Sightline Daily spells out how a recent Seattle Times editorial sows confusion about Initiative 1098:
Here’s what the paper says:
The new tax created by I-1098 would top out at 9 percent of adjusted gross income, with no deductions. That’s not quite the highest rate in the country: Oregon’s, at 11 percent, is at the top. But Oregon has zero sales tax. We would have high rates of sales and income taxes…
This is plain wrong. We would not have a high rate of income tax under 1098. … The comparison in the editorial amounts to deception because it completely ignores that income tax rates are marginal tax rates — they apply only to income earned above a threshold. (See all state income tax rates here.)
Let’s do the math. If 1098 passes, a Washington couple earning $400,001 per year would pay… wait for it… a whopping 5 cents in income tax.
A whole nickel! Run for the borders!
In other words, for a couple pulling down $400,001 a year, 1098 would institute an effective income tax rate of 0.00001 percent. I don’t think it really compares to, say, Oregon’s tax structure in which the same income would result in $38,272 in taxes, an effective tax rate of 9.6 percent.
The comparison in the editorial amounts to deception because it completely ignores that income tax rates are marginal tax rates — they apply only to income earned above a threshold. (See all state income tax rates here.)
How this works in practice makes a big difference.
The entire post is worth reading – and when you’re done, if you’d like to see just how low Washington’s effective income tax rates would be under I-1098 in comparison to other states, check out the graphs here:
Initiative 1098: If you were wealthy, how would Washington’s income tax compare to other states?
Initiative 1098 effective tax rates are lower than most
Looking for more information about Initiative 1098? Visit the Economic Opportunity Institute website.
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