Recent Stories with tag B&O

Bill Gates, Sr.

Word "leaked" out last night that an income tax initiative could join the marijuana legalization initiative already in progress. Joel Connelly posted the news to Strange Bedfellows, describing I-1077 as a "sweeping plan to cut the state property tax, eliminate the Business and Occupation Tax for small businesses and create an income tax on high income couples."

How times have changed--Connelly also points out that Republican governor Dan Evans tried twice to bring an income tax to Washington in the early '70s. Now, a Democratic governor and legislature won't touch the idea. Bill Gates, Sr., is the figurehead for the initiative; Gates has been unusually willing to argue for higher taxes on the wealthy, so he has probably already lost all the country club friends he's going to.

I-1077 is (like State Senate Majority Leader Lisa Brown's earlier, unsupported proposal) a high-earner's tax, applying first a five percent tax to income earned over $200,000 for individuals, or $400,000 for couples. A second bracket of $500,000/$1 million would apply a $15,000/$30,000-plus-nine-percent tax (again, on income earned above that amount). For some reason, Canadian Business Online has the most details on the initiative's actual brackets.

Total revenue could be $1 billion. In return, the Seattle Times says, the initiative "would cut the state property tax by 20 percent" and "end the business-and-occupation tax for small businesses."

The success of the initiative is dependent on first gaining 240,000 signatures between now and July, so that it makes the ballot; then winning in November, and then not being ruled unconstitutional, thanks to a 1933 Washington Supreme Court ruling that interpreted income as a form of property. Under the state constitution, "property taxes must be uniform on every class of property and can't exceed 1 percent of the value of property" (the Seattle Times, again).

"Rainier on Tap" courtesy of troyjmorris

The House Democratic Caucus reports on this weekend's revenue package (pdf) agreement, down at the Capitol. They are careful to note that the B&O surcharge, and soda and beer tax increases, are set to expire in 2013, along with the recession. Got that, recession? 2013 and you're out!

To keep B&O taxes from killing very small businesses, there's a credit for the first $46,600 in gross receipts. There's also a credit for state candy-makers, and the first $10 million you sell in soda is exempt. "None of Washington's breweries are expected to be impacted by the beer tax increase."

A $1 increase in the cigarette tax, for a grand total of $3.025 per pack, has passed the House and is in being considered by the Senate. You might think that's a lot, but Sen. Rodney Tom (D-Medina) says if you add up the medical care for cigarette-caused health problems, the "cost" of a pack of cigarettes is $8.47.

That BoingBoing headline--"Broke-ass Washington state set to give MSFT $100M annual tax cut and amnesty for $1B in evasion"--should make the people (well, Jeff Reifman) at Microsoft Tax Dodge happy--they've been wondering where the Seattle Times has been on this issue. Who needs old media? BoingBoing is here.

To catch you up, many people have long known about Microsoft's bid to avoid paying Washington state's B&O royalty tax by setting up Microsoft Licensing Incorporated in Reno, Nevada. Jeff Reifman has been reporting on that story since 2004, as he will be the first to mention, in a slightly incredulous, "Has it been that long?" way. (Reifman has worked at both Microsoft and Seattle Weekly.)

Although Microsoft makes no secret of producing its software in Washington state, the idea is that since the sales "location" is domiciled in Nevada, they're not subject to Washington state taxes. Notes Reifman:

Nevada's tax rate for licensed software is zero. Washington's is .484%, lowered in 1998 from 1.5% by lobbying from...the software industry....

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The Seattle City Council is working on its 2010 proposed budget, which differs from the "endorsed" budget in that this time they're serious. (The city uses a modified biennial budget process, producing an endorsed budget for two years that sets spending levels, but does not appropriate money, for the second year. The proposed budget takes care of that.)

The Council's 2010 budget is weighing in so far at $3.88 billion, and is supposed to address a $72-million shortfall between the endorsed budget's predictions of revenue and what has actually transpired.

For instance, Seattle City Light's surplus electricity sales were predicted to be  about $142 million for 2009, but now it's estimated at almost half that: $77 million. The Department of Planning and Development (DPD) was supposed to bring in $28 million from construction permits and licensing and so forth, but with construction and real estate markets in a coma, the new number is $14 million for 2009.

B&O tax revenue "growth" declined severely in 2009--I'm quoting the city budget there, but my loyalty to English demands that I mention there was zero growth--and in fact revenue is projected to dip about 7.4 percent, to $162 million.

So the budget cutting is general, though the Council has dialed back some of Mayor Nickels' cuts, and added back in some library funding. In this environment, it's odd to see that they have also repealed the employee hours (aka "head") tax, delighting the bean counters at the Seattle Times, but resulting in a loss of $4.5 million for the city. The tax levied was not more than $25 per full-time employee per year, and there were deductions if the employee(s) didn't commute by driving. Businesses grossing under $80,000 were exempt.

Political theater aside--the contretemps over whether City Council members would "chip in" to reduce a $72 million shortfall forced me to exhale slowly with my eyes closed--the reality is that the city's tax base has shrunk to what it was in 1987. It is a substantial shock, and with a jobless "recovery" on the horizon, the Council's Richard McIver is probably right in expecting a worse 2011. And while the City Council is busy getting lean and mean, simple budget starvation tends to yield the same results.

Mayor McGinn, your hot seat is ready.