Lunch Links: Democratic Candidates for New Hampshire Governor Pitch Tax Increases; Local Income Tax Back on Ballot in Olympia, Washington, For Now; China Consumers Rush to Buy Small Cars to Get Tax Break
September 8, 2016
Today is September 8, the date in 1933 when the Washington Supreme Court ruled that a graduated state income tax violated the state’s constitution. Citing a state constitutional provision expansively defining property as everything and a separate constitutional provision requiring uniformity in taxing property, the Court concluded that an income tax applying different rates to different income levels violated uniformity and thus could not be sustained. The dissent argued that the equating of income and property taxes was “sheer sophistry,” but said regardless, the matter should be left to legislative discretion. The case, Culliton v. Chase, has never been overturned, with voters rejecting efforts to enact a graduated income tax on nine occasions since 1933.
Interestingly, the exact same day, the same court upheld the Washington state B&O gross receipts tax in State ex rel. Steiner v. Yelle. The majority opinion upheld it against a uniformity challenge by defining the tax as not on property or the acquisition of property, but on the privilege of acquiring property. As such it’s an excise tax not restricted by the state’s uniformity clause. (The opinion also said upholding the B&O tax was okay because “it will be but temporary.” The tax is still with us.) Four justices approved both the income and B&O tax, and four justices opposed both. The swing vote, Justice Oscar Holcomb, never truly explained his reasoning.
Here are some interesting links I came across:
The Tax Code Does Not Subsidize CEO Pay: My colleague Scott Greenberg refutes Vox’s incorrect piece that the federal government doesn’t tax CEO pay. (It’s called the income tax, Vox.) (Tax Foundation)
Designing Tax Triggers: We have a new study out explaining the new innovation of state tax triggers: tax reductions or tax policy changes implemented over time subject to meeting pre-established revenue (or similar) targets. Eleven states and D.C. have used them in recent years. (Tax Foundation)
Olympia Income Tax Back On: An appellate judge stayed the decision striking the proposed 1.5 percent local income tax off the ballot, while not ruling on the merits of the case. Washington state law unambiguously bans city income taxes so it’s very strange to me it’s gotten this far. (State Tax Notes)
Wisconsin Republicans Offer Tax Goals: While Governor Walker (R) is pushing a gimmicky sales tax holiday, legislative Republicans proposed a package of changes, including a call “to eliminate loopholes and targeted tax breaks in favor of broader-based tax relief. Whether it is removing outdated and illogical exemptions to the sales tax, federalizing our tax code where it makes sense, or targeting burdensome and inefficient taxes, we will explore ways to improve Wisconsin’s tax climate.” They want a study group to recommend specifics. (Wisconsin Public Radio / Wisconsin Legislature)
New Hampshire Anti-Opioid Tax Ideas: Three Democratic candidates for governor of New Hampshire sparred last night, pitching tax increases to raise money to fund anti-opioid efforts. Mark Connolly wants to raise the gas tax, the cigarette tax, and business taxes. Steve Marchand wants to increase the gas tax, business taxes, and a marijuana tax. Colin Van Ostern wants to expand Medicaid. (Governing)
China Auto Sales Rise 24.5% To Beat Tax Cut Expiration: It’s an auto-buying boom in China as consumers rush to buy before a year-end expiration of a tax break on the purchase of small cars. GM sales in China rose 18 percent; Nissan, 17 percent; Ford, 22 percent. (Bloomberg)
Income and Payroll Taxes: Most Americans pay more payroll tax than income tax. (Tax Policy Center)