I & I Editorial BoardWhen Washington lawmakers were debating the state’s first-ever income tax, Gov. Bob Ferguson said the 9.9% rate on incomes above $1 million “represents historic progress in rebalancing our unfair system.”
And at first blush, you can see why Washingtonians might agree with him. The new tax promises, after all, to raise $3.7 billion from fewer than 0.5% percent of the state’s taxpayers, with the money going toward such wonderfulness as education, child care, and expanded low-income tax credits.
The middle-class families in that state are in for a rude awakening.
First, the tax isn’t likely to collect anywhere near $3.7 billion, as the wealthy figure out ways to hide their income or just pack up and leave for places that don’t treat them like slot machines.
That’s been the case with other “tax the rich” schemes. A paper published by the National Bureau of Economic Research found that the revenues from California’s 2012 tax-the-rich scheme generated about half as much new revenue as expected.
Already, Starbucks founder Howard Schultz announced plans to relocate from Washington to Florida (which has no income tax).
As Nathan Goldman put it in Forbes, “The question now arises of whether more will follow and if Washington is equipped to financially handle a mass exodus of high earners out of its state.”
Where is the state going to go to make up the shortfall? History has the answer.
When the federal government first imposed an income tax in 1913, it was very much like a millionaire’s tax.
The law included a $3,000 personal exemption, which is equal to roughly $100,000 today. And even then, the rate was a mere 1% up to $20,000 (or $670,000 in today’s money). And the seven tax brackets topped out at 7% on incomes that in today’s dollars would exceed $17 million.
Just five years later, the personal exemption had been cut down to $1,000, the lowest bracket had been hiked to 6%, and there were 49 more tax brackets, with the top one set at 77%
Federal income tax rates and exemptions have bounced around ever since, but we’ve never come close to returning to those initial levels.
And each time the top rate was hiked to “soak the rich,” it was used as cover to raise taxes on the middle class. When George H.W. Bush raised the top rate in 1990, he also raised taxes on things like beer, cigarettes, and gasoline. Bill Clinton and Joe Biden performed the same trick when they raised taxes on the rich. In contrast, when Ronald Reagan, George W. Bush and Donald Trump cut the top tax rate, they also slashed taxes for the middle class.
The story is much the same in states that imposed income taxes on the promise that they would be modest and would mainly target the rich.
New York’s initial 1919 tax rate, for example, was 3% on incomes over $50,000 – which effectively made it a millionaire’s tax in today’s dollars. Today, New Yorkers pay 4% on income above the $1,000 personal exemption, and 9.65% on incomes above $1 million.
Once in place, income taxes inevitably start to metastasize after lawmakers realize how much money is there to be had.
Gov. Ferguson might think the state’s new income tax is “historic,” but Washingtonians will soon find out they’ve just been taught a very expensive history lesson.
— Written by the I&I Editorial Board
When you tax something, you create less of it. Improvements to the Starbucks founder’s mansion will now be going to Florida contractors.
Progressives are economic idiots. Marx was a loathsome individual in thought and deed.
Thus the original credo: “The only sure thing in life are death and taxes.”
Now starting 5 years after the income tax was created, we have the amended credo: “The only sure thing in life is death, taxes, and a growing tax rate.”
This horrendous uptake, where now many young elected as mayor of New York City the anti-capitalist, socialist and jihadist- with- a- smile, Zohran Mamdani, is what happens when you take courses of economics, capitalism and civics out of the public school system.
You get publicly funded thievery!
Gov’t is like mold. As long as it has food(money) and tolerable environment, it will grow. People also need a tolerable environment, so the only way to control gov’t growth is to reduce its food. Resist tax increases!
No, it\’s not just suckers, it\’s also stupid, lazy, envious, takers who
just don\’t get it that most wealthier people didn\’t get wealthier by
being as stupid as they are. When you attack wealth, the wealthy
leave. It\’s that simple. But it\’s apparently to complicated for
the stupid, lazy, envious, takers. And for Dem politicians as well.
it’s always been that way and the politicians rely on that to get votes. lets get the trailer park trash angry at the working class for having money by promising to give it to them, that’ll get their vote. it works every time.
It seems these people don’t realize that “the rich” simply pass any increased cost on to those who keep mindlessly supporting “taxing the rich”.
In a very real sense, business does not actually pay taxes. Taxes are a business expense, and are necessarily passed to the consuming public in the form of higher prices if the business wishes to be profitable.
A moronic public thinks that increasing taxes on landlords, or example, will not cause its rent to rise. Ditto for every other product on the market.
The real target is the equity in your home by taxing all your assets at market value. Once this scheme is perfected for “billionaires,” it will metastasize to include millionaires and then thousandaires.
Property taxes are nothing more than legalized plunder. The justification is straightforward: the state has the power to steal, so it steals.
when have you EVER seen a tax go away? …. crickets
when have you seen a tax grow and grow …. every morning you wake up.
libs just love spending your money don’t they.
Taxation that results in increased government dependency cements people into a life of poverty that cannot be escaped while it puts the entire country on a journey toward communism. No matter who pays, we all suffer.