The Golden Age of Rich People Not Paying Their Taxes “An eight-year [Republican-led] campaign to slash the IRS’s budget has left the agency understaffed, hamstrung, and operating with archaic equipment. The result: a hundred-billion-dollar heist.” I have a friend who works as an examiner for the IRS; he said the same thing: they’re woefully understaffed and can’t prosecute fraud.
Category: Taxation
The budget deficit dropped two-thirds during the Obama administration. Forbes: GOP Has Been Playing Us All For Suckers
From PolitFact: “We rate the claim Mostly True.” Barack Obama claims deficit has decreased by two-thirds since taking office
From Forbes: On The Deficit, GOP Has Been Playing Us All For Suckers
The GOP budget and tax plan overwhelmingly benefits the rich.
Just a few months after the tax bill was signed, the GOP-controlled Congress agreed to increase federal spending and the budget deficit by another $130 billion or so.
Think about this. The same congressional Republicans who over the previous eight years wanted everyone to believe they were fiscal conservatives hell-bent on balancing the budget and not increasing the national debt, sponsored, passed and then danced around the fire because of legislation that will result in a permanent $1 trillion deficit and a debt that will soar to close to 100 percent of GDP by 2028.
KCTS9: What’s Up With Washington State’s Tax System?
Washington state’s vibrant and diverse economy doesn’t hint at it. Neither does Seattle’s red-hot construction and tech boom, nor the sheer wealth of some of our residents. You’d never know it by the tens of thousands of people moving to Puget Sound for the plentiful jobs and outdoorsy lifestyle. But, Washington has a tax problem. It simply can’t seem to raise enough money to fund basic services. Especially not in ways that feel fair to most people or even meet what courts say are the fundamental expectations for important services. Read more: https://kcts9.org/node/55446
On Seattle’s head tax
If taxes on corporations kill jobs, as opponents of Seattle’s head tax claim, shouldn’t we tax only the middle class? 🙂
After all, the rich will just take their money and invest it elsewhere — in other states or, perhaps, the Cayman Islands.
Indeed, tax avoidance is a national and international problem and is a big reason why economic inequality is so large. Amazon and other large corporations have benefited tremendously from state and city services. It’s time for them to reinvest in the community. If they move some divisions elsewhere, that wouldn’t be a total loss: their presence has caused over-crowding and homelessness.
Billionaire Bill Gates Says He Should Pay ‘Significantly Higher’ Taxes
Billionaire Bill Gates Says He Should Pay ‘Significantly Higher’ Taxes
Microsoft founder and billionaire Bill Gates says he should pay more in taxes and that the government should require other superwealthy people like him to contribute “significantly higher” amounts.
“I need to pay higher taxes,” Gates, who is worth over $90 billion, said in an interview with CNN’s Fareed Zakaria on Sunday.
“I’ve paid more taxes, over $10 billion, than anyone else, but the government should require the people in my position to pay significantly higher taxes,” he said…
What’s Missing from What You’re Hearing About Washington’s Budget
Last June, Gov. Jay Inslee made headlines when he signed a state budget totaling $43.4 billion in spending for 2017-19. Which of the following statements about that budget is true?
A. State spending will grow 15.3% by 2019.
B. State spending will grow 6.1% by 2019.
C. State spending will grow 3.2% by 2019.
D. State spending will grow 0.27% by 2019.
If you chose any answer, congratulations: you’re right (technically)! Let me tell you why – and what you can do with the often-contradictory things you hear about the state budget.
A. “State spending will grow 15.3% by 2019”
Washington’s Fiscal Year (FY) 2017 budget was $19.6 billion, and the FY 2019 budget is $22.6 billion, which is a 15.3% increase.[1] A “double-digit increase” isn’t only helpful for writing catchy headlines – it’s also useful rhetorical bait for conservative and anti-tax (well, anti-tax for the wealthy) activists. But this easy-to-understand calculation is also a pretty misleading one, as we’ll see below.
B. “State spending will grow 6.1% by 2019”
This figure takes inflation into account. Like every market, the amount the state pays for workers and goods changes from year-to-year – usually upward. So unless we account for inflation, simply comparing one budget year to another isn’t “apples-to-apples”.
