before it went to the President for signing?
Doesn't it just limit property tax to 1% while saying nothing about income tax?
Is it this?
> the aggregate of all tax levies upon real and personal property by the state and all taxing districts now existing or hereafter created, shall not in any year exceed one percent of the true and fair value of such property in money
Asking an AI (I know, I know) it suggests "Courts have ruled that income is property" which to me sounds like ruling up is down. I mean everywhere that has property tax separate from income tax or only one or the other would object...
There was initiative 2111 which seems it wouldn't even be necessary if income tax was against the constitution to begin with? Also I assume this law basically nullifies initiative 2111?
Washington's constitution says: "The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership". That is extremely broad, and there is 90 years of precedent affirming income is include here as something intangible and "subject to ownership."
In principle it sounds like a reasonable idea but the obvious problem is that people can become domiciled elsewhere, or structure their income to avoid this. It would be interesting to know what's been planned to mitigate that.
I think I don't like income tax as it disincentivizes labor and also makes it harder for working people to build up wealth. Making a million a year sounds like a lot, but who knows how long someone might be making that kind of money? Meanwhile already wealthy people are mostly untouched. Would rather see majority of taxes come from corporate taxes and capital gains.
> but who knows how long someone might be making that kind of money?
Would you mind saying a little bit more about your thinking here? A million a year doesn’t just sound like a lot, it is a lot. FRED reports the median income in Washington at just shy of $100,000 [0]. We’re talking about households that make 10x the median.
Also, what does it matter the length of time they earn it? If they don’t earn more than $1m, they don’t pay it, right?
There are plenty of ways that you might make a large income in a single year like selling a business you have spent years or decades building up. Your "income" for that year might be several million that year, but it took you years to "earn" it. In general I don't think taxing people that actually have to work for a living is a great thing, all you are doing is prolonging the amount of time they have to work to save enough to either retire or start their own business. I would prefer to shift taxes to cap gains (why do long term cap gains rates exist???) and corporate taxes as well as sales tax.
> If they don’t earn more than $1m, they don’t pay it, right?
Correct, and for the times they do earn more than $1m, with this tax they are only taxed on the income over $1m and pay nothing for income of $999k and below. If you make a million and one dollars, you owe 10 cents.
How do you deal with a corporation just moving their HQ to another state though? It is hard because you cannot just say oh we should only have a federal income tax because then states would just rely on the federal government for funding. At the same time the wealthy people/corporations can easily move to another state leaving the middle class to make up for lost revenue.
You deal with it by competing with other states, which is what happens now, and what is intended based on the very architecture of the federal and state governments. This will make Seattle less attractive to the type of person who makes a LOT of money almost entirely from W2 income. Private practice physicians, specialty attorneys, that kind of thing. "Working people" who happen to be very highly compensated.
If I was in that type of role and I could routinely expect to make $1.5-$2M/yr it would absolutely make me consider places like Florida or Texas more, especially with the marriage penalty mentioned in the article (although I'm curious how many households have two people both earning more than $1M/yr).
You just... deal? You think about it then make a law in a way or another, instead of this decision paralysis. I also assume all states will think about it (rather sooner than later) so it's all a matter of concern and will - if there's one, because in a world ruled by corporations and billionaires, if it's all left to them, the only ones paying for roads, military or community services will be you, me and our likes (I assumed there aren't many billionaires on HN and also won't be any time soon). The tax breaks trend seems to only increase, right?
WA has been raising taxes for some time, but the problem I care about the most - the prevalence of drugs in high schools - is getting worse. I voted with my $ and out of WA.
There is a school of thought that the powers should be enumerated in the constitution. But this is not in favor.
Instead this argues that Culliton the ruling that classified income as property was incorrect. And once that door is opened saying that the claims within the existing constitution only apply to property and finally that there is a strong presumption of constitutionality.
Seems like a gauntlet. But it seems clear that given the composition of the supreme court that they will pass the gauntlet.
A constitution is but paper. It does not hold back the motivated.
Progressive taxation is the most efficient and fair system of taxation. America was it's most prosperous when the top federal income tax topped 90%, 1944-1963. Modern wealth consolidation makes this structure even more logical.
I'm going to assume that you mean progressive INCOME taxation is the most efficient and fair...
Classically the ranking is :
Least distortionary
Land value taxes / recurrent tax on pure land rents
Broad recurrent property taxes
Broad consumption taxes (uniform VAT / sales tax)
Tariffs / trade taxes
Personal income / labor income taxes
Corporate income taxes
Transaction taxes
Most distortionary
Everyone except the people uncritically repeating this political talking point agrees that a 90% marginal rate is very far on the right side of the Laffner curve.
The point of a 90% marginal rate isn't to increase tax revenue, it's to discourage high incomes that are economically and socially harmful. If you don't believe that's a problem then policies to address it won't seem logical.
Is someone earning $1.1M more economically or socially harmful than someone earning $980,000?
Even if it is, and even if your point is true, that's not what the GP said. They said taxing rich people a higher percentage than poor people is "more efficient" (whatever that means in this context) and a "[more] fair system," and immediately followed it up with the 90% anachronism.
As someone who lives in WA, I despise how bad any state government run program here is. Literally it took me 3 months to get a SSN and I couldn’t get hold of anyone. Also on top of this tax, they have this care tax which also taxes 1% of your income for “long term care”.
I would love to pay my taxes if I had seen reasonable outcome. So far all I see is a corrupt state government with no accountability and transparency.
Also isn’t this illegal? I thought the state constitution says it is illegal.
> Also isn’t this illegal? I thought the state constitution says it is illegal.
The state constitution treats income as property, and states that property taxes must be uniform.
So the bill is actually a state-wide, uniform 9.9% income tax but with the first million dollars exempt.
It is expected to be challenged almost immediately in probably a long court battle so we will see what the arguments are. I'm in support of the tax, but I'm a bit miffed that they refused to add language that prohibited lowering the threshold.
> I'm a bit miffed that they refused to add language that prohibited lowering the threshold.
