Don't believe that a WA income tax will only tax the "rich"

SEATTLE, Washington - The politicians are scraping around for new revenue sources in Olympia, but at least for the moment they have shelved the idea of creating a state income tax on people earning above $250,000 per year.

Now, you're welcome to think that the state should have an income tax (although it would probably drive people like me from the state). There are legitimate pros and cons. But you're a straight-up sucker if you think such a tax would continue to only be levied on the "rich" going forward.

Look at the history of the federal income tax for guidance on this. The first federal income tax created after the passage of the 16th Amendment in 1913 only applied to income above $3,000 (which if you do the math is almost $65,000 in 2008 dollars). The bottom rate was 1% (ONE Percent!), going up to 7% for income above $10,000,000 in 2008 dollars. Given the $3,000 threshold, less than two percent of American households paid any income tax at all at that time.

This tax was pitched as just grabbing a bit from the very very rich, those who could afford it, just as the proposed Washington income tax has been pitched.

Interestingly, when the 16th Amendment was being debated, there was talk of putting a 10% hard cap in the amendment. This was rejected, because it was considered absurd, a total howler, that the income tax rate could ever rise that high. (See here). In fact, by 1918 (under wartime conditions) the top rate had blown right through the inconceivable 10% barrier all the way to 77%.

State governments can't wage war as a justification for raising taxes, so they just institutionalize big spending increases and new programs in good times and then start cooking up ideas for ways to take more money to pay for these things when things sour. This phenomenon is discussed in detail in the excellent cover story from this month's Reason magazine.

Of course, every last penny of the government spending (in programs that sometimes did not even exist a few short years ago) is alleged to be indispensable, crucial to the functioning of a civilized society, kids will be starving in the gutters if anything is cut, etc etc.