Here’s an illustration of the difference – in the graph below, the “nominal” line shows spending in current dollars, while the “real” line show the equivalent amounts in 2017 dollars: [2]
Adjusted for inflation, FY 2019 spending ($20.8 billion) will be 6.1% higher than FY 2017 ($19.6 billion) – less than half the increase shown in answer A). But some important information is still missing.
C. “State spending will grow 3.2% by 2019”
Since Washington is a growing state – with just over 6 million people residing here in 2002, and more than 7.6 million projected in 2019 – our budget and spending comparisons also need to account for the fact that the cost of public structures and services goes up as population increases.[3]
To account for population change, we can use the same nominal and real numbers from above and divide by the state’s population for the corresponding year to get spending per capita:
So: adjusted for both population and inflation, the state spent $2,643 per capita in 2017, and will spend $2,728 in 2019 – an increase of just 3.2% ($85/person). You won’t see that figure in many headlines, let alone hear it in talking points from conservative legislators and activists advocating for budget cuts.
This particular chart also highlights why it’s important to know how a reference year fits into the bigger picture. Even using these population- and inflation-adjusted numbers, you could truthfully say that in 2019, Washington is a) budgeted to spend 12.6% less ($395/resident) than it did 17 years ago; or b) spend 14.9% more ($355/resident) than it did 5 years ago.
It all depends on the story you want to tell.
D. “State spending will grow 0.27% by 2019”
Political rhetoric commonly cites spending as evidence government is “too big” – but what exactly is the ruler used to make this judgement? Compared to Washington’s economy (Gross Domestic Product), state spending is well below what it was 10 years ago, and will rise just one-quarter of 1% (0.27%) from 2017 to 2019 [4]:
It’s the same story when you measure by state total personal income – state spending is at historically low levels, and is projected to rise a mere 0.16% from 2017 to 2019 [5]:
Why It Matters and What You Can Do
The old adage that “statistics can be made to prove anything – even the truth” seems applicable here, if a touch too cynical for my taste. And media coverage of Washington’s budget too often revolves around political wrangling, last-minute deal making, or short-term analysis, which doesn’t help.
The case I’m making is not to ignore the numbers or the news, but to remember: without the context of inflation, population, and historical perspective, budget numbers don’t tell us nearly enough about what our government is doing.
So the first thing you should do when you encounter news or opinions on the state (or any other government) budget – whether from a legislator, media outlet, or other source – yes, I’m looking at you, sketchy Facebook meme! – is pause to find out:
- Are the numbers adjusted for inflation?
- Does it account for population (or change in enrollment, number of people served, etc.)?
- What’s the time period of reference for a particular percentage/dollar change? What happens if you use a different year for comparison?
- Who came up with the source data, and is it public so I can I see it for myself?
If your source can’t or won’t give you those answers, they haven’t done their homework (or they don’t want to tell you the results), and you really can’t rely on them to provide a useful perspective.
Second, remember that Washington’s budget is really a list of public values. For example:
- In our current society and economy, every child needs a lot more education than they did 50 or even 30 years ago – starting before they’re 5 and continuing after they’re 18. So we fund pre-K, K-12 and higher education.
- A healthy community and environment are essential not just for our health, but for our quality of life and economic development – so we fund the Department of Ecology, Department of Health, and similar agencies.
- We consider beautiful natural spaces a birthright for current and future generations to enjoy – so we fund State Parks and the Department of Natural Resources.
When you read or hear someone opine that “the budget” for something is too big or too small – or that some unit of government is spending too much or too little on something – they’re actually telling you something else: that it’s a lower (or higher) priority than it ought to be.
Now, there’s nothing wrong with that – just don’t get bogged down in their numbers (unless they haven’t given any, which ought to be a red flag!). Instead, think about the needs and priorities of the wide variety of families, neighborhoods, and communities in (as the case may be) your city, state or nation.
Then ask that person to explain exactly how their proposal will affect the structures and services necessary to deliver on the public values you care about. See what they have to say for themselves. You’ll learn more from that conversation than any graph or spreadsheet can tell you.