Well that's because the entire point of this is just to get a tax on the books so they can later increase the amount and lower the thresholds when all of a sudden this $4B windfall isn't enough.
This is absolutely going to be a lions-eating-faces situation a few years from now when we're talking about a 14.9% tax with a $250,000 exemption.
I'm also genuinely curious how the exemption doesn't by definition make it no longer uniform. How does any exemption at all not violate the uniformity requirement?
> I'm also genuinely curious how the exemption doesn't by definition make it no longer uniform. How does any exemption at all not violate the uniformity requirement?
That's the part that I'm assuming is going to get fought out in court when this is inevitably challenged. The state will likely try to argue that it's not a property tax, but an excise tax. They used that argument in support of the capital gains tax, and won (Quinn vs. Washington State, 2023), stating that the tax was an excise tax on the privilege of selling assets. The WA supreme court ruled that the tax was a permissible excise tax and not a property tax, so did not run afoul of the constitution.
They'll likely argue that the millionaire tax is an excise tax on the privilege of participating in the state's economy.
Alternatively, they may try to define high income as a new class of property. Property taxes only have to be uniform within a specific class of property, so if they create a new class, then it would be uniform for that class.
> Alternatively, they may try to define high income as a new class of property. Property taxes only have to be uniform within a specific class of property, so if they create a new class, then it would be uniform for that class.
If nothing else, from a rhetorical/argumentative perspective I am actually really interested in hearing a coherent argument that your 1,000,001st dollar is a difference class of property than your 999,999th.
Yes. Washington desperately needs infrastructure improvements, our state has not kept up with population growth, especially in areas outside of the Seattle metro. Go north into the Skagit valley or Whatcom county, we have two lane roads over capacity with many fatal accidents each year, power lines still above ground that get taken out year, after year every time we have a wind storm (happens a lot, especially in the fall).
There's a reason it's a long standing joke that our state bird is the traffic cone.
Near where I live there's still remains and pot holes from a landslide a year ago that has not been cleaned up or repaired.
I'm not a "punish the rich just for the sake of it" type person, but I do believe that you shouldn't get to move here, use the state's economy to extract wealth, and then not contribute back into it's development, infrastructure and people.
Even if you don't buy the "job creator" argument, if you're bringing a business and "extracting wealth" you're not earning that wealth as a W2 employee, so this tax won't apply. The best example I can think of for >$1M W2 earners are highly specialized physicians, and maybe some even more specialized (and prolific) attorneys. Aren't they already contributing a lot?
> The best example I can think of for >$1M W2 earners are highly specialized physicians, and maybe some even more specialized (and prolific) attorneys. Aren't they already contributing a lot?
That depends on how much they are consuming within the state and paying sales tax. If they are W2 earners, they aren't contributing via B&O tax like businesses do, and so essentially they just contribute the same as anyone else in the state, via all the other regressive taxes, just proportional to how much money they spend.
> they aren't contributing via B&O tax like businesses do
Well they're not businesses so that makes sense.
> "just" proportional to how much money they spend (emphasis mine)
Yeah, which for most of them is going to be a lot more than someone earning a fraction of what they earn, so they do actually contribute more in absolute terms, even if for some reason you think that their contributing less on a percentage basis is for some reason bad.
Good luck finding someone making $2M/yr who isn't spending a lot more in the local economy than someone earning $40k/yr.
I grew up in WA and as much as I enjoyed the lack of income tax, it's factual that until recently they held the title of #1 most regressive state tax system nationwide (recently bumped to #2 by FL). Income taxes are much better distributed among income brackets than consumption taxes are. I grew up just over the river from Portland, where there is no state sales tax; we got to enjoy the best of both worlds by crossing the state line to OR for large purchases and living in WA.
Ironically, my home for the last decade (MO) has recently moved forward with a bill eliminating the statewide income tax in favor of a higher sales tax. This is in a state where the two largest cities are situated on the borders of other states, so it's essentially a guarantee that this will backfire.
In Missouri, the current proposal is to put it up to a vote, so Missourians will decide what they want. There are safguards builtin where the income tax is only phased out if there is revenue to replace it. Its an interesting experiment setup.
**
The way to make a consumption tax progresive is with a prebate, or if you want to be more complicated, a rebate. With a prebate, every citizen or resident would recieve a check each period for the amount of the consumption tax up to the spending level you set as the curve for regresiveess, such as the federal poverty line.
It would be difficult for Missouri to implement a prebate on its own due to the proximity of the population to other states! (Residents could take the prebate, then travel across state lines to spend it, resulting in a huge loss to the state).
Income taxes are complicated to collect, subject to massive violations of privacy, and generally provide more perverse incentives than consumption taxes.
Given the experience I've had with MO's legislature, I don't have a lot of trust in them to do anything that directly reflects the majority desire. Ultimately they have clearly shown a preference towards Republican dogma than democratic norms, so I fully expect the income tax removal to go through regardless of the balance sheet.
The "free" federal tax filing service I use in Florida, makes their money by charging for state filings. It will add an additional hour or two of effort to every resident of the state, even if they are below the state income threshold which is quite an externality.
Also, I would be wary bragging about buying your goods in Oregon, you technically may owe WA use tax https://dor.wa.gov/taxes-rates/use-tax.
>It will add an additional hour or two of effort to every resident of the state, even if they are below the state income threshold which is quite an externality.
Nope, that is false. The language of the bill only requires filing if tax is owed. There will be a handful of folks on the cusp who will need to calculate their AGI to determine their state tax liability but everyone else knows offhand if they need to file.
The language is "Individuals not owing tax under this chapter are not required to file a return..."
This is one of those things that I question the legality of, but it will never get answered because nobody is going to the Supreme Court over sales tax. I can understand the argument of me sitting at home in State 1, buying something online, and having it delivered to me in State 1, and owing State 1 some sales tax on that.
It is absolutely no business of State 1's what I do when I travel into State 2. Whether or not I buy something and/or the value of that purchase should not enrich State 1 in any way. The only reasonable exception I can think of is if I'm buying things to bring back and resell.
