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The Lars Larson Show Interviews
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The Lars Larson Show Interviews
Jason Mercier - Which new Washington taxes are hitting your wallet today?
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A new batch of Washington tax laws takes effect today, affecting everything from estates to property taxes and businesses. Will taxpayers see better government services, or simply higher bills?
Jason Mercier is Vice President and Director of Research at Mountain States Policy Center. He joins the show to discuss the new tax laws that took effect on July 1, what they mean for Washington families and businesses, and why critics argue the Legislature approved them without giving voters a direct say.
Welcome back to the Lars Larson show on this Wednesday live on the Radio Northwest Network. Well, a wave of new Washington State tax laws hits today, and not one of them went to a vote of the people. So which new taxes are hitting our wallet today and what can we do about them? Jason Mercier is Vice President and Director of Research at the Mountain States Policy Center. Jason, welcome back to the program.
SPEAKER_01Hey Laura, it's good to be with you.
SPEAKER_00You know, one of the things I'm wondering about, because Oregon just went through this, and Oregon's right next door, and Oregon and Washington are kind of uh almost uh twins in that uh Washingtonians hate income taxes with a passion, and Oregonians hate sales taxes with an equal passion. So Oregon has an income tax, Washington State has a sales tax, but now both states are trying to get to the kind of tax that citizens hate. And it sounds as though tomorrow they're going to submit enough signatures to put the Washington State so-called badly named millionaires tax to a vote. In Oregon, on the most recent tax vote, just a month ago, uh sorry, two months ago, May, uh, because we're now in July, uh, Oregonians voted that thing down by 83 to 17, which I think qualifies as more than a landslide. Don't the Washington State Democrats expect the same kind of result when this thing goes to a vote?
SPEAKER_01Well, I think the answer is very clearly they do, because that's why they prevented a referendum on this. You know, this debate about an income tax in Washington is not new. We've been kicking this around for almost a century. What's new and different is the fact that for the first time this year, you had a bare majority of the legislature, and you had the governor, who used to be the state's attorney general, willfully and knowingly violate the state constitution and push through an unconstitutional income tax, despite the fact the voters have already rejected these multiple times, and the fact the Supreme Court has repeatedly said, if you want this, you have to amend the Constitution. So I think it's fitting that as we approach the 4th of July, a country born upon a tax revolt, that as you indicated, in a couple of days you're going to see that ballot measure submitted with more than enough signatures to put this issue back before voters.
SPEAKER_00I mean, I guess it'd be bad enough that they simply ignore the wishes of the people that Democrats claim to represent in the legislature. We still do call them representatives in Olympia, senators and representatives, same as Oregon, and yet in both states, they seem to openly ignore or even spit in the face of Oregonians, of voters, and say we're going to do it anyway, and we just double dog dare you to ref you know to ref refute or rescind what we've all already done. So, but the fact that Washington State has actually based its budget on money that they almost know to a certainty is not going to be coming in. What should we say about that?
SPEAKER_01Yeah, I mean that is just a shocking, I guess, most disappointing part about this is you've guaranteed additional future budget problems on a couple of fronts. First of all, we've got a lawsuit filed against us because for a hundred years the courts have said this type of tax is unconstitutional. You've got a ballot measure about to repeal it, which takes that off the balance sheet. But let's say somehow, some way, this tax is upheld and the voters don't overturn it. It's one of the most volatile sources of taxes you possibly can have. And from a budget standpoint, you want stable and predictable revenues. You don't want volatility. We already know Washington can't control its spending. It already has a budget deficit before we know what happens with this tax, and they're putting all their eggs in the basket in a volatile revenue source. It's just not a good way to budget.
SPEAKER_00Well, and and on top of that, I think everybody expects, and I'd like your comments on this. You're the guy who does research in mountain states, but when they call it a millionaires' tax and they sell it that way, but everybody knows that once they get the tax in place, they can say, well, we're currently taxing those who make more than a million dollars a year, uh, and we're gonna obtain that information from the IRS or other sources and force Washingtonians to give uh information that would otherwise be private. Their income is private. And yet the State is saying, well, we're gonna take your info so that you can prove that you don't owe us the tax. All the State legislature has to do, correct me if I'm wrong, is lower that threshold from a million to, say, eight hundred thousand, five hundred thousand, and they will keep working it down in the same fashion that the federal government did with the income tax passed over a hundred years ago, where they said we're only going to tax the very rich and only at a very low rate. And then within seven years, the federal income tax in America had become a tax that applied to the majority of the people in the country.
SPEAKER_01And you're exactly right, Lars. The federal income tax, when it was first imposed, with a 1% tax on millionaires, it applies to everybody now at much higher rates. That's just the history of these types of taxes. Once they're on the books, the rates increase and the brackets uh continue to expand. And had the lawmakers truly wanted this just to be a targeted tax, they could have put it on the ballot with as a constitutional amendment that restricted it. But they chose not to do that. And in fact, you have even those that voted for it say that there's nothing to ties the legislature's hands from doing what you just indicated, from increasing that rate and expanding to more people. And in fact, the sponsor of this referred to previous tax promises made by the legislature as pie crust promises, easily made, easily broken. So this is not a millionaires' tax. This is an income tax with the capability of applying to all Washingtans if it remains on the books.
SPEAKER_00Well, and the folks who push this thing, Jason, tell me if I'm wrong in looking at it this way. They apparently never heard or never took to heart the story about boiling a frog, that if you really want to boil the frogs, turn the heat up slowly. This one came up so fast. 9.9% tax, one that is equal to one of Oregon's top rates. And already we're seeing people fleeing from the state. Those who can afford to flee, those who can't afford to flee will still be around. So the legislature can say, well, we thought we were gonna get a lot of money from the millionaires, and we're not. So now we we have an incentive to change the rates already. And the the the wealthy people are fleeing. I mean, the number of of, for instance, very expensive houses for sale in the State of Washington has gone up 65 percent. So people who've got the money are saying, I'm out of here. I'm gonna sell my house, even to the point where there's one house in the Seattle area that I think was the second most expensive home on the market at $75 million. Its owner has now cut the price by, I think, $40 million. The house is up for sale for $35 million. Say, well, those are rich people. They can afford to buy it. Well, you know, we shouldn't be uh, I think, setting taxes that way by saying, well, you can afford to give up the money, because by that by that nature, you can go after people of average incomes and say, you don't really need $150,000 a year to live. You can you can live on $100,000. So we're gonna tax the rest of it away. Isn't that the logic they'll try to follow?
SPEAKER_01I mean, you're exactly right. They they they are not easing into this. This new tax is one of the highest income tax rates in the country. In fact, if you combine it with the local taxes in Seattle, Seattle would have the highest taxes on income of any place in the country. And this has a huge impact not only on individuals, but on the state's business climate. And the example I'll give you, it was as recently as 2012. So just over you know, a couple of decades ago, you had the State Department of Commerce telling Washington businesses and entrepreneurs across the world, you need to come to Washington because you're going to be at a competitive advantage because we don't have capital gains or income taxes. Well, that's all gone now. And we're seeing even before this tax takes effect, Washington has one of the worst competitiveness rankings for businesses in the country.
SPEAKER_00Unbelievable. That is Jason Mercier, who's vice president, director of research at Mountain State's Policy Center. Jason, thanks so much. Back in a moment, we'll talk about the changes in Medicaid rules and why twenty-five states are suing.