Editorial
Sims' tax plan: bold but impractical

E-mail this article Print this article Search archive Most read articles Most e-mailed articles

Of all the candidates for governor, Democrat Ron Sims has been the boldest and most specific about taxing and spending in Washington.

His plan is a serious one. He proposes to abolish the state part of the sales tax — 6.5 percent — and the state's tax on business gross receipts. He would replace the revenues lost with a personal income tax with brackets of 4, 6, 8 and 10 percent. Skeptics will note that liberal Democrats have long wanted a state income tax, that Sims is seeking their support in part because he is behind in the primary race. They will also note that Sims' plan would take an amendment to the state constitution, which requires two-thirds of the state House, two-thirds of the Senate and a majority in a public vote. In the past 70 years, the people have voted down a graduated income tax six times.

The most practical and appealing feature of Sims' plan is that state income-tax payments are deductible on federal income tax, and sales taxes are not. According to Sims' economists, that means the people of this state send to Washington, D.C., $731 million a year — $118 per person — and would keep it if they had a state income tax.

The part of this plan that appeals to Democratic progressives is its progressivity in the arithmetic sense. It shifts the tax burden to the high incomes. Sims' economists calculate that it would lower state taxes for the bottom 80 percent of taxpayers and raise them for the top 5 percent. Those in the 95th to 98th percentiles would pay 3.5-percent more of their total income in state taxes than they do now, and in the 99th percentile, 4.7-percent more.

What is a pleasant surprise from a candidate of the left, and what has business abuzz, is Sims' proposal to repeal the business gross-receipts tax and replace it with nothing. Business profits would be tax-free as long as they were re-invested. The Sims document says this would create "tax-free growth that will drive business investment much in the same way it drives individual retirement accounts." This could give Washington a strong competitive boost.

There is pain in this plan. The proposed 10-percent rate on personal income would be the highest in the country, one point higher than Oregon, and would apply at an adjusted gross income of $100,000. There is also risk. The plan would remove the state part of the sales tax but not the local part. Seattle would be left with a 2.3-percent sales tax — an amount easier to increase for local taxes than the current 8.8-percent rate.

People will also note that much of the impetus for the Sims proposal is the public sector's hunger for revenues. It is not revenue-neutral; it would raise more than the system does now. For decades, the public has been suspicious of giving the Legislature any new tax that could be raised. Those suspicions are well-founded, and would have to be addressed in any constitutional proposal.

This page has both big reservations about a state income tax and realism that putting one into place is almost politically impossible. But Sims deserves credit for forcing people to stop and think about the best way to pay for state government.