Bill Gates Sr. leading Wash. income tax initiative

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by DEBORAH FELDMAN / KING 5 News and Associated Press

NWCN.com

Posted on April 21, 2010 at 5:42 PM

SEATTLE -- Bill Gates Sr. is leading a new initiative campaign for a state income tax on wealthier residents, saying Washington's current tax system is unfair and doesn't supply a steady stream of money for important state programs.

Wednesday's announcement sets up a bruising political fight in the fall—if the measure can make it onto the November ballot. Organizers will need to collect more than 240,000 valid petition signatures by July 2 to qualify Initiative 1077.

Gates, father of the Microsoft Corp. co-founder, is a longtime supporter of tax reform in Washington. He said the issue has been studied extensively without enough action.

"So today, this day, we're going to do something," Gates said.

I-1077 would tax couples with adjusted gross incomes greater than $400,000 annually, or incomes of more than $200,000 for individuals. Supporters say that represents the top 3 percent of earners in Washington.

It also would cut the state property tax by 20 percent and increase the business-and-occupation tax credit to $4,800.

The proposed initiative sets out two tax brackets. The first tax rate would be 5 percent of the portion of joint income that exceeds $400,000, or $200,000 for individuals. The tax would increase to 9 percent on the portion of income that exceeds $1 million for couples or $500,000 for individuals.

Advocates said it would raise about $1 billion per year for education and health programs.

Conservative activist Tim Eyman stood outside the coffee shop hosting Wednesday's income tax announcement to collect signatures for his latest tax-limiting initiative, I-1053. It would reinforce a difficult two-thirds vote threshold for the Legislature to raise taxes.

Eyman said the income tax measure would almost certainly make the ballot because of its wealthy supporters. But he didn't think voters would go along, particularly following the Great Recession and fresh state tax increases on beer, soda pop, service businesses and more.

"It is the Holy Grail for the progressive movement," Eyman said. "They probably should have had this event at a church because it requires so much faith."

"Basically, it's a terrible idea," said Amber Gunn, Economic Policy Director for the Evergreen Freedom Foundation, a conservative political watchdog group. Gunn said the state has a spending problem and creating another tax won't change that.

Most of the state's taxes come from two sources: The 6.5 percent baseline sales tax and the business-and-occupation tax, levied on a business' gross receipts. Property taxes also are in the mix but have relatively strict caps on their annual increase—the consequence of another voter initiative.

Income tax measures have been attempted over the years in Washington with little success. A graduated income tax was enacted by initiative in 1932, passing with about 70 percent of the vote. But it was thrown out by the state Supreme Court, which pointed to the state constitution's call for uniform taxation on property.

Voters have defeated subsequent attempts to amend the constitution for a state income tax, most recently in 1973.

Since then, some legal experts have said a modern court might overturn the 1933 court decision that defeated the original income tax, arguing that the old decision is based on obsolete legal theory.

Gates said he expects I-1077 would be upheld under those circumstances if it passes and is challenged in court.

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