Carleen Johnson - Is WA’s Millionaire Tax A Small Business Hit?

Washington’s new income tax is being sold as a tax on the wealthy but some small business owners say they’re the ones who could end up paying the price. One trucking company owner is now suing the state, arguing the policy could hurt hiring, growth, and family-run businesses already operating on thin margins.

Carleen Johnson of The Center Square joins the program to break down the lawsuit, who could actually be affected, and what’s at stake if the tax moves forward.

Transcript

SPEAKER_00 0:02

Welcome back to the Lawrence Longstone Show. It's one of the craziest things that so-called representative government in Oregon and Washington never actually represents what the people want. Let me give you a good example. Oregonians have voted nine different times against a sales tax, and yet they got a sales tax called the CAT tax. And Washington residents, I think it's ten different times that Washingtans have voted down the idea of an income tax. It's even in the state constitution, a limitation of the Constitution that makes it functionally impossible to impose an income tax. And yet, what do the jokers at the state legislature do? They say we're going to have an income tax only. It's only going to apply to millionaires. Cross our hearts and hope to die, we promise. So I thought we'd bring on Carlene Johnson, who's a staff reporter at the Center Square. Carlene, welcome back to the program.

SPEAKER_01 0:58

Hi, Lars. Yeah, it's only going to be on the millionaires. I mean, obviously, not going to affect Joe Normal, so don't worry about it. Much ado about nothing. Although they would not ever say, in fact, quite the contrary, wouldn't say that this is eventually going to be a tax on all income earners in the state. They were very careful to say we will not bind future legislators. So we'll just, you know, speak for ourselves. For now, we want it to be a million dollars, and who knows what will happen down the line.

SPEAKER_00 1:27

I mean, what did it take with America's original income tax? It took seven years for them to break the promise they had made. They said we're only going to tax at most seven percent is the highest tax we'll ever charge. And it's only going to apply to people who are super, super rich at the time, you know, a hundred, a little about a little over a hundred years ago, uh, people who made over half a million dollars a year, which back then was stratospheric uh income, that they would be charged seven percent. And and then we had a marginal rate that went as high as the nineties, you know, before before President Kennedy finally knocked it down. So does anybody think the Democrats in Olympia aren't playing the same game right now?

SPEAKER_01 2:10

No, there isn't anybody. In fact, even some Democrats, Representative Springer, said, you know, on the record when he was asked, you know, months before it passed, should should anybody think this is, you know, should we believe anybody that this isn't going to eventually be expanded to a tax on all income earners? And he said, Well, no, you shouldn't believe them. I mean, he flat out said it. And and the governor uh, you know, says, for now I'm only saying a million. For now I'm only saying a million. Don't put words in my mouth. But like you said, we know what happened with the federal income tax, we know what happens with all taxes. And it's coming. And well, and unless this uh unless this litigation is successful. We'll find out.

SPEAKER_00 2:50

Well, I'm I'm hoping that it is successful, although Carleen, I'm safely out of range for now because I don't make a million bucks a year. So tell me about this man in Kent who has the small trucking company that you wrote about at the Center Square.

SPEAKER_01 3:04

Yeah, what a cool guy. It was a really uh privilege to get to meet him. His name is Kurt Nucetelli, and he runs a business called Spirit Transport Systems down in the Kent Valley, and he's been in business uh for himself since I think he said about 2005, so a little over 20 years in business. Yeah, he's got 14 employees, so kind of a typical small business owner, right? Um, certainly not well to do. He's actually coming off a couple of very lean years where um they they took some losses. Of course, you can write those off, right? Problem is the way the income tax bill is crafted pass through businesses, which I know you know a lot about um in this bill, um they're gonna be they're gonna be stuck with this income tax because if you have a good year and and you know you and that business income is passes through as personal income for the owner operator, right? So it looks like this guy made, say the business did 1.6 million in profit that layer. Looks like he made that money and he's gonna pay this tax. Well, then what does that mean? That means he can't buy some more equipment, he can't give his employees, you know, uh maybe a promise bonus at the end of the year. You can't maybe expand um, you know, operations, buy another warehouse. I mean, that's what that means. So, in practical terms, this isn't a tax on millionaires, even as it is currently designed, it is a tax on small business, and 85% of them in the state of Washington operate as from what I've been told as pass-through entities, and they will be subjected to this tax if they have a good year.

SPEAKER_00 4:47

I'm talking to Carlene Johnson from the Center Square, and I think about spirit transport systems and this gentleman, 14 employees. And like you said, if he has a really fat year and he says, Hey, I think I'll buy two more trucks and hire two more drivers, and we'll do even more business next year. Except this is going to get in the way of that. So the Democrats are helping to destroy the very economy that they say they're going to try to help by giving all these extra billions of dollars to the state government.

SPEAKER_01 5:16

You're right. And he toured me around the back side of um his warehouse there in the Kent Valley, and you know, he was kind of explaining I learned more about trucks that day last week than I ever thought I wanted to know, but it was pretty fascinating. And he's like, see all those chassis over there? And I'm like, that's really cool. You own all these? He says, Yeah, it's really not cool that they're all sitting back here in the back lot. That means we're not busy right now. He goes, So we're having another lean year. He goes, I'm about, you know, quarter of the way through another what looks like it will be an extremely lean year. But they also cannot write off losses, you know, so then you do have that fat year. You can't count the previous couple years losses against that to maybe not have to pay.

SPEAKER_00 5:59

Why is it because most federal tax, I don't know that I have somebody else do my taxes because I'm not smart enough to do it, but aren't carried forward losses a regular part of income taxes, but they're not part of this crazy income tax for Washington state?

SPEAKER_01 6:15

Correct. And you can still on your federal, but not here in the new uh state of Washington income tax once this thing takes effect, if in fact it takes effect, which is something that, you know, opponents lobbied to change with some of the many amendments. Remember, there was that 24 and a half hour marathon session on the House floor as Republicans tried in vain to, you know, monesthesize this awful bill as best they could. It, you know, all of those amendments were rejected by the majority. But um, yeah, really cool guy. And I hope he's one of the three individual plaintiffs. The other two are actually couples, so there's there's three individuals, and we've got you know, groups like uh NFIB and uh the Association of Washington Business that are uh BIAW Building Industry Association is is part of this lawsuit as well. And, you know, a couple of big hitters to to make these legal arguments. I mean, having former AG Rob McKenna and former State Supreme Court Justice Phil Talmadge, a Democrat, mind you, uh making these legal arguments. Um, if it's gonna succeed, they've got the best team, you know, to make those arguments.

SPEAKER_00 7:27

It's just amazing to me, though, that that they think that somehow you can tax your way to prosperity. And this is a sickness in both Olympia and Salem, where they say, oh, the state government has to have more of your money, but if you just hand off more of your money, all the rich people will stay here. Yeah, except that you see the rich people are moving out of the Northwest. They're leaving Oregon, they're leaving Washington, the bigger businesses are questioning whether they want to stay here or not. And then you're gonna say, oh, but we'll be able to hang on to all that business. I don't think it's gonna happen. That's Carline Johnson. She reports for the centersquare.com. Back in a moment, I'll get to your phone calls and emails. And a brand new poll shows seventy percent of Americans want that SAVE Act be to be passed by the uncooperative Republican controlled Senate.