[1] Nominal budget data provided by fiscal.wa.gov, Historical Spending (annual), “Near General Fund – State” (NGFS). NGFS includes the General Fund, Education Legacy Trust Account, Pension Funding Stabilization Account, and Opportunity Pathways Account. The largest of these is the state general fund, which is the fund in which most general revenues are deposited; the other funds have more specific purposes. Washington receives additional federal funding (not shown here) that is reserved for specific services, such as Food Stamps, Medicaid, and children’s health. The state legislature also adopts separate budgets for transportation (using the gas tax and other dedicated revenue) and capital projects.
[2] Real (inflation-adjusted) numbers calculated by the author using the Implicit Price Deflator (IPD) provided by the Bureau of Economic Analysis and economic estimates from the Washington State Economic and Revenue Forecast Council. The IPD is a measure of inflation, similar to the Consumer Price Index – however, the IPD includes a measure of inflation specifically for state and local governments, which is used here.
[3] Yes, I hear you there in the back, and I get that not every person uses everything our state has to offer, and different public structures/services cost different amounts. Here’s the thing: in general, everybody benefits, directly or indirectly, when our state government delivers on widely shared/supported public values. Think of it like going to a buffet dinner. Everyone pays at the door, and everyone has access to the entire buffet (in this case, our state’s public structures/services). Maybe you may only eat salad and jello, while others enjoy turkey and potatoes.
[4] State Gross Domestic Product data through 2017 via U.S. Bureau of Economic Analysis, “Annual Gross Domestic Product by State”; 2018-2019 are author’s estimates, based on 3-year rolling average of prior years.
[5] Per Capita Income data through 2017 via U.S. Bureau of Economic Analysis, “Annual State Personal Income and Employment”; 2017 data based on Q1-Q3 average of same year, 2018-2019 data are author’s estimates based on WA Economic and Revenue Forecast Council reports.
Originally published at Economic Opportunity Institute
"another $500 million regressive sales tax increase"
The Official Local Voters’ Pamphlet for the primary election in King County includes statements for and against Proposition 1, which would impose a 0.1% increase in the sales tax in order to fund arts, science and cultural enrichment programs.
The statement against Proposition 1 states, “it is unwise and inequitable to impose another $500 million regressive sales tax increase on overburdened King County taxpayers.”
The interesting thing about this statement is that one of the co-authors is state Senator Dino Rossi (45th LD), a Republican who ran for governor. Republicans are, with few exceptions, adamantly opposed to fixing our regressive tax system. In the latest session of the legislature, they refused to agree to a capital gains tax and instead insisted on raising real estate taxes to fund education. Real estate taxes are more regressive than a capital gains tax, though not as regressive as a sales tax.
It’s disingenuous for politicians who oppose progressive taxation to use an argument about regressivity to attack a ballot initiative that increases the sales or real estate tax.
At least they acknowledge that the problem exists.
I note, by the way, that the legislature, including Republicans, voted, in 2015 to raise the regressive gas tax by 11.9 cents. See http://www.thenewstribune.com/news/politics-government/article43025553.html and Gas tax increases by 7 cents in Washington state.
Is K-12 education fully funded? Not so fast
In 2009 I voted against an “education reform” bill that, amidst devastating cuts, promised fully-funding K-12 education by 2018. As I asked then, how could we expect future Legislatures to possess the courage of our convictions if even we didn’t possess that courage?
The 2009 bill’s promise was to avoid litigation, now known as the “McCleary case,” over K-12 funding inadequacy. The Washington state Supreme Court saw through the smokescreen and, in August 2015, began imposing a $100,000 daily contempt-of-court fine upon the Legislature for not progressing toward its self-imposed goal.
This year’s never-ending legislative process produced what Gov. Jay Inslee proclaimed “a historic budget that fully funds our schools for the first time in more than 30 years.” Other Democrats echoed his exultations, labeling “Democratic” a budget borne out of a Republican Senate, a claim that ignores nine Senate Democratic no votes, and frothing in a press release that it “adds $7.3 billion to Washington schools.”
Not so fast: Education isn’t fully-funded.
The $7.3 billion figure reportedly fails to subtract billions lost from local property tax revenues. The Legislature has added by subtraction before, as it did in 2013 by shamelessly counting $295.5 million in denied K-12 cost-of-living increases toward a “$1 billion funding increase.” It’s doubtful the high court will be fooled.
