Income Tax Quashed, Ballmer To Cash In Billions

theodp writes "Washington's proposed state income tax not only prompted Microsoft CEO Steve Ballmer to spend $425,000 of his own money to help crush the measure at the polls, it also inspired Microsoft to launch a FUD campaign aimed at torpedoing the initiative. 'As an employer, we're concerned that I-1098 will make it harder to attract talent and create additional jobs in Washington state,' explained Microsoft general counsel Brad Smith. 'We strongly support public education, but we're concerned by key details in I-1098. This initiative would give Washington one of the top five highest state income tax rates in the country. I-1098 would apply this tax rate to all income, including capital gains and dividends, and would not permit any deductions for charitable contributions.' Nice to see a company take a principled stand, backed by a CEO who's not afraid to put his money where his company's mouth is, right? Well, maybe not. Just three days after the measure went down in flames, Ballmer said in a statement that he plans to sell up to 75 million of his Microsoft shares by the end of the year to 'gain financial diversification and to assist in tax planning.' Based on Friday's closing price of $26.85, the 75M shares would be valued at approximately $2 billion. All of which might make a cynic question what was really important to Microsoft — public education, or a $2B state income tax-free payday for its CEO?"

Comments

No surprise

[betterunixthanunix]

A corporation is required to maximize the profits for its share holders. Ballmer is a major share holder. Of course Ballmer's profits matter more than public education.

Re:No surprise

[91degrees]

No it's not. Not exactly. The board is meant to run it in the best interests of the company, but this is not always about maximising shareholder profit. For example, an ethical farming company could quite legitimately refuse to sell a parcel of land to a developer which would use the land for purposes counter to the ethics of the company, and could probably be sued by its shareholders if it didn't no matter how much the other company was willing to pay.

Re:No surprise

[Dolphinzilla]

that may be true about not "maximizing" a profit but as soon as the company is not on the profit side the shareholders either sell their stock, or hire new management. At some point it IS after all a business - not much point in having it if its not profitable

Re:No surprise

[es330td]

The problem is that the person making that statement didn't get it quite right. From my professor of Managerial Economics: "The job of management is the LONG TERM maximization of shareholder wealth." This means that selling one's manufacturing equipment for a short term gain doesn't make sense because next year income will be zero. Likewise, it benefits the long term view for employer and employee to have cordial, versus adversarial, relations because the most productive, innovative workforce is the one that wants to come to work each each day. As a shareholder, I would hope that the management can wring every cent to the bottom line they can. I also expect, however, that they will not open the company to a future lawsuit in the process.

Re:No surprise

[davester666]

Unfortunately, particularly if you are a public company in the US, long term = did we make this quarters numbers?

Re:No surprise

[Locutus]

Selling close to 20% of his stake in Microsoft seems rather interesting. Was the tax increase so great that his believe in the growth of Microsoft, or lack thereof, exceeded his ability to come out ahead down the road?

That's a large chunk to be selling off just because of a tax. 75 million shares when out of something like 400 million total is more than just a tax issue.

Behind the scenes, he must not have much faith in Windows Phone 7 making them much money. But he would know that Microsoft has lost billions and billions on lots of products which have been, and continue to be, money pits.

LoB

Re:No surprise

[drinkypoo]

Let me be blunt again: Fuck public education. It's not more important than educating my children. I care about my family. That's it. My wife, and my children.

This attitude is how we get No Child Left Behind producing legions of dipshits who are going to have no choice but to enlist in the military because no one else will hire them, and to serve as cannon fodder because any more desirable job requires the ability to use your brain. These useful idiots will continue to pad out our standing armies so that we have the power to project our might across the globe for economic gain for the same people who convinced you that public school is a bad idea. The bad idea is letting the government fuck it up...

Well...

[crumbz]

...something is to be said for unenlightened self-interest. I am just not sure as to what.

He wouldn't be paying income tax on that

[zippthorne]

Income tax is on income, not capital gains. He wouldn't have been paying income tax on his share sale anyway.

And his argument was that it would hurt his ability to attract talent. Unless by talent he meant himself I fail to see how what he does with his assets has to do with this issue.

