Wednesday, January 17, 2007

Washington State's New Anti Productivity Tax?

Originally from Sound Politics, Washington State is heading towards a sales tax thanks to my state Senator, Jeanne Kohl-Welles, which comes as no surprise.

First of all, the chances of this passing are slim. Even the average rich Seattle guilty white liberal in the privacy of the voting booth is going to have a hard time filling in that circle. Even King County is going to have a hard time "enhancing" enough ballots to overcome the overwhelming opposition to this idea.

Here is the problem with an income tax, any income tax. While a sales tax discourages excessive spending, an income tax discourages, anyone? anyone? Income! How is income produced... anyone? anyone? by productive work. Why would anyone want to discourage productive work... unless... there was another motive such as, oh I do not know, the state simply wanting more revenue, specifically from the highest income earners in a class warfare manner.

Most people really do not have a good understanding of who shoulders the tax burden. As I stated in a previous post.
A two minute search on the internet points out that for the tax year 2003, the top 1% of income earners take in 16.77% of the total adjusted gross income but they pay 34.27% of income tax. The top 5% take in 31.18% but pay 54.36%, the top 25% take in 64.86% but pay 83.88%. The top 50% take in 86.01% but pay 96.54%. THE BOTTOM 50% PAY 3.46% OF FEDERAL INCOME TAX.
So the top 1% make 1.19 times as much as the bottom 50% but pay 9.90 times as much federal income tax. Feel free to make a case about income inequity, especially if you are a member of the Socialist Workers Party, but make sure you also explain why 1% of the people pay 9.9 times what 50% of the people pay. Put it another way, the average top 1% earner pays as much tax as 495 of the average bottom 50% earners.

The issue of an income tax is a typical liberal feel good, catchy saying policy that will have the reverse effect of what is intended. Just as "gun free zones" encourage, rather than discourage gun violence at schools, an income tax will ultimately discourage what it intends to do, raise more money for the state. But at least it will make liberals feel good about making the rich finally pay their fair share. The problem for the state, the unintended consequence, is the rich will do what the rich can afford to do, change their legal residence to someplace without a state income tax.

Let's just imagine there are two states side by side. One has a fairly low tax rate and lower social services for poor who are capable of working, just do not want to. The other, a fairly high progressive tax rate and hands out cash, no questions asked and no strings attached to whomever does not have a job regardless of your situation. Which type of person is going to be attracted to which state? Which state is going to be more successful and efficient measured by the percentage of citizens living a quality life? Where would you rather live?

1 comment:

Anonymous said...

Thanks for the perspective. I wonder how high taxes can become before people choose to stop creating wealth for others to steal.