> This is one of those things that I question the legality of, but it will never get answered because nobody is going to the Supreme Court over sales tax
Someone did go the Supreme Court over sales tax on property bought out of state. Henneford v. Silas Mason Co., Inc., 300 US 577 (1937). Text here [1].
[1] https://www.law.cornell.edu/supremecourt/text/300/577
What’s the reasoning? If you were a business, would your opinion change?
Going from a high tax state to a low tax state to purchase goods is not substantially different than going from a state with strict anti-abortion laws to a state with very pro-abortion laws to get an abortion. One is economic, one is healthcare, both boil down to "I shouldn't have to tell the government what I do outside of that government's jurisdiction." I'd rather people have the freedom to vote with their wallets and feet.
Even taking states out of the equation, if I live in a city with a city-specific sales tax, that city doesn't suddenly get the right to lay claim to all my economic activity whether in that city or elsewhere.
> Also, I would be wary bragging about buying your goods in Oregon, you technically may owe WA use tax
In my experience, this is well-known around Vancouver and elicits nothing but eye rolls when mentioned. If there is any enforcement whatsoever for that rule (a big if), it's clearly toothless and people don't worry much about it. A Best Buy opened a couple miles north of the river in the late 2000s and didn't make it much more than a year because another one existed in Jantzen Beach, immediately across the state line. The Vancouver location amounted to a showroom before people decided if they wanted to drive the extra 15 minutes.
the great thing about sales tax is rich people spend a lot of money on dumb shit
Not relative to their income tho. Sales taxes are regressive and get more money from the poor
They get less money from the poor but it's a higher percentage of that person's income. There is a difference.
The great thing about sales tax is that everyone can bypass it. You don't need to be the kind of person who can hire a tax expert to coach you; all you need to do is drive over the state line!
Not enough to make it preferable to income taxes.
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When I was a new grad moving to the US and deciding where to live and work, the biggest draw of Seattle was its lack of income tax. Of course this particular $1 million threshold wouldn't apply to me until I'm very late in my career, or have a lucky year, or get married to a high-income person (the $1 million threshold applies to married couples, not just individuals) but Seattle loses a lot of its appeal if it's not financially advantageous. Of the other tech hubs, SF beats Seattle on weather and jobs and New York beats it on urban lifestyle. Or if you want to avoid income taxes, why not go to Florida or Texas.
I wonder if introducing income taxes will impact Seattle's tech hub status going forward. Sometimes people talk about how much these measures will lead to rich people moving away, but discouraging high-income people from moving there I think is a bigger long-term impact.
I live in Texas. People move here and are flabbergasted by our property taxes.
Tax rates under 2% of property value should not "flabbergast" anyone. I prefer a state having a high property tax rate and cheap housing over an income tax. I'm sure most Texans do, too.
> Tax rates under 2% of property value should not "flabbergast" anyone
The national average effective property tax rate is, IIRC, below 1.5% for all property and below 1% for owner-occupied homes. It is really not surprising that people coming to Texas under the popular illusion that it is a tax refuge whose property tax expectations are set by the places they are coming from are flabbergasted by Texas’ property taxes.
They tend to size up when moving here and are expecting the rates from back home. Not saying it's a logical thing but what tends to happen. This is more of a comment on how people aren't really taking everything into account when just moving because "no income tax".
How about a high property tax rate and expensive housing? Because that's what you'll get in all the desirable areas of Texas.
The current governor is proposing cutting property taxes in ~half by eliminating the school district portion and instead funding schools directly via the state's budget surplus.
Remains to be seen, as the next legislative session isn't until 2027.
I mean, most property developers are playing shell games to avoid the requirement of having to build school districts anyway in Texas from my experience living there. Build small developments up to just short of the line where it's required, then continue development as a different legal fiction with what turns out to be ultimately the same beneficent owners. Texas education system leaves much to be desired.
I'm not familiar with that specific example, but I do know that independent players in any economic system will follow the incentives.
Expecting companies, people etc to do the "right thing" when it's financially disincentivized usually doesn't work out.
Same will happen in regards to all these new taxes reinforcing existing population migration trends.
NJ, in areas with good schools, has higher property taxes.
And I'm sure we can find places with higher property taxes than those New Jersey examples.
I don't understand your point or why you are sure of that? New Jersey consistently ranks as having the highest average property tax rate of any state, and it also has relatively high income tax rates.
This is mainly caused by having a ridiculous number of tiny towns and tiny school districts, each with redundant services and employees.
AI says:
TX: Average Effective Rate: Approximately 1.36% to 1.6% (some estimates range up to 1.8%) of a property's assessed fair market value. The typical homeowner in Texas pays a median annual property tax of $4,108
WA: Effective Rate: The average effective property tax rate in Washington is approximately 0.75% to 0.79% of the home's value. State mean the median annual property tax payment is roughly $4,361 to $4,729
Take this into account. People move from places with high cost of living where their 2 bedroom house nets them easily $1mil. They sell that and move to Austin where they can afford a much bigger house. They think they win not paying income tax and then their property tax bill drops and they are paying $16k per year. Enter the flabbergast.
$16k per year in total taxes is very cheap for someone with a $1 million house and the income to support it.
It's more nuanced than that. Say someone moves from California where their property taxes were based on the purchase price of the home, they then buy a home in Austin where it based on the property value and they size up. It is a sticker shock of the taxes. Not justifying it, it is just a reality of what happens here.
The assumption of course being that high-income people moving in is good for everyone.
Who are the "good" immigrants? It's a topic that's been talked about a lot recently but most countries, and I imagine states too, prefer that people with more money or income potential move there versus people with less.
If I had to choose I'd probably pick a neighbor who makes 3x what I do than 1/3. But I don't think it matters at all.
I'm just being snarky here but wouldn't you be concerned that the 3x neighbor would view you as you view the 1/3rd neighbor?
Yes but they chose to move next to me, not vice versa ;)
Raising income taxes for those making over $1 million while cutting taxes paid by people making under $1 million makes it cheaper (in employer cost for the same disposable income; looked at a different way, it provides more disposable income for the same nominal pay) to hire workers across most of the income spectrum of any industry (even in tech—most workers in the field aren’t making over $1 million/yr).
