One of the burning questions in the debate over I-1098, the income tax initiative, is the volatility of the tax source. Proponents claim passing I-1098 makes our state's tax revenues more stable.
Is that so?
Today reporter Erik Smith, Washington State Wire, wires:
"The experience of the last dozen years has shown that income taxes are the least stable form of taxes around – less so than sales taxes or property taxes. High earner taxes are particularly volatile. Generally speaking, the more a state relied on an income tax, the more trouble it had when Wall Street tanked a year and a half ago and personal income plunged. Recession hit especially hard in states that had enacted high income rates for the wealthy – among them California, New York and New Jersey."
Whatever side of the issue people are on,” said Don Boyd of the Nelson A. Rockefeller Institute of Government at the State University of New York at Albany, “on the factual question, volatility will be greater with an income tax. How much more volatile depends on the way the tax is configured.”
In its analysis of I-1098, the Washington Research Council added: "The I-1098 income tax will be extremely volatile. A variant of the so-called "millionaire's tax," the graduated tax imposed by I-1098 established tax policy principles and would seriously destabilize our revenue system, threatening state services and assuring future fiscal crises. Put another way, I-1098 puts the state budget on a wild roller coaster and increases the velocity."
