Committee recommends state income tax; lawmakers dubious

OLYMPIA — Condemning Washington state’s tax structure as unfair and regressive, a commission headed by Bill Gates Sr. recommended today that the state impose an income tax to reduce the sales tax and eliminate the state property tax.

The Washington State Tax Structure Study Committee’s recommendations, submitted to a joint House-Senate committee, don’t endorse a specific version of the income tax, but offered several alternatives for lawmakers to consider.

The current state system relies almost entirely on the retail sales tax, the business and occupation tax, and the state’s share of the property tax. The system is widely criticized as unduly burdensome on the poor, who pay a larger percentage of their income in sales taxes, and on new businesses that are taxed on their gross proceeds whether they make profits or not.

“The most important problem with the current system is in terms of fairness,” said Gates, an attorney and the father of Microsoft Chairman Bill Gates.

Poor people pay as much as 16 percent of their income in sales taxes, Gates said, while the rich pay as little as 4 percent. Meanwhile, Washingtonians miss out on the opportunity to deduct state income taxes from their federal tax bill — to the tune of more than $1 billion a year.

Most of the committee’s alternatives are variants on a flat income tax, which would fall more equitably on people of differing incomes.

However, members of the panel conceded that any changes might be difficult. Imposing an income tax would likely require a statewide vote, and past proposals have gone down to stinging defeat at the polls.

“People like the tax devil that they know and they’re nervous about something they don’t know,” said Hugh Spitzer, a law professor at the University of Washington and vice chairman of the committee.

Lawmakers, already facing a $2 billion budget hole next year, seemed dubious about the short-term prospects of major tax reform.

“The income tax, we just don’t see that happening,” said Sen. Dino Rossi, R-Sammamish, the incoming chairman of the Senate Ways and Means Committee. “We have 2 billion of our own problems right now,”

Rossi and other Republicans tend to view the imposition of an income tax as a prelude to higher taxes, although the commission’s recommendations envision raising the same amount of money through a different system.

Even Democrats generally inclined to favor an income tax seemed uncertain what to do with the committee’s proposal.

“What will we do with it? I don’t know,” said Rep. Jeff Gombosky, D-Spokane, the chairman of the House Finance Committee. “We’re going to give it its due consideration.”