The only people making more than $1M in W2 income are in fields where nearly everyone is going to be making that. Highly specialized physicians come to mind pretty quickly but I'm sure there are "lots of" (relatively speaking) attorneys making that too, and probably some other fields where it's more doable than something like tech or sales.
There is no way this meaningfully changes the income distribution of hires in any industry.
I didn't say it changed the income distribution within thr industry, I said it made hiring for the vast majority of roles less expensive in terms of disposable income provided (or, holding nominal pay constant, provides greater disposable income at the same pay.)
That is, its not a negative economic incentive except for people who have a very large amount of income taxed as regular income where that income is not dependent on the ability to have other people with more normal incomes working in close proximity.
Sorry for misunderstanding, yeah I think we're on the same page on that point.
> The tax would apply only on the amount of income above the $1 million threshold, so a person making $1.5 million, for example, would be taxed on the final $500,000. It would apply to an estimated 20,000 to 30,000 households in the state, with collections beginning in 2029 on the previous year’s income.
It's a sliding scale tax. Someone making a million will barely feel it. Someone making 50 million will feel it a lot. Objectively, anyone making $50 million should feel it a lot and be taxed heavily. Nobody is making $50 million under their own power.
I know numbers are hard for the ultra rich. I've mostly only posted this for all the poor souls only making a mil a year. I want them to know this won't impact them.
Nobody is making $50M a year in W2 income. Maybe a couple pro athletes? But if you're making $50M a year it's all stock and that doesn't fall under this, and once you have enough of it there are ways to actually realize it as income and never pay taxes on it.
This is not about the money at all, it's about getting an income tax on the books. In a year or two they'll lower the limit a few hundred grand. They're start removing exemptions, they'll add more brackets, and before you know it Washington will have California's tax structure and the people who live there will not be any better for it. But the government will be bigger, and the people will be poorer.
It's not about whether rich people should or should not feel it. It's not about whether they should or should not be taxed heavily. This isn't a normative question - it's about incentives and mobility.
It's about what their alternatives are, where they choose to be domiciled, what job-creating businesses they take with them, and what effect that has on the state's economy over the long term.
As it is, California and New York have the highest income tax rates in the nation, and are both experiencing large net domestic out-flows. Florida and Texas have no state income tax and have been the largest net recipients of domestic migrants for several years.
> Florida and Texas have no state income tax and have been the largest net recipients of domestic migrants for several years.
Rich people don't like taxes or paying back into the systems they abused to get rich. Water is also wet.
> Objectively, anyone making $50 million should feel it a lot and be taxed heavily. Nobody is making $50 million under their own power
You’ve got it backwards. The people making $50,000 are the ones who are dependent on someone else to provide all the infrastructure for their job.
The person earning $50m a year is profiting on the labor of hundreds of thousands of people. Rent seeking on their labor and skills, relying 100,000x more on the infrastructure that made them rich. No one makes $50m a year in a vacuum, they do so by utilizing the economy they live in and rely on.
If that's the way you see it, you are also free to do so. Labor is a market and the laws of supply and demand are at play just like any other market. Go start a company and hire some people. This is Y Combinator's Hacker News after all. The world needs more founders.
Imagine for a second if supply and demand were actually the only forces at play for these businesses run by billionaires… - forgetting oligopolies, blatant antitrust, lobbying, the revolving door between government and the c-suites, legal tax evasion, etc.
We don’t live in a fantasy world simulation on a frictionless plane where anyone can be a billionaire if they just pull up their bootstraps.
> Rent seeking on their labor and skills
Paying people for their work isn’t “rent seeking.” If I hire someone to replace my roof shingles, is that “rent seeking?”
You don’t clear $50m a year by paying people what they’re worth. The wages are unfair, by definition, if there is someone able to skim away that much at the top.
Your definition of “unfair” is quite peculiar. By your logic, the same salary for the same work can go from being “fair” to “unfair” depending on how many employees you have.
Ah yes, all the 50k makers are dependent on the very altruistic nature of the 50mil earners who all got there under their own power and without any systematic abuse, grifting, or generational wealth to get them going. Won't anyone think of these poor folks? They'll now have 49x0.099 mil less yearly income to charitably pay their indebted employees bonuses.
> Someone making a million will barely feel it.
Easy for you to say.
> Objectively, anyone making $50 million should feel it a lot and be taxed heavily.
How is that objectively true? Why should they?
Well the tax is on income over $1M so yes someone making $1M will pay nothing. Technically that's easy for anyone to say, assuming they actually read the article at least.
The word you’re looking for is “subjectively”, or “in my opinion”.
Maybe that's a good thing? I miss the Seattle of the 2000s that was less overflowing with tech and more a mix of incomes.
I for one support the tax. The dichotomy of being a liberal state with a regressive tax structure needs to stop. Slippery slope argument aside this tax is a good first step. Income tax while imperfect seems to be the best system we have to tax the rich and not the poor.
The rich don't tend to have much income to tax (proportionally). The bulk of their wealth increase per year comes from capital gains.
Washington also has a capital gains tax now, 7% on long-term capital gains above $270k, and 9.9% on gains above $1 million, exempting real estate and retirement accounts.
I don't understand how anyone in good conscience can vote against this tax. As a reminder, this tax does not affect income under a million US dollars. From the article, if you earn a dollar over a million dollars, you owe 9.9% so you need to pay a dime in income tax.
The first set of US federal tax rates when it was allowed by the 16th amendment with adjustments for inflation on the the right:
The point being that once you allow the tax, it has a tendency to become more and more. It's much easier to raise income tax than establish it.I don't have a dog in this fight and if it's what the people of Washington want, so be it.
(edited for formatting
This is important context, and people forget that "taxation without representation," which started a war, was about a tax of about 1.5%.
Why is it when people are against a tax they typically talk about it in terms of historical context, unintended consequences, interstate migration, while people in favor of the tax almost exclusively appeal to emotional blackmail statements like "paying your fair share" (when something like 40% of the country pays no federal income tax whatsoever) or "good conscience" or assume anyone with any money got it through borderline illegal activities?
