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SEATTLE, May 26.—Pollster Scott Rasmussen says the most striking trend in national political races is that Americans trust government less and less. That's bad news for the party in power, whichever one it might be, and it’s looking tough for Democrats this year, he said. But the problem runs far deeper.
via www.washingtonstatewire.com
Good coverage of last night's keynote address at the Washington Research Council's 78th annual dinner.
Yesterday I posted on income taxes and Initiative 1098. Today, the Puget Sound Business Journal ran my column on the proposed income tax on the rich (subscription required). Here's some of it.
...the initiative doesn’t do much to relieve the burden on the poor. Instead, it perversely pursues “equity” by increasing the drag on the rich.
...with the rates and brackets not cemented in the state Constitution, lawmakers are free to adjust them at will. That’s been the inexorable drift since the 16th Amendment made the federal income tax a permanent feature of our system in 1913. Initially, less than 1 percent of the country paid the tax.
...Before joining [the] Heritage [Foundation], [Curtis] Dubay prepared the Tax Foundation’s Business Tax Climate Index used by Forbes magazine in its “best states for business” rankings. Largely because of the absence of an income tax, Washington routinely comes out near the top on the rankings.
If the initiative were to pass, Dubay says, “With a 9 percent rate (Washington’s ranking) would plummet.”
Taking a wise course, New Jersey Gov. Chris Christie yesterday vetoed an increase in that state's "millionaires tax." Voters here will be inclined to do the same in November, should 1098 qualify for the ballot.
The meeting begins as 7:00 p.m. Reception begins at 5:30.
Contact the WRC for ticket
information.
Here's the story in the Spokesman-Review.
And the press release on the AWB website.
“Taxes and increased costs on business are the top issue of concern for our members right now,” said AWB President Don Brunell. “This fall’s elections will undoubtedly be about the impact of taxes on families and businesses. Our board felt strongly enough about this measure to provide an early endorsement, in the hopes of raising the visibility of the issue among voters.”
Makes good sense.
I share some of my views on the I-1098 high-earners income tax proposal in tomorrow's Puget Sound Business Journal and will post it when it's published.
The Washington State Labor Council is an enthusiastic booster of the plan. Having seen the union lobbyists fight to eliminate job creating tax incentives over the past few years, I was astonished (not really) to see this in the labor council online newsletter.
Initiative 1098 includes provisions that will generate thousands of jobs by freeing small business from onerous B&O taxes...
Wow! That's a lot of power from a $4,800 tax credit that affects the state's smallest businesses. While backers claim it will eliminate the B&O for 80 percent of the state's businesses, it represents less than 10 percent of B&O tax collections. Unlikely that that will generate "thousands of jobs." And I doubt even the labor council believes it.
A more realistic view of what's at stake might be seen by looking at Rhode Island, which is considering lowering its high marginal income tax rates.
Aimed at fighting the perception that Rhode Island’s tax climate is unfriendly to business, the plan would sharply lower the state’s top individual income-tax rate...
One of the key goals is to drop the personal income-tax system’s top rate of 9.9 percent, the sixth highest in the nation, said Gary S. Sasse, former state revenue director. Most people wind up paying Rhode Island income tax at rates as low as 3.75 percent; the 9.9 percent rate generally kicks in only when one’s Rhode Island taxable income exceeds $373,000 or so.
Still, national surveys tend to focus solely on the 9.9-percent rate. As a result, Rhode Island often ranks among the nation’s highest-tax states.
The top rate under 1098 would be 9 percent, which would put Washington near the top, sending the "unfriendly to business " message Rhode Island hopes to shed. And how are income tax states doing at this stage of the recovery? Not so well, reports the Wall Street Journal.
April is the biggest revenue month for many states because it is when they collect a large portion of income taxes. The month's collections came up short of expectations in California by 26.4%, or $3.6 billion; in Pennsylvania by 11.8%, or $390.1 million; and in Kansas by 10.2%, or $65.3 million.
Enough said.
In this morning's column in the Everett Herald I write about the state labor council's efforts to punish Democratic centrists through the endorsement process and campaign funding. The unions have every right - heck, they'd probably say they have an obligation, to back candidates that line up with them on their legislative agenda. I think they're a little tone deaf this year. And I believe the effort will fail. Please read the column and let me know what you think.
To read the WSLC legislative scorecard and the Bender column I cite, click here.
Although we stream Olympia Business Watch to this site, I wanted to flag this post from AWB president Don Brunell to your attention. Don's responding to the decision of Janicki Industries to invest in a major new manufacturing facility in Utah. The Skagit Valley Herald reports the decision.