Re:He wouldn't be paying income tax on that

[Pharmboy]

I also fail to see the story. Ask any business manager and he will be against higher income taxes, in part because it makes it harder to attract new talent when your area has income tax higher than average. That means you have to PAY higher than average just to let the person break even on net bring home income. It doesn't so much matter WHAT the tax increase would be used for, as politicians have a habit of claiming that a tax increase is earmarked for a certain project, and in reality it just goes to the general fund.

Here in NC, they sold the idea of a lottery that way, the "education lottery", as "all the money will go toward education". Sure, and for each million in additional lottery money, they just cut the budget by a million, so the net effect is ZERO advantage to education and for all intent and purpose, the money goes into the general fund. But you can "feel good" about voting for the lottery, since it means you are thinking of the children. Politicians love new money, just as businessmen love low taxes.

Re:He wouldn't be paying income tax on that

[Anonymous Coward]

Income tax is on income, not capital gains. He wouldn't have been paying income tax on his share sale anyway.

You didn't even make it through the entire summary, then. It said "I-1098 would apply this tax rate to all income, including capital gains and dividends".

Re:He wouldn't be paying income tax on that

[Anonymous Coward]

If you would have read above, you would see the tax DOES apply to capital gains. Also, it applies to anyone who makes more than 200,000 a year, so it would hurt his ability to recruit management employees.

Not really trying to start a war, but people should actually read before they post. The capital gains part is right in front of your face in the paragraph above.

Re:He wouldn't be paying income tax on that

[CajunArson]

Stop using logic when Slashdot is having its 2 minutes of hate for Microsoft! And for the love of There-is-no-God don't point out the fact that Ballmer will be paying more $$ to the Federal goverment in Capital Gains taxes in this one transaction than all of the collective readers of this Slashdot story will pay in any form of taxes for their entire lives combined. Ballmer is rich, and therefore must have stolen the money from the Government! Anyone who makes more money than the Slashdot poster bashing the rich is automatically an evil rich bastard!*

* (Exceptions apply to CEO's of companies we are fanboys of, and billionares who dump money on left-wing "grassroots" causes like Moveon.org, with an exception-to-the-exception being Bill Gates who is still evil even though he dumps money on causes that the group would approve of if anyone else dumped the money)

Re:He wouldn't be paying income tax on that

[ltlasset]

hahaha. great.

Re:He wouldn't be paying income tax on that

[cynyr]

Depends, I'd love to hand minnesota ~$300 extra this year if it would help fix the damn roads, or build a train, or make the buses work(by work, i mean have enough routes to enough useful places at enough times and not turn a 30 minute drive into a 1 hour 45 min ride.)

Re:He wouldn't be paying income tax on that

[kevinmenzel]

Yup, me. I pay pretty high taxes since most of my income is investment rather than employment income. So from an income tax perspective, I pay a fairly high rate, as my income is grossed up by some percentage, before it is taxed. I also pay sales tax on almost everything (13% HST, I live in Ontario). I'm young, healthy, I usually drive instead of taking public transportation, and when it comes to paying taxes, I'm all for it. Of course I'm a left leaning person who believes that civic and social responsibility are important features of a functioning democracy.

Re:He wouldn't be paying income tax on that

[Kohath]

There's also the people that want to spend the money. They'll claim they're "happy to pay" higher taxes for service X. But what they really want is for you to pay higher taxes so they can enjoy service X. When they say they're "happy to pay", they're essentially saying "I'll pay an extra $10 so I can spend $10,000,000 on things that I want".

Meanwhile, there's nothing keeping them from paying as much extra tax as they want already. Your local, state, and national treasuries are happy to accept any additional amount you'd like to send them. But the "happy to pay" people don't send any extra money. Because "happy to pay" is a disingenuous fraud.

Re:He wouldn't be paying income tax on that

[epine]

Ask any business manager and he will be against higher income taxes, in part because it makes it harder to attract new talent when your area has income tax higher than average.