It took 100+ years of horribly repressive policies to start that war, including far worse tax schemes including things like straight up requiring burning half your tobacco or only selling it through monopolized channels that required paying tariffs to England before it could be re-exported anywhere else. Policies that resulted in mass starvation and death, sometimes resulting in failed rebellions (like Bacon's). So there's history of Americans being willing to spend decades starving to death to pay high taxes or economically destructive policies before they will successfully rebel against it.
Well we're decades in at this point.
I think you can in good conscious be opposed to new taxes. This tax is being introduced in a way that only affects the most privileged portion of the population but that's how the Federal income tax was introduced many years ago too. People who oppose the tax are looking forward to a future where the tax burden in Washington might be as oppressive as it is in California or New York.
States with massive, growing populations? Must not be as oppressive as stated.
Both California and New York have shrinking populations according to Wikipedia. And even if the estimates are wrong and they do have growing populations you still need to consider the fact that the Southern states are growing much faster.
Federal power is shifting south. If you like the politics of New York and California that's a long-term problem that needs to be resolved.
California has a "Neutral Decrease" in population and New York has a "Neutral Increase" according to Wikipedia. I'm gonna go with the 5 year trendline, which is up.
> And even if the estimates are wrong
Nice, covering all your bases.
> Southern states are growing much faster
Yeah, smaller states grow faster than larger ones.
I'm talking specifically about this phenomena[1]. I wasn't agreeing with the GP that these policies are "oppressive". I'm only informing you that these states are not experiencing "explosive growth" and the downstream effects of that fact.
1. https://thearp.org/blog/apportionment/2030-apportionment-for...
You'll have a much better time here if you take others' arguments with the assumption that they're made in good faith.
CA and NY are both expected to lose 4 seats next census, based on current trends. Saw this in an HN submissions yesterday about gerrymandering and how it might be a losing strategy for Dems looking out into the 2030s.
California and New York are the opposite of growing, and Washington thus far hasn't taxed anyone, so this statement makes no sense
Let's not quibble over the population growth rates of these states which provide welfare to everyone. Instead, let's talk about te tax base which provides this welfare and you'll notice that tax base does not grow nearly as fast and might in fact be shrinking - actual reliable numbers are hard to come by. How many of the newcomers to these states will end up being net providers to the tax base and how many will end up being net consumers? If you provide more benefits, more people will come. If you raise the net tax rates to provide those benefits to a growing number of consumers more net payers will leave. The total population may remain the same or may even grow but a larger fraction of that total population will never become net providers, remaining net consumers. What is the end game here? This is a question which has already been answered in many European countries with similarly structured social benefit systems. There the end game is called 'austerity measures', the reduction of state services to keep the state from getting even deeper in debt.
A cynical take on this situation is that the current crop of politicos in these states launch these ever-increasing benefit systems in the knowledge that this attracts voters from a few segments of the population as well as 'future voters' who will move to these places because they promise to provide them with (more) benefits than their current domiciles. Once the costs of the whole system become too high the system will no longer be tenable but the current crop of politicos will by that time have moved on to greener pastures, probably golf courses in some nice shielded and guarded areas. The 'other party' will end up winning the elections after having been out of power for a long time but this will end up being a Pyrrhic victory since they inherit a state on the verge of financial collapse. OK, they say, "we need to fix this mess and the only way to achieve that is to cut spending because we can not raise taxes above where they've been raised by our predecessors" - in fact this promise was one of the factors which made them win the elections. They do just that, lower benefits, lower some taxes - but not that much because they do need money to pay off all those debts and all the running contracts entered by their predecessors - and they manage to pull the state away from the brink of financial ruin.
At the next election round the party which put in place all those benefit programs portrays the current incumbents as "inhumane penny-pushers who only want to appease the rich" with organised - and paid - protests by all the right groups, long media campaigns about the threat of *-ism and *-phobia, the works. The current incumbents try to defend their record stating that they're just cleaning up the mess left by the previous leadership who are financially irresponsible spendthrifts but that message is not nearly as emotionally appealing as the video clips of poor single mothers who now have less to feed their poor children, about the cancelled school trips because the state no longer had the funds to pay for them.
The elections are won by the party which put in place the programs which nearly bankrupted the state, the new leadership undoes part of what the previous leadership did to save the state from financial ruin and as a result the process is set to repeat in a few years. Enough years at least to make sure they get to retire to greener pastures, probably golf courses in nice shielded and guarded neighbourhoods. They don't have to worry about such silly things as financial responsibility, they know they can get the other side to clean up the mess and they also know they'll be able to use the measures the others need to take to clean up the mess to launch a campaign against them which is nearly sure to regain them the leadership in one or two election cycles.
As the label on the shampoo bottle says: rinse, repeat.
Washington is a one-party State where not even Democrats trust the Democrats on tax issues.
Many Democrats object to it in principle because the new income tax is unconstitutional on its face; they support an income tax but ignoring the constitution because it is inconvenient and blocking people from voting on it is gross. The supreme court in Washington won't be any help, they are have an unfortunate track record of rubberstamping whatever the party wants.
This is in addition to many years of tax increases exceeding growth, the regular introduction of new poorly designed taxes that are simultaneously wasted and expanded with no accountability.
Many Democrats fully expect a rugpull is coming because that is the recent history in Washington. Regressive taxes are never lowered or removed, they just stack new ones on top of them.
> I don't understand how anyone in good conscience can vote against this tax.
For all the reasons you can vote against any tax.
Taxation is not the default. The justification always has to come from the proponents.
And I say this as a pro tax person who has voted for more taxes and lives in a high income tax state.
I say they get plenty of money already. The amount of fraud and grift is incredible anytime tax money is being spent.
Defense contractors, road works, entitlement fraud, politicians' unexplainable wealth, college tuition, learing centers, and the list goes on.
Manage the money properly.
The time to talk about these things is when we spend them, not when we need to pay for them though.
