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Opinion: History of Washington’s income tax shows why we need it

The income tax continues to be a hot-button issue in Washington. (Getty Images)

Many have described Washington’s tax structure as one of the most regressive in the nation. But how did we arrive at that place? The simple answer is that once people get accustomed to living without an income tax, it’s tough to apply it after the fact.

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“I think we’ve been so used to not paying income tax here, it’s kind of a point of pride,” said KIRO Radio historian Feliks Banel.

The state’s battle over income tax goes all the way back to the 1890s, when roughly six out of every 10 people in Washington lived on a farm. Because of that, the government saw fit to tax property, rather than income.

Fast forward to the 1920s, and the evolution of transportation meant that local governments needed to pay for things like roads and mass transit. Suddenly, property wasn’t the only valuable commodity. Right around the Great Depression, the farming community began to push for an income tax as a more equitable way of raising money.

In 1931, an income tax was passed in Washington state, before getting vetoed by Republican governor Roland Hartley. The measure then ended up in the courts, which ruled that it violated the Washington State Constitution, which mandated that property taxes needed to be applied uniformly.

Essentially, the court argued that income should be treated like property, making for a legal interpretation that’s survived to this day. That’s had the state’s tax structure facing criticism over the years, for taking an 1889 standard and applying it the modern version of Washington.

“Property is kind of complicated,” Banel described. “When you own a piece of property, it’s an asset, and its value shifts from year-to-year, depending on the market. But that property tax is essentially the same each year with ups and downs, depending on its value. This court ruling in the 1930s meant that income would be treated that way as well, which is pretty bizarre and twisted.”

Another attempt

Bill Gates Sr. — the father of Microsoft tech magnate Bill Gates Jr. — kicked off another push for an income tax in 2010.

That failed too, spelling out why Washington residents have been so resistant to the income tax over the years.

“If Bill Gates Sr. couldn’t get enough people to vote for it, it’s hard to imagine any situation coming up where people would willingly tax themselves,” said Banel.

Today, the debate around income tax continues to rage on, after an appeals court recently ruled Seattle could implement it, provided the tax was uniform across all earners.

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Despite what many advocates might view as forward progress, though, the implementation of such a thing remains obscured by politics.

“I don’t see any politicians on either side attempting to sincerely persuade the people on the other side and have an actual conversation,” Banel points out. “We’re just baked into these positions.”

Meanwhile cities have had to get creative in the ways they raise money, sans the massive source of revenue typically provided by an income tax.

“You have leaders looking at things like congestion pricing where we have to pay tolls on things, because if you can’t collect the taxes from everybody, a system’s going to be set up that targets people almost like the sales tax,” Banel said.

Moving forward, it’ll be up to the Washington State Supreme Court to decide whether the appeals court ruling will stand. If it does uphold the decision, it would put an exclamation point at the end of a 130-year-old saga.

Correction: A previous version of this piece erroneously reported Bill Gates Sr. launched an income tax effort in the 1960s. In fact, it was in 2010. Governor Dan Evans launched his effort in the 1960s.

 

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