The budget also spreads new funding over four years, when truly meeting McCleary might require $5 billion more just by next year. It relies upon fickle property tax revenue and various gimmicks, like diverting $5.5 million from the litter account. It may also fail to fix a broken mental health system — where federal contempt-of-court fines have exceeded $21.5 million so far this year.
Political triumphalism is inevitable. But Carter McCleary was 7 years old when the McCleary litigation was filed. He graduated from high school last month. My son starts high school this fall. Am I wrong to feel impatient about the state meeting its constitutional “paramount duty”?
I also worry about the budget’s unsustainability. As a House member, I voted against budgets on that basis.
The 2007 budget, for example, was “balanced” by breaking a 1998 pension promise — largely for teachers. The state reacted to the Great Recession by decimating programs and denying state workers’ wage increases for eight years. It was heart-wrenching.
Washington continues to use baling wire and volatile revenue sources for budgets, and we are only ever a volatile president’s actions (perhaps tweets) away from another recession. The Washington state Supreme Court has, rightly, insisted on “dependable revenue sources” for K-12.
You can’t separate a budget from its shaky revenue foundation. So why should the public demand progressive tax reform if even Democrats claim progressive aims were “fully” achieved by regressive means? Settling for less is learned helplessness.
It happened in 2009, when I opposed cuts initially characterized as “cuts that will kill” — in a half-hearted case for new revenue — that rhetorically transformed into “cuts with a conscience.” The next year, Democratic super-majorities mustered courage and finally raised taxes upon … candy. Budget secrecy — culminating this year in voting on a budget no one had read — hardly helps make the tax reform case, either.
The public can handle honesty. While it might not serve the aims of political rhetoric, it would be honest to admit trying hard, as I know many legislators did, but falling short in key respects. The public must, again, hope for that honesty from the state Supreme Court.
Originally published at HeraldNet
Senator Reuven Carlyle explains why he voted against the McCleary deal: the entire burden is placed on the middle class
Video: Sen. Carlyle’s McCleary Floor Speech
(Excerpts)
70% of low income people in King County are going to see a tax increase.
There is a perception that this is about taxing rich folk in the big cities [but it’s not so].
There is not one business in this state that does not win in terms of lower taxes in this deal. And the middle class is going to feel it deeply and seriously.
The entire weight, the entire obligation, the entire bill is being sent to the middle class, seniors, working folk, renters, and so many others. We have lots of people who are, effectively, house rich and cash poor because we’ve had an explosion in the past 10, 15 years of value in homes.
To put all of that burden, in a state with the most regressive tax system in the nation, all of the burden, exclusively on the middle class . We’re better than this. We could have made it fair, we could have made it equitable, and we could have made it widespread.
We haven’t closed any tax breaks of meaningful size. We haven’t done anything. We haven’t asked anyone else [other than the middle class] to contribute. Hundreds of millions of dollars in business taxes will be reduced. Hundreds of millions in this deal. And yet a retired grandma in Ballard will see 100s of dollars of increase for a home she’s lived in for 20 years.
To put that entire bill on that grandma in the middle class is just not right.
This middle class property tax increase is just too much, too high, too unfair, and too narrowly applied.
Republicans work hard to main our regressive tax system that benefits the rich
The perennial brinkmanship that the Republican State Senate engages in on the State Budget can best be seen as a concerted effort to maintain the most regressive state system in the United States. Please see the chart from Money Magazine, hardly a progressive publication. Essentially, every two years, the Republicans fight to maintain a system where the middle 60 percent of us pay four times the percentage of our income in state taxes that the top one percent pay and the poorest Washingtonians pay almost seven times the percentage of their income in state taxes that the top one percent pay.
If you earn $379,000 a year or more in Washington State, you are in the top one percent of earners (source: Economics Policy Institute) and the regressive status quo that Republicans fight so hard to maintain means you pay lower taxes. If you earn LESS than $379,000 a year, the Republican efforts to maintain the regressive tax system in Washington State mean you pay higher taxes than you should.
Let me repeat that: If you earn LESS than $379,000 a year, the Republican efforts to maintain the regressive tax system in Washington State mean you pay higher taxes than you should. Perhaps it is time that Washington voters sent Republicans and tax breaks for the One Percent at the expense of everyone else state tax system packing.