Logically speaking, the solution is clear going forward:
1. Higher taxes 2. Reduced government spending
However, we are not willing to have these difficult conversations and are focused on appeasing people.
Also, lets put things in context -- here is a summary from Claude. Over the last decade, federal income taxes went down for nearly everyone in rate terms, but the percentage benefit was larger for high earners and corporations.
Another option is to increase the tax base. Washington has had high population growth this century which has been great for revenues.
Disagree. Why trust someone with more money when they haven’t proven they can avoid squandering what they have?
It’s a beachhead that will expand. The history of income taxes shows that. Once you have established an income tax, the next fight will be to raise it, or lower the income limit, and over years, it will end up covering everyone. The government is incentivized to over spend and then try to dig their way out be expanding taxes, but there is a limit to what you can tax.
You want people to vote for a millionaire tax tie it with a constitutional amendment that requires a higher vote bar to ever increase it and have all numbers automatically inflation adjusted
If that means curbing the comparatively high consumption taxes in WA, then it's for the best. The lowest income brackets pay an outrageous percentage of their income to taxes compared to the upper brackets because of them.
> If that means curbing the comparatively high consumption taxes
“Most of the roughly $4 billion a year the tax would bring it would be devoted to the state’s general-fund budget to pay for government agencies and services. A 5% chunk would be earmarked for early education and child care.
Democrats also say they’d use some of the money to fund free school lunch and breakfast for all kids in K-12 schools, though Republicans pointed out that money is not legally earmarked in the income tax bill.
ADVERTISING Skip Ad Skip Ad Skip Ad The bill would also exempt more businesses from paying the state’s business and occupation tax. It also would eliminate the sales tax on purchases of diapers, and personal hygiene products such as toothpaste, antiperspirants and shampoo.
It also would expand the state’s Working Families Tax Credit, which sends annual rebates of up to $1,300 a year to lower-income working families. Ferguson had pushed for the expansion of the program and said the revised bill would make 460,000 households eligible for the payments.”
TL; DR It’s not materially curbing the sales tax.
What about this law makes you think any of the revenue is going to be used to curb consumption taxes? Because that's not what any of this money is being earmarked for. Most of it is basically a government slush fund.
There are no plans to reduce consumption taxes in any meaningful way. This is one of the reasons so many Democrats are against it.
This new tax regime makes no attempt to improve the tax structure or reduce taxes for anyone.
> I don't understand how anyone in good conscience can vote against this tax
Then you have intellectual blinders on. There’s good reasons to have broad based taxes instead of singling out rich people. In Sweden, for example, the top tax bracket kicks in at 1.5x the median income. In Germany, the second highest 42% bracket kicks in around 70,000 euros and the top 45% bracket kicks in at 277,000 euros.
None of the countries that American liberals admire in terms of having a robust welfare state adopt a policy of “soak the rich.” The have policies based on solidarity where everyone in the top half or third take on a heavy tax burden.
The income disparity between Germany and California is gargantuan as you approach the top percentiles.
In the 1%, average income in Germany is 272k usd. In California, it's north of 1mil usd. At 0.1%, it's 1.1 mil usd in Germany and 3.2+ mil in California.
The distributions between high and low income earners are much flatter in Germany because it is harder to abuse the system to get to such salaries. No so in America. Hence Germany also does not need such aggressive taxation schemes as what's proposed (they also have way more flat taxes as well).
You’re comparing to California, but we’re talking about this proposed Washington tax. California’s tax schedule is actually much more like Germany’s than this proposed Washington income tax.
In California, the big jump comes at $72,000, where the 9.3% rate kicks in. The $742,000 rate is only a little higher, at 12.3%. That’s similar to Germany where 42% kicks in at 70,000 euros (top 15%) and the top rate is only a little higher at 45%.
Those are numbers. They are not reasons. Modern social democracies are just a capitalist compromise. They are still capitalist dominated. Hence why these Euro social democracies have rich people.
Bourgeoisie blinders are on.
If you are truly incapable of even imagining the objections (that you might disagree with!) you should probably get out of your bubble and expand the content you consume.
> As a reminder, this tax does not affect income under a million US dollars.
For now. The legislature refused to add an amendment forbidding the threshold from ever being lowered to guarantee that it only applies to a million and above.
The way the Washington state constitution works is income is treated as property, and property taxes must be uniform.
So this bill isn't just a millionaire's tax, it's a state-wide income tax of 9.9% with the first million exempt.
It's a good thing, for now, but it does set precedent and the fact they refused to add language to the bill forbidding that exemption from every being removed or lowered is telling. The income threshold will eventually be lowered.
> The legislature refused to add an amendment forbidding the threshold from ever being lowered
Wouldn't such a change have to be made by the same legislature with a similar majority? Or was this some sort of constitutional change that required a more qualified majority, after which the threshold can be changed more easily than this could be introduced?
The WA constitution doesn't seem to have anything to say on income tax, just a lot about property tax?
> Wouldn't such a change have to be made by the same legislature with a similar majority?
Yes. The legislature voted on the additional language and it did not pass.
> The WA constitution doesn't seem to have anything to say on income tax, just a lot about property tax?
Washington state treats income as property, and property taxes must be uniform and flat within a specific property class.
Technically, this law does run afoul of that because having an exemption makes it not uniform, and per the state constitution property tax is capped at a total aggregate levy of 1% per year.
The state will use the argument that this is not a property tax, but an excise tax on the privilege of earning high income from the state's economy. They used a similar argument for the capital gains tax, and won in the WA supreme court.
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Republicans in Harris County sold voters on the Beltway 8 toll road in the 80s based on the idea that when the bonds were paid off the tolls would go away.
Clever hack: they never stopped issuing bonds.
At least they've made it really easy for them to take your money. You don't need a toll tag, they'll scan your license plate, mail you, and charge you extra for mailing you. No coins needed.
Living in Portland I meet SOOOO many tech people that live across the river in Vancouver just because of the income tax - WA has none - OR has a healthily number of them (5 lines worth of various taxes show up on my paystub).
