Would a state income tax benefit or hurt ethnic communities?

By Stacy Nguyen
Northwest Asian Weekly

From left: Pramila Jayapal, Bill Gates Sr., Matt McIlwain, and Alex Porter debate on the pros and cons of I-1098, a measure that involves the creation of state income tax for those with high incomes. The debate took place Oct. 15 and the Life Enrichment Bookstore in the Rainier Valley. (Photo by Stacy Nguyen/NWAW)

Lately, television airwaves have been bombarded with commercials about whether Washington residents will be burdened with a state income tax. The commercials urge voters to take a stand.<!–more–>

But many people say that information about the current ballot initiatives has been conflicting and confusing, especially for those who are not proficient in English. As a result, many people of color are not voting on initiatives.

This is something founder and coordinator of Sea Beez  Julie Pham and Norman Sigler, of the Urban Enterprise Center, are trying to remedy.

They organized a candidates meet-and-greet and two debates on controversial initiatives currently on the ballot, Initiative 1098 (regarding a state income tax) and Initiatives 1100 and 1105 (regarding liquor sales in the state). The event took place on Oct. 15 at the Life Enrichment Bookstore, a Black-owned small business that has been in the Rainier Valley for 16 years.

From left: Steve Williamson, Sharon Maeda, and Ashley Bach, who were debaters against and for I-1100 on Oct. 15 at the Life Enrichment Bookstore (Photo by Stacy Nguyen/NWAW)

What is I-1098?

I-1098 is a measure that would tax the adjusted gross income of individuals who make more than $200,000 annually or a couple (joint-filers) who make more than $400,000, beginning in 2012. Those affected would be taxed 5 percent over the amount of $200,000 or $400,000.

The measure would also cut the state portion of everyone’s property taxes by 20 percent.

I-1098 is projected to net $1 billion annually ($2 billion according to some estimates), which will be dedicated to funding K–12 schooling, college tuition, health care, and long-term care for seniors.

Could the tax extend to everyone in the future?

“It is the single largest tax increase in the history of Washington state,” said Matt McIlwain in the debate. McIlwain is managing director at Madrona Venture Group. “I-1098 is the wrong path at the wrong time for Washingtonians. More importantly, it’s the path that misses the opportunity for real tax reform. What I would ask you: Is it fair if we already have the third largest sales tax in the country at 9 percent?”

McIlwain is wary of giving up too much power to the state legislature. If the initiative passes, after two years, lawmakers could change the law with a simple majority vote. McIlwain said this means the tax could extend to everyone. Additionally, he said, income tax rates could eventually go up.

However, according to a statement from YesonI-1098.com, partially written by Bill Gates Sr., a civic leader and philanthropist, “By law, the legislature is prevented from extending the tax on the rich to others or increasing it — any attempt would face a statewide vote. The people will have the final say.”

McIlwain pointed out that Connecticut’s state income tax originally applied to high-income earners.

However, it currently applies to anyone who makes $13,000 or more.

What is fair?

“I’m still paying off student loans,” said debater Alex Porter, a general surgeon and entrepreneur. “I’m still paying back for every opportunity that I’ve gotten. I came from neighborhoods just like this all my life. So [I get upset] when I hear people talking about, ‘We need a hand out. We need this.’ ” Porter was raised by a single mom who worked three jobs. He thinks that people should not be forced into a state income tax, that it should be left to individuals to decide how to distribute their wealth. He cautioned citizens against giving legislators too much power.

“Next thing you know, every person will be paying a state income tax,” said Porter.

“Let me just say that I think we, an ethnic minority community, understand the issue of fairness,” said debater Pramila Jayapal, founder and executive director of One America. “We understand what it means to be fair, and we understand what it means to not be fair. In our state, right now, the low 20 percent of income earners are paying more than 17 percent of their income in taxes, while the wealthiest 1 percent only pay 1-3 percent of their income to taxes. Is that fair?”

Jayapal was referring to a recent study by the Sightline Institute, which ranked Washington state last (out of 50 states) in tax fairness. “So what we’re saying is that 1098 offers us an opportunity to level the playing field,” said Jayapal.

Neither McIllwain and Porter argued against tax reform, but they did argue that I-1098 wasn’t the right course.

What is the best way to grow?

Gates and Jayapal put emphasis on educating youth and helping small businesses as the best way to bolster the economy. Under I-1098, the B&O tax will be eliminated for the smallest 81 percent of businesses in Washington.

“We’re talking about something that involves a very small number of people on a relatively small tax. All the good that would come from the immense amount of money when it gets banded all together, we’re talking about a couple billion dollars,” said Gates.

“We don’t have fairness in our system. And our kids are the ones that constantly get screwed by the system that we have. … [1098] is an opportunity for us to see our dreams come true. To see our kids graduate from high school, to see our families be able to have health care,” said Jayapal.

However, those who oppose I-1098 worry that a state income tax will result in fewer new jobs.

“The seven states that don’t have an income tax right now are the fastest growing in terms of job creation and economic growth. … Ironically, those states are the ones that generate the most tax revenue in the [United States],” said McIlwain, referring to Alaska, Florida, Nevada, South Dakota, Texas, Wyoming, and Washington.

“I’m in the process of starting a couple businesses,” said Porter. “In order to raise money, I have to have a certain amount of money.  If I don’t have money, I can’t create jobs. Just last week, I was in Brazil. I was the only representative from Washington state in this group. And my focus was to figure out how to do business in Brazil and bring it back here to Washington. I don’t really care about the rest of the United States. How will [1098] affect me?  These activities will be gone.” ♦

Stacy Nguyen can be reached at info@nwasianeekly.com.