Miracle! If you frame the question as getting more than giving, everyone pipes up in full agreement. Uniform consensus is usually a dead giveaway that the question is half framed. It's also hard to attract talent if your civic structure decays until only Batman is holding the fort.

Around here people are opposed to the HST (harmonized sales tax). This raises more revenue for the province, and helps to balance the books. There are only two alternatives: increase a different tax, or cut programs (unless you count waving the magic wand of waste-free administration, as much beloved by the pumpkin pie in the sky sect). The programs large enough to achieve the necessary cost savings are most likely the usual suspects: education, health care, and pensions.

What people are really in favour of is decreasing taxes while increasing programs. You can sell that proposition any day of the week. You can even return from the political grave to mobilize heroic opposition. (Damn, I thought we had put a stake in that guy. Bill Voldemort. I dare not speak his name.)

Government is a necessary evil. Solutions proposed by the cheerleaders of polarization (no government/all government) are worse than the disease. The useful debate is on subjects such as accountability and effectiveness, not self-interested wishful thinking by sober capitalists cloaked in the gravitas of expensive suits while fixing their beady eyes on their next quarterly bonus payment.

The joy of capitalism is the pursuit of narrow self-interest. That's why it works, and that's also why you don't solicit the people involved for balanced perspectives.

Besides, fat cheques speak louder than words.

Re:He wouldn't be paying income tax on that

[YrWrstNtmr]

Yup, me.
...and when it comes to paying taxes, I'm all for it. Of course I'm a left leaning person who believes that civic and social responsibility are important features of a functioning democracy.

Of course, there is nothing preventing you from stroking an extra check to the govt. Asking/requiring/demanding your neighbors do the same...not so good.

Re:He wouldn't be paying income tax on that

[Blakey Rat]

Well, you see, all of Washington State is obviously evil because Microsoft employs some people here. As a result, any decision made by Washington taxpayers is also obviously evil. (The fact that Boeing, Nintendo of America, Amazon, Costco, Starbucks etc. employees all voted the same way? Well, that's irrelevant.)

If Slashdot didn't post this, they'd need some other paper-thin excuse to bash Microsoft today! And those are hard to think up sometimes!

Re:He wouldn't be paying income tax on that

[thetoadwarrior]

Correct me if I'm wrong but doesn't California have a state income tax as well as the highest sales tax and yet it still manages to a magnet for high tech companies. Even Microsoft has offices in Silicon Valley which, to me seems a bit unnecessary especially if high taxes are so detrimental to businesses.

Re:He wouldn't be paying income tax on that

[drsquare]

Is the anybody that loves high taxes?

Europeans.

What amuses me is how America's system of 'trickle down economics', whereby they keep average wages down whilst all the proceeds of growth are sucked up by a largely non-producing elite, has left it in such dire economic straits that only reckless borrowing (both private and government) keeps the whole house of cards propped up, yet no-one actually questions this system. It's as if the more the system fails, the more people believe in it. The more money made by the rich at the expense of the workers, the more people think taxes on the rich are too high; the more average people struggle to stay afloat, the more people think wages are too high and unions should be crushed so people can earn even less.

After firing millions of workers, corporate profits are soaring. So what do the people do? Vote for the candidates backed by those corporations. It's almost as if the American people are committing economic suicide.

Re:He wouldn't be paying income tax on that

[schmidt349]

I think you're exaggerating a bit. The Two Minutes Hate is really reserved more for Apple and Facebook these days.

Re:He wouldn't be paying income tax on that

[AK Marc]

I'd gladly pay higher taxes to improve government services. But sending them an additional check will not have that result. So wanting higher taxes and better services along with those higher taxes is unrelated to your quip about sending in voluntary payments.

Re:He wouldn't be paying income tax on that

[TheRaven64]

It's called 'The American Dream' and is a wonderful piece of propaganda by the plutocrats. The American Dream says that one day, you too could be a plutocrat. If you believe this, then you will always vote for things that are in their interests.

Re:He wouldn't be paying income tax on that

[Anonymous Coward]

No, you have probably been called a racist because of making sweeping statements about groups of people you don't see yourself belonging to.