Bigger impact im sure will be Seattle but the impact to Portland is not insignificant. I'm sure the WA tax would be less than the OR one though so I don't see the moves stopping, but probably akin to whats happened in CA where people moved to NV or AZ to escape some of the taxes (not a significant number but ive met enough to wonder). As people retire, they moved away to those places as they think they will be taxed less
On Nextdoor here (Puget Sound area but on the other side of the water from Seattle) there are a lot of people who (1) post a lot about how property taxes and gasoline taxes are too high, (2) complain about any cuts to government services, and (3) oppose any effort to tax income even if the threshold is way way way higher than anything they or anyone they know will ever come near on the grounds that at some future time the threshold could be removed.
> (3) oppose any effort to tax income even if the threshold is way way way higher than anything they or anyone they know will ever come near on the grounds that at some future time the threshold could be removed.
This is exactly what happened with the national income tax, which initially only applied to <1% of the population. Of course the snare was set, and after WWI broke out the snare then sprung. It took less than a decade to go from <1% to >33% of households.
Washington State’s constitution limits a tax like this to no more 1% and requires it to be uniform; this law meets neither requirement.
I am uncomfortable that supporters of the income tax are so unbothered by it being unconstitutional. So few are insisting we amend the constitution to allow or not do it at all, on the grounds that violating the constitution (or flexibility construing it to match our desired ends) is bad.
Until there are severe personal penalties for an elected official violating their oath of office with regard to unconstitutional laws, they will simply ignore it. This is doubly true in formerly purple but now uniparty states like Washington where the Supreme Court is completely beholden to the party elite.
We have the same problem at the federal level in part because SCOTUS will not or cannot provide input or warnings on proposed legislation. How many federal laws would simply not exist if SCOTUS got a veto before it went to the President for signing?
Doesn't it just limit property tax to 1% while saying nothing about income tax?
Is it this?
> the aggregate of all tax levies upon real and personal property by the state and all taxing districts now existing or hereafter created, shall not in any year exceed one percent of the true and fair value of such property in money
Asking an AI (I know, I know) it suggests "Courts have ruled that income is property" which to me sounds like ruling up is down. I mean everywhere that has property tax separate from income tax or only one or the other would object...
There was initiative 2111 which seems it wouldn't even be necessary if income tax was against the constitution to begin with? Also I assume this law basically nullifies initiative 2111?
Washington's constitution says: "The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership". That is extremely broad, and there is 90 years of precedent affirming income is include here as something intangible and "subject to ownership."
In principle it sounds like a reasonable idea but the obvious problem is that people can become domiciled elsewhere, or structure their income to avoid this. It would be interesting to know what's been planned to mitigate that.
how can i structure my income to avoid income tax? asking for a friend.
A popular technique is to be compensated in options. Don't exercise the options, but take out loans against them.
This is incredibly tech-specific, where most workers make a small fraction of $1M a year.
Physicians don't get options, attorneys don't get options. This is a fairy tale answer not grounded in reality.
Vote with your feet.
It is very easy politically to target those over the top 2-5% of income, but you better believe those tranches will be expanded in the future.
I think I don't like income tax as it disincentivizes labor and also makes it harder for working people to build up wealth. Making a million a year sounds like a lot, but who knows how long someone might be making that kind of money? Meanwhile already wealthy people are mostly untouched. Would rather see majority of taxes come from corporate taxes and capital gains.
> but who knows how long someone might be making that kind of money?
Would you mind saying a little bit more about your thinking here? A million a year doesn’t just sound like a lot, it is a lot. FRED reports the median income in Washington at just shy of $100,000 [0]. We’re talking about households that make 10x the median.
Also, what does it matter the length of time they earn it? If they don’t earn more than $1m, they don’t pay it, right?
[0] https://fred.stlouisfed.org/series/MEHOINUSWAA646N
There are plenty of ways that you might make a large income in a single year like selling a business you have spent years or decades building up. Your "income" for that year might be several million that year, but it took you years to "earn" it. In general I don't think taxing people that actually have to work for a living is a great thing, all you are doing is prolonging the amount of time they have to work to save enough to either retire or start their own business. I would prefer to shift taxes to cap gains (why do long term cap gains rates exist???) and corporate taxes as well as sales tax.
> If they don’t earn more than $1m, they don’t pay it, right?
Correct, and for the times they do earn more than $1m, with this tax they are only taxed on the income over $1m and pay nothing for income of $999k and below. If you make a million and one dollars, you owe 10 cents.
How do you deal with a corporation just moving their HQ to another state though? It is hard because you cannot just say oh we should only have a federal income tax because then states would just rely on the federal government for funding. At the same time the wealthy people/corporations can easily move to another state leaving the middle class to make up for lost revenue.
You deal with it by competing with other states, which is what happens now, and what is intended based on the very architecture of the federal and state governments. This will make Seattle less attractive to the type of person who makes a LOT of money almost entirely from W2 income. Private practice physicians, specialty attorneys, that kind of thing. "Working people" who happen to be very highly compensated.
If I was in that type of role and I could routinely expect to make $1.5-$2M/yr it would absolutely make me consider places like Florida or Texas more, especially with the marriage penalty mentioned in the article (although I'm curious how many households have two people both earning more than $1M/yr).
You just... deal? You think about it then make a law in a way or another, instead of this decision paralysis. I also assume all states will think about it (rather sooner than later) so it's all a matter of concern and will - if there's one, because in a world ruled by corporations and billionaires, if it's all left to them, the only ones paying for roads, military or community services will be you, me and our likes (I assumed there aren't many billionaires on HN and also won't be any time soon). The tax breaks trend seems to only increase, right?
WA has been raising taxes for some time, but the problem I care about the most - the prevalence of drugs in high schools - is getting worse. I voted with my $ and out of WA.
To where?
We settled on Canada for their decent PISA scores. Singapore would have been the top choice, but it has very high immigration barriers.
Are drugs in high schools really a problem in WA? Where are you in Canada and how does it compare?
And the timing is very interesting of the CEO of Starbucks moving out of Washington.
