Initiative 920 would kill a useful, progressive tax

October 22nd, 2006

Critics contend it was cynical of this year’s Democratic-controlled Legislature to link education funding to the state estate tax. It makes any move to repeal the estate tax – such as Initiative 920 – more painful.

Cynical or not, the connection is there. If voters approve Initiative 920, an estimated $184 million in education funding over the next two years will disappear from the state budget.

That funding would be put to excellent use. It would help reduce class sizes in public schools, boost college enrollment by more than 7,000 slots and improve remedial progams for struggling students.

The estate tax itself has a long history in Washington. It went on the books in 1901. Voters repealed it in 1980, but they allowed the state to keep a portion of the federal estate tax.

During the past decade, however, the Republican-controlled Congress began phasing out the estate tax, although it is to be reinstated in 2011 unless Congress takes further action. If the federal tax is reinstated, however, there will only be a partial credit for state estate taxes, not a full one.

A court decision forced the Legislature to adopt a stand-alone estate tax to make up for the revenue wiped by congressional moves against the estate tax.

The estate tax is vilified by opponents as the “death tax” in an effort to make it seem horribly ghoulish and unfair. In fact, the tax, which affects the estates of only the state’s wealthiest citizens, is highly progressive – in a state with an otherwise regressive tax system.

Remember, Washington is among only a handful of states without an income tax, and there is no state capital gains tax. Only estates larger than $2 million, or $4 million for couples are subject to the state tax, and family farms are exempt. Only half of 1 percent of state residents inheriting large estates would be affected.

Claims that the state inheritance tax would force heirs of small family-owned businesses to sell off their companies are overblown. The tax can be paid off over 15 years.

Making the state’s tax system less progressive and making it harder for lawmakers to pay for education don’t make sense. Vote no on Initiative 920.