In the very post I am replying to you show a tendency to make sweeping statements about groups of people, to pigeon-hole others, and to view the world through a mechanism of "us and them".

All in all, those things are a recipe for disaster. Or not, if you seek to rule.... Do you think the holocaust could have happened if it weren't for prejudices in society that the Nazis were able to stir up?

Re:He wouldn't be paying income tax on that

[MartinSchou]

Ballmer will be paying more $$ to the Federal goverment in Capital Gains taxes in this one transaction than all of the collective readers of this Slashdot story will pay in any form of taxes for their entire lives combined.

Really? Interesting claim. Let's examine it a bit.

It' not entirely unfair to assume that each member is a reader. In fact, we can safely assume that there are more readers than members, but there are also inactive members (i.e. people who used to read, but don't any more), but since you didn't exclude those (collective readers implies every single person who has ever read Slashdot), let's just go with the highest member number I can easily find - mine: 1,360,093.

Now, Ballmer is selling off about 2,000,000,000 dollars worth of stock. That's 1,471 dollars per Slashdot member. Assuming a low average life span of 60 years, most people will be paying some kind of tax for 40 of them. Now we're looking at paying an average of 37 dollars a year. In any kind of tax (your words). How about sales tax? I think it's a fair assumption that we will be averaging more than 37 dollars a year in sales taxes alone.

There is a fault in my maths though. 1) Average life span is higher than 60 years. 2) On average we will have paid taxes for more than 40 years when we die. 3) There are now more than 1.36 million Slashdot members. None of these facts makes your claim any less idiotic, even if you were being facetious.

Re:He wouldn't be paying income tax on that

[Shakrai]

Hopefully I-1098 was actually a bad idea, because otherwise Ballmer just scammed the Washington electorate.

How did he "scam" them? He inserted his thoughts and ideas into the public debate. Nobody held a gun to a voters head and said "You must do what Mr. Ballmer says is right."

Re:He wouldn't be paying income tax on that

[shutdown -p now]

Around here people are opposed to the HST (harmonized sales tax). This raises more revenue for the province, and helps to balance the books. There are only two alternatives: increase a different tax, or cut programs (unless you count waving the magic wand of waste-free administration, as much beloved by the pumpkin pie in the sky sect). The programs large enough to achieve the necessary cost savings are most likely the usual suspects: education, health care, and pensions.

Is that Ontario or BC?

For BC at least, the issue is not just about HST itself, but about how it was sneaked in - a supposedly fiscal conservative party got voted in by claiming, in public, that they would absolutely not support the introduction of HST, because it's so bad and awful. One month after the election, they proudly proclaim that they're signing up for HST, and go ahead to explain how totally awesome it is, all while saying that they didn't quite understand it before the election. It's no surprise that you get a lot of pissed voters that way... even more so when leaked documents show that party leadership was planning the HST move all along before the election, and they were lying through their teeth just to get the votes.

A lot of people that I know here signed the anti-HST petition not because they think the tax is wrong, but because they believe that such things should be done right and proper - with true consent of the electorate - in a properly functioning democratic state.

Re:He wouldn't be paying income tax on that

[shutdown -p now]

I-1098 would apply this tax rate to all income, including capital gains and dividends

Which is a wonderful idea if you ask me. I don't see why some sources of income should be magically exempt - and it gets particularly suspicious when those are the very same sources most heavily used by the richest (and are what is largely responsible for the growing wealth divide).

Re:He wouldn't be paying income tax on that

[hedwards]

It's because it's a bunk argument. MS is more or less stuck in WA state because they use our courts. They have chosen in recent years not to pay their taxes, except for the property taxes and what sales tax they can't avoid. But they owe the state a huge amount of money in back taxes. The number is somewhere around $1 billion or so at present.

Re:He wouldn't be paying income tax on that

[hedwards]

It's arrogance and ignorance. A lot of people assume that because the Democrats had majorities in both houses and that the Senate had 60 votes with the independents, that the Republicans weren't responsible for anything. The problem is that for the last 2 years, the Republican party has refused to have any involvement in pretty much anything. And with 60 votes in the Senate you need absolutely ever one on every vote, and each and every Senator is the one that made the difference.