WA = Washington State (USA), not Western Australia
Legally this is quite fascinating.
The state constitution is quite strange wrt. taxes:
https://law.justia.com/constitution/washington/constitution-...
There is a school of thought that the powers should be enumerated in the constitution. But this is not in favor.
Instead this argues that Culliton the ruling that classified income as property was incorrect. And once that door is opened saying that the claims within the existing constitution only apply to property and finally that there is a strong presumption of constitutionality.
Seems like a gauntlet. But it seems clear that given the composition of the supreme court that they will pass the gauntlet.
A constitution is but paper. It does not hold back the motivated.
People are worried about billionaires moving to another state as if it’s a bad thing
Progressive taxation is the most efficient and fair system of taxation. America was it's most prosperous when the top federal income tax topped 90%, 1944-1963. Modern wealth consolidation makes this structure even more logical.
I'm going to assume that you mean progressive INCOME taxation is the most efficient and fair...
Classically the ranking is :
Everyone except the people uncritically repeating this political talking point agrees that a 90% marginal rate is very far on the right side of the Laffner curve.
The point of a 90% marginal rate isn't to increase tax revenue, it's to discourage high incomes that are economically and socially harmful. If you don't believe that's a problem then policies to address it won't seem logical.
Is someone earning $1.1M more economically or socially harmful than someone earning $980,000?
Even if it is, and even if your point is true, that's not what the GP said. They said taxing rich people a higher percentage than poor people is "more efficient" (whatever that means in this context) and a "[more] fair system," and immediately followed it up with the 90% anachronism.
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As someone who lives in WA, I despise how bad any state government run program here is. Literally it took me 3 months to get a SSN and I couldn’t get hold of anyone. Also on top of this tax, they have this care tax which also taxes 1% of your income for “long term care”.
I would love to pay my taxes if I had seen reasonable outcome. So far all I see is a corrupt state government with no accountability and transparency.
Also isn’t this illegal? I thought the state constitution says it is illegal.
> Also isn’t this illegal? I thought the state constitution says it is illegal.
The state constitution treats income as property, and states that property taxes must be uniform.
So the bill is actually a state-wide, uniform 9.9% income tax but with the first million dollars exempt.
It is expected to be challenged almost immediately in probably a long court battle so we will see what the arguments are. I'm in support of the tax, but I'm a bit miffed that they refused to add language that prohibited lowering the threshold.
> I'm a bit miffed that they refused to add language that prohibited lowering the threshold.
Well that's because the entire point of this is just to get a tax on the books so they can later increase the amount and lower the thresholds when all of a sudden this $4B windfall isn't enough.
This is absolutely going to be a lions-eating-faces situation a few years from now when we're talking about a 14.9% tax with a $250,000 exemption.
I'm also genuinely curious how the exemption doesn't by definition make it no longer uniform. How does any exemption at all not violate the uniformity requirement?
> I'm also genuinely curious how the exemption doesn't by definition make it no longer uniform. How does any exemption at all not violate the uniformity requirement?
That's the part that I'm assuming is going to get fought out in court when this is inevitably challenged. The state will likely try to argue that it's not a property tax, but an excise tax. They used that argument in support of the capital gains tax, and won (Quinn vs. Washington State, 2023), stating that the tax was an excise tax on the privilege of selling assets. The WA supreme court ruled that the tax was a permissible excise tax and not a property tax, so did not run afoul of the constitution.
They'll likely argue that the millionaire tax is an excise tax on the privilege of participating in the state's economy.
Alternatively, they may try to define high income as a new class of property. Property taxes only have to be uniform within a specific class of property, so if they create a new class, then it would be uniform for that class.
Should be an interesting court battle.
> Alternatively, they may try to define high income as a new class of property. Property taxes only have to be uniform within a specific class of property, so if they create a new class, then it would be uniform for that class.
If nothing else, from a rhetorical/argumentative perspective I am actually really interested in hearing a coherent argument that your 1,000,001st dollar is a difference class of property than your 999,999th.
Do you have anything specific you want the money spent on?
Or is it just a punish the rich type of support?
Yes. Washington desperately needs infrastructure improvements, our state has not kept up with population growth, especially in areas outside of the Seattle metro. Go north into the Skagit valley or Whatcom county, we have two lane roads over capacity with many fatal accidents each year, power lines still above ground that get taken out year, after year every time we have a wind storm (happens a lot, especially in the fall).
There's a reason it's a long standing joke that our state bird is the traffic cone.
Near where I live there's still remains and pot holes from a landslide a year ago that has not been cleaned up or repaired.
I'm not a "punish the rich just for the sake of it" type person, but I do believe that you shouldn't get to move here, use the state's economy to extract wealth, and then not contribute back into it's development, infrastructure and people.
Even if you don't buy the "job creator" argument, if you're bringing a business and "extracting wealth" you're not earning that wealth as a W2 employee, so this tax won't apply. The best example I can think of for >$1M W2 earners are highly specialized physicians, and maybe some even more specialized (and prolific) attorneys. Aren't they already contributing a lot?
> The best example I can think of for >$1M W2 earners are highly specialized physicians, and maybe some even more specialized (and prolific) attorneys. Aren't they already contributing a lot?
That depends on how much they are consuming within the state and paying sales tax. If they are W2 earners, they aren't contributing via B&O tax like businesses do, and so essentially they just contribute the same as anyone else in the state, via all the other regressive taxes, just proportional to how much money they spend.
> they aren't contributing via B&O tax like businesses do
Well they're not businesses so that makes sense.
> "just" proportional to how much money they spend (emphasis mine)
Yeah, which for most of them is going to be a lot more than someone earning a fraction of what they earn, so they do actually contribute more in absolute terms, even if for some reason you think that their contributing less on a percentage basis is for some reason bad.
Good luck finding someone making $2M/yr who isn't spending a lot more in the local economy than someone earning $40k/yr.
> As someone who lives in WA ... it took me 3 months to get a SSN
States don't issue social security numbers. Your complaint is with the Feds.
Not to detract from your point, but aren’t SSNs handled by the federal government?
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