In a New York Times op-ed over the weekend, the economist Greg Mankiw, using himself as an example, illustrates how higher taxes on the rich incentivize them to work less, thereby providing fewer services to the non-rich. The article is a response to the general idea of increasing taxes on the wealthy, in light of the current debate on extending the Bush tax cuts. It is also applicable to the debate on I-1098 here in Washington. (Our policy brief on I-1098 is available
Today we have posted two new briefs. The first, Now is Not the Time To Raise Seattle Taxes, is available here. The second, I-1098 Income Tax Proposal: Wrong Diagnosis, Wrong Prescription (Second Edition), updates our June 8 brief on Initiative 1098 and is available here.
"Canada's Budget Triumph," a recent paper from David Henderson (published by the Mercatus Center) is well worth the read. It is particularly instructive as Washington implements immediate spending cuts and faces a $4.5 billion deficit for the 2011-13 biennium.
A Stateline article notes that nationally this year the bulk of the ballot initiatives focus on fiscal, rather than social issues. This is certainly the case in Washington, where we have initiatives affecting taxes and state debt, among others. Yesterday we posted policy briefs on two of these: Referendum 52 and Initiative 1053.
The Research Council has pubished briefs on Referendum 52 and Initiative 1053:
The first, Referendum 52: $505 Million to Fund Energy Savings at Universities, Colleges and Public Schools, is available here.
The second, Initiative 1053: Requiring a Two-Thirds Majority to Increase Taxes, is available here.
Here are two charts to give some perspective as Seattle Mayor Mike McGinn releases his budget proposals for 2011 and 2012. In “the worst economy since the Great Depression,” the City of Seattle’s revenue collections have held up relatively well.
In its impact statement for Initiative 1098, the Office of Financial Management estimates that the initiative’s expansion of the small business credit would eliminate the business and occupation tax obligation for 118,000 Washington businesses. What fraction of Washington businesses would this represent?
For Washington residents, I-1098 defines taxable income to be adjusted gross income (AGI) as calculated at the bottom of the first page of the federal 1040 income tax form less interest received on federal obligations (which the state is prohibited from taxing). The deductions that are itemized on Schedule A and entered on the second page of federal form 1040 are not allowed. Thus, taxpayers will not be able to deduct a number of items, including home mortgage interest and charitable contributions, that are deductible for the federal income tax.
Nick Hanauer, a backer of I-1098, gave TechFlash a quote that he must have thought helped the cause:
A recent posting on the Economic Opportunity Institute’s Washington Policy Watch Blog wrongly claims that Initiative 1098 income tax proposal provides an exemption for capital gains on the sale of a business (link here).
In response to the question: “Would there be an exemption for capital gains income, such as someone selling their home or small business?” EOI provides this answer: