Read EOI’s latest policy brief, “Initiative 1098: The right fix for Washington’s flawed tax structure” (Updated September 2010)

Initiative 1098* has been filed to appear on the November 2010 ballot in Washington. If passed by voters, the measure will lower taxes for most Washington residents by lowering property taxes and exempting small businesses from the business and occupation tax. I-1098 would raise new revenue dedicated to education and health services by adding an income tax on the wealthiest 1.2% of households.

Here’s what the initiative proposes:

• Reduce the state portion of the property tax by 20%;

• Eliminate or reduce B&O taxes for most businesses by raising the small business tax credit from $420 to $4,800 per year;

• Tax adjusted gross income over $400,000 (for joint filers) and over $200,000 (for single filers);

• Dedicate net new revenue from the measure — nearly $2.3 billion per year — to education (70%) and health (30%);

• Require a) regular public reporting on how revenues are spent and b) that future changes in the income tax be approved by a vote of the people

EOI’s analysis of Initiative 1098 shows the measure would:

1) Cut taxes for low- and middle-income earners. Two thirds of Washington households own their homes. These households will receive a direct reduction of 20% of the state portion of the property tax.

2) Cut taxes for small businesses. According to analysis by the Department of Revenue, of the 317,000 firms in Washington, 81% would be exempt from B&O taxes under I-1098. An additional 12% of firms would have their taxes reduced.

3) Support public education and health services. The combination of tax cuts and increases would result in $2.285 billion in new revenue per year for education and health care:

Estimated impact on state revenue 2012: Initiative 1098

Source: Washington State Office of Financial Management

For a more detailed look at these findings, please read our complete analysis of Initiative 1098.

**UPDATE 08/11/2010: The Washington State Office of Financial Management has released an independent financial analysis of Initiative 1098 — these figures have been updated accordingly. Read highlights and get the full report here.

*UPDATE 05/21/2010: Because Initiative 1077 has been refiled and renumbered as Initiative 1098 since this post was first published, the post title and references to the initiative number have been updated; the content of the article is otherwise the same.

Looking for more information about Initiative 1098? Visit the Economic Opportunity Institute website.