Taxed in the USA: Washington Governor Wants More Money

The tax hikers are at it again. This time in Washington state where, according to the Seattle Post Intelligencer, Governor Gregoire wants to raise the state’s sales tax:

Addressing 17,000 listeners on an AARP call-in town hall, Gov. Chris Gregoire evoked the state’s last Republican governor in arguing for a temporary, half-cent increase in the state sales tax. “Do you know when the sales tax was last increased?” Gregoire asked. “It was 1983: We were in the greatest recession until now.  We had a Democratic Legislature and a Republican governor, my friend John Spellman. “They raised it over a penny, 1.1 cents.  They just could not see an all-cuts budget.”

You have to appreciate Governor Gregoire’s creative logic: we haven’t raised a tax since 1983, so it’s about damned time… As if tax rates should go up over time just like people get older. And every time a politician says that he or she wants to raise a tax “temporarily”, keep in mind that “temporary” means “between two Big Bangs” in politi-speak.

Gregoire fielded queries left and right over the phone from retirees around the state. A woman named Evelyn asked how much the half-cent, three year increase would raise toward fending off cuts in public safety, education and aid to the vulnerable:  $494 million, Gregoire told her. “Why in the hell? Excuse me, why don’t we do a penny instead of a half-cent?” Evelyn asked the governor. “I’d love to go to a penny,” Gregoire said.  But she cited what the state’s small businesses are going through in the Great Recession, and gave the answer:  “Not in such tough times.” The state has closed three prisons, argued the governor.  It has shut down a juvenile correction facility.  Washington has 2,000 fewer state employees than when it had one million less people. “

From 2008 to 2009 the state of Washington increased its spending by 6.3 percent. Preliminary numbers for 2010 show a slight reduction, but that is due entirely to a small cut in Other Funds spending. The General Fund increased by almost three percent, and the state has grown its dependency on federal funds by 30 percent in two years. Governor Gregoire would serve her state much better if she reversed the relentless growth in government spending than to try to skim more money from Washington families.

It is true that the state of Washington has reduced its number of employees: down by 9,600 from 2008 to 139,500 in 2011. It is also true that there has been a modest downward adjustment in local government employment. But these adjustments have only reflected the state’s loss of private jobs: in September 2011 81.7 percent of Washingtonians were privately employed, compared to 82.1 percent in September 2008. So in reality there is not much to brag about for the governor – other than that she has done her job and kept government a relatively constant burden on taxpayers’ shoulders.

The state of Washington does not need a tax hike. It needs a government that stays within a budget that its taxpayers can afford.

Another tax hiker in Seattle, internet entrepreneur Nick Hanauer, wants the government to take more of his money so that, he says, there can be more consumption in the economy:

Jobs and prosperity are hurt — not helped — by a tax system that bestows its bounty on the super-rich and saps the middle class of buying power, according to a prominent Seattle entrepreneur. Writing in an article for Bloomberg View, Nick Hanauer who founded the internet media company aQuantive, Inc., acquired in 2007 by Microsoft for $6.7 billion, argues: “I can start a business based on a great idea, and initially hire dozens or hundreds of people.  But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

He is right. Without consumers, there will be no producers. But what is his solution to this? Lower taxes for the middle class? Deregulation of consumer-oriented markets?

“That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large and small.  What does lead to more employment is the feedback loop between customers and businesses. “And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire.  An ordinary middle class consumer is far more of a job creator than I ever have been or will ever be.”

After this semi-coherent rant which, again, makes a point in a very convoluted way, Hanauer then moves on to his solution:

The super-rich paid about 40 percent in taxes during the prosperous 1960′s, argues Hanauer, and about 30 percent during the prolonged prosperity of the 1990′s.  They now pay an average of 16 percent.

Source, please?

Hanauer reports that last year, he paid an 11 percent rate on an eight-figure income. (The median Washington family has a yearly income of $56,479.)

Either he is a big-time tax cheat, or he takes his income in the form of dividends. He could easily take it out as a salary instead and pay 35 percent, not 11 percent. That way he could surrender three times as much to the government and neither the state of Washington nor the U.S. Congress would have to raise any taxes. But apparently Nick Hanauer is too busy doing tax planning to realize this.

Now we know he wants to raise taxes to strengthen middle-class consumers. OK, so how are his tax increases going to strengthen middle-class consumers?

Hanauer was a major supporter of Initiative 1098, the 2010 ballot measure that would have created a modest income tax on high income earners, with the money earmarked for education.

Aha. So if we take money from high-income earners and give them out in the form of teachers’ salaries, teachers’ benefits and compensation to school administrators, we strengthen the middle class.

We appreciate Mr. Hanauer stepping forward to prove that there is absolutely no correlation between wealth and wisdom.

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