They had their chance to contribute to the healthcare bill, for instance, and not only did they opt out, but they chose to make up outlandish lies like the death panel lie and do whatever they could to kill the bill.

Re:He wouldn't be paying income tax on that

[nashv]

Trickle down economics? The system you described is exactly not trickle down economics. That's the one where it doesn't matter that the rich get richer, because they are then willing to pay higher for the services and goods they use, thus letting the money 'trickle-down' to the lower economics strata.

The problem is that 'trickle-down economics' only works when you have continuous wealth generation. India is a perfect example of how it works well when you have an insane 8.5% growth rate. The US has not exactly been generating net wealth for some years now, rather its propped up by an incestous cycle of self-lending.

As for Europeans, I live in Germany. We have high taxes, and we enjoy superb public transportation, almost free education up to the Doctorate level, public healthcare and so on. By I assure you, Germans are getting awfully pissed about paying for bail outs of some countries (I am looking at you, Greece) who can't seem to balance their cheque books.

Re:He wouldn't be paying income tax on that

[apoc.famine]

And why wouldn't they? Did you see what happened this election?

My state went from light blue to dark red. We've got like 2 democrats left in the House, every other major elected position is republican.

With outcomes like that, why would you expect the republicans to do anything but lie and stall? That seems to work wonders. And it once again leads me to idle thoughts about how we could require an IQ test for voting, as a way to weight votes. If you think that the democrats started death panels and are utter failures for not stopping two wars and fixing the economy in 2 years, your vote shouldn't count for much. It's not reliable in the least.

Re:He wouldn't be paying income tax on that

[br0k_sams0n]

Indeed, clearly higher European tax rates lead to a better recirculation of the wealth and overall fiscal health superior to the US. Unless you actually look at the data. Belgium, Ireland, the UK Spain, Portugal and Greece all have higher private debt defaults than the US as a percentage of GDP, Germany is statistically equivalent. All of those states aside from Germany, despite higher taxes have a higher debt to GDP ratio and again, Germany is roughly equivalent. The Europeans may "love" their higher taxes, but they aren't any better at controlling their spending or debt, quite the opposite. http://online.wsj.com/article/SB10001424052748704140104575056751636031606.html

Re:He wouldn't be paying income tax on that

[nashv]

Sure, German banks hold Greek bonds. So basically Germans have had to lend money to Greece and then let it go. That counts for about 45 billion Euro. And then the total bailout package cost about 120 billion Euro. I don't know how you figure that the Euro came at the expense of "places like Greece". Places are Greece are not forced into the EU or the EEZ. They vie for it. And Germany has always been the most generous funding source for the EU.

As Time puts it :

According to polls conducted in Germany last week, 53% of people want Greece tossed out of the euro zone if it can't resolve its deficit dilemma without outside funding — a financial helping hand that a full 71% of Germans don't want their government to extend. Though no similar surveys have been conducted in France, leaders there say the public sentiment is much the same. "There are cultural differences for why the French wait for something to happen before reacting when the Germans respond as they see it developing, but opposition to a bailout — if that happens — is likely to be similar in both [countries]," says an adviser to French Economy Minister Christine Lagarde, who commented on background due to the sensitive nature of the situation. "Try explaining to public opinion you're using its money to help Greece after it kept building up debt and lied about it the whole way."

Re:He wouldn't be paying income tax on that

[Anne Thwacks]

The problems in Europe are not due to the social problems. They are due to the fact that, without external control, forex trading and derivatives tradings become Ponzi schemes. They suck in all the capital that would otherwise fund farming and manufacturing, and constructing the country's infrastructure.

Since there was no capital left after the last fiasco, the social programs (which the vast majority support) are being raided to provide more capital so the Ponzi schemes can continue to benefit the few.

Had it not been for the Ponzi scemes, the social programs were sustainable despite being very badly managed in some cases.

Do not confuse social programs with "jobs for the boys" schemes, where huge numbers of people are employed in pointless jobs by left wing governments to create dependents who will vote them back in (Like Blair did in the UK, and Mugabe does in Zimbabwe).

