Published: Sunday, October 1, 2006
The structure is woefully regressive, falling hardest as a percentage of income on lower- and middle-income taxpayers. That's because sales and property taxes, with few exceptions, hit everyone at the same rate. The less you have, the bigger the relative bite.
The state's business and occupation tax isn't any better. It's levied on gross receipts rather than net profits, a clear disadvantage to small and start-up companies.
None of that is likely to change soon. Voters have repeatedly turned thumbs down to a graduated income tax. Big, profitable companies know the B&O tax is easier on them than a corporate net income tax would be, and they have the political muscle to keep it in place.
In such a regressive system, Washington's estate tax is a reasonable step in the direction of progressivity. Initiative 920, which seeks to repeal it, should be rejected by voters.
A new estate tax was approved by the Legislature in 2005 after the state Supreme Court threw out the old one, ruling that it could no longer be collected because of changes in federal law. The new version has no such conflict.
It exempts the first $2 million of an individual's estate; the first $4 million of a couple's. Only assets above those amounts are taxed, at rates ranging from 10 percent to a maximum of 19 percent. Working farms and their equipment are also exempt. Family businesses can spread payments over 15 years, an aid to heirs who want to keep the business going.
The state Office of Financial Management estimates that the estate tax will raise $184.5 million during the next two years from a total of about 450 estates. All of it is dedicated to funding public school improvements approved by voters, additional higher education enrollment slots and college financial aid. If I-920 passes, education will likely take the bulk of the revenue hit, and nearly $100 million a year wouldn't be a small one.
Supporters argue that death shouldn't be a taxable event. But this isn't a tax on the dead, it's a tax on heirs who stand to inherit a sizeable estate that was never subject to a state income or state capital gains tax. They also say it hurts the state's business climate, but the exemption for farms and the option for family businesses to spread payments over 15 years make such fears seem far-fetched.
In a state with such a regressive tax structure, requiring a relatively modest contribution from the wealthiest 0.5 percent of estates isn't unreasonable. We recommend voters keep a little progressivity in place by voting no on I-920.
Copyright ©1996-2006.
The Daily Herald Co.
ALL RIGHTS RESERVED.