Janicki Industries plans to invest $19.5 million in a new manufacturing facility in Salt Lake City, Utah, the Sedro-Woolley company announced today.
The facility will employ 50 people and support the company’s work on the F-35 Joint Strike Fighter, a press release said.
Brunell comments:
In talking with Lisa Janicki, the company's chief financial officer and Association of Washington Business (AWB) board member, costs are a very important consideration for the company. What's at stake here is not only the current costs of doing business in Washington, but what lies in the future.
He then looks at data from the WashACE Redbook. Read the post. Then ask legislative candidates appealing for your vote what they'll do to help employers expand and create jobs in Washington.
The Seattle Times editorial board looked to California this morning and noted uncomfortable parallels with Washington.
Democrats in California resist cuts. Instead, they talk up taxes.
They did that here, and our Legislature has just raised taxes by more than $800 million for the year beginning July 1. In addition, an effort is under way here for a personal income tax.
About that income tax ... this is astonishing:
California has a personal income tax. Its top tax rate of 9.3 percent kicks in at $47,055.
The initiative proposed here has a top rate of 9 percent and a higher income tax threshold - at least initially. I suppose that's what they promised in the Golden State at first, too.
The Times sums it up correctly.
In the Great Recession, we have yet to reset our expectations of government to fit the resources available. If we do not do it, this state will follow the Golden State in a race to the bottom.
Speaking of tax increases, the Washington State Budget and Policy Center issued a new report asserting that Washington's tax increases fell below the U.S. average. And then they present data that - to my eye at least - appears to directly contradict the assertion. Maybe someone out there can help me understand it.
Here's the line from the Schmudget blog:
In Washington State, taxes were increased by about 3.6 percent of total state tax revenues.ii Even without including tax actions taken in other states this year, this falls below the national average. On average, states increased taxes by about 3.8 percent nationally.
Then there's this from the report:
Washington State joins 20 other states that have increased taxes by more than one percent since the start of the recession. At least 10 of these states increased taxes by more than 5 percent.
They also provide a nice map showing the 50 states color-coded to show which raised taxes by how much. But what I don't get is this, if 30 states either did not raise taxes or raised them by less than 1 percent, how is a 3.6 percent tax hike below the national average? Are we just averaging tax hikers?
Seems to me they've benchmarked Washington against the wrong group.
The Tax Foundation today released its analysis of state revenue changes for 2008-2009. Washington ranked 31st, posting a 9.1 percent revenue loss. (Number 1 Wyoming gained 13.9 percent in revenues.) Follow the link to the tables.
This is striking: Nationally, property taxes increased 3.6 percent, individual incomes taxes dropped 12.5 percent, corporate income taxes fell 23.1 percent, and the sales tax declined 5.5 percent.
Meanwhile, the push for a state income tax continues here, with Austin Jenkins reporting on initial campaing contributors.
The American Legislative Exchange Council has released its latest Rich States, Poor States report. Again, as is common, the authors ding states with progressive income taxes. Washington places 24th in Economic Outlook and 14th in Economic Performance. The economic outlook ranking includes two income tax measures. If the high-earners income tax passes, the state's ranking would plummet.
While Utah, the first place finisher, has an income tax, it's imposed at a 5 percent flat rate, which analysts find preferable.
Earlier this month, Gov. Gregoire signed into law the 2010 supplemental budget. The Washington Research Council just published a 9-page policy brief analyzing that budget.
Although we don't have a detailed outlook for the sustainability - word is the state will present one next month after the revenue forecast - there's no doubt about the significant risk associated with this spending plan. Still, the state's top economist, Arun Raha remains confident that - barring unwelcome surprises - the economy is in recovery.
"What we see now is the recovery is gaining momentum," Raha said, adding that things have improved enough that the chances of a double-dip recession in the fourth quarter of this year -- something he warned about -- has now diminished.
"I'm pretty confident that we are on the right track," he said.
The recent collections report, while down slightly, would seem to confirm that. The Senate Democrats blog notes the mixed message.
Here's the good news. After adjusting for legislative changes and non-economic factors, the month produced the first year-over-year revenue growth since September, 2008...
The bad news is that since the February forecast, revenue collections have fallen $69.3 million short of projections.
The News Tribune finds it mostly good news.
Beyond the challenges associated with the global and state economies, there are the risks stemming from the November election. The Associated Press reports a possible initiative to repeal some of the new taxes legislators imposed to support their spending plan.
Things could get a lot more complicated before next January.
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