And so what?

[Flozzin]

Just because the CEO then uses the tax free environment he helped create the article questions his intentions? Of course it was going to benefit him greatly, and just because it does, doesn't make any of the prior points against the tax less valid. Its his money, he worked for it. Get over it.

Re:And so what?

[lawnboy5-O]

He did not work for it... sorry. That is trivializing what it means to work for your money. And most importantly, this is a clear example where money and corporate wealth need to be abolished all together from our rules of governance.

Re:And so what?

[Wonko the Sane]

There's nothing socialists hate worse that failing to get their hands on someone else's money.

Re:And so what?

[mibe]

While Ballmer may not be a corporate superhero from an Ayn Rand fairytale, I have no reason to believe that he did not work for his money, nor have you presented evidence to the contrary. If he has money that he did not inherit, where do you suppose it came from? Did he steal it? Would you mind pointing to some rich people who did work for their money? Of these, which ones deserve to keep their money and which ones deserve to have it taxed away? Or do they all, by virtue of having more money, need to have more taken away?

Re:And so what?

[swb]

I have no reason to believe that he did not work for his money

What exactly has "work" been like for Ballmer these past 10-15 years, anyway?

Has it been anything like the "work" that you and I might know? The kowtowing to tyrannical bosses? The ridiculous hoop jumping and bureaucracies, the ceaseless busywork and minutiae, the pressure to "do more with less", putting up with substandard and inadequate facilities and resources, working late hours and riding public transportation back to an Ikea-furnished apartment?

Or has Steve Ballmer's work been...different...a series of trips taken in a private jet, being driven in a limousine from the jet stairs to the luxury hotel accommodations where he'd stay? Dining out at four-star restaurants? Sitting in an expansive office on luxury furniture, droning on to subordinates before driving a company-reimbursed luxury automobile back to a large luxury home, attended to by a professional staff of gardners, housekeepers and dining on a meal prepared by a professional chef?

Yeah, you're right. He has been working hard. And sacrificing. Cut him that $2 billion check. He deserves it.

Re:And so what?

[Wonko the Sane]

A capitalist will commit fraud and manipulate the law to make it legal. Or will use eminent domain or asset forfeiture to get the government to take it from you.

What you described is not capitalism. Just because a bunch of statist pricks have hijacked the term doesn't mean the meaning of capitalism has changed.

Re:And so what?

[Blakey Rat]

So what are you proposing? Some kind of Federal Council of Does-He-Really-Deserve-That-Paycheck? Would it say "yes" to Tiger Woods and "no" to Ballmer? How about Oprah, does she deserve her payday?

Or maybe Ballmer is the *only* one the Government should get to make that decision about? Single out a single person? That's Democratic, right?

What, in practical terms, are you proposing exactly?

Re:And so what?

[Missing.Matter]

Wow, bitter much? I can see your job sucks, but I can guarantee you Ballmer makes more billion dollar decisions before he puts his pants on in the morning than you'll make in your entire life.

Re:And so what?

[mibe]

Yes, the claim is that he's worked hard. And then you went on a rant claiming that he currently lives very well, and (I guess, because of that) doesn't work hard. Obviously, he no longer has to. So, take his money? Who gets it if he doesn't "deserve" it? In your opinion, do any rich people - like Oprah, Bill Gates, Warren Buffet (all of whom live in comparable luxury) - deserve their money?

Re:And so what?

[sjames]

Why replace him with a random schmuck just because they'll work for nothing?

It's common enough for people below the C level. So much so that it has a special name: "offshoring". So why not? The unemployment lines are filled with people who were ready, willing, and able to work for one company for life and who routinely went the extra distance when it was necessary.

Quite a lot of people routinely go over 8 hours a day and quite a lot of people have a much bigger impact on people's lives than Ballmer. They typically make 40-100K/year.

Odds are, there's a nuclear plant close enough to you that you are really glad the people running it have made good and timely decisions every day. Their decisions affect millions of lives. The level of impact could be described fairly as life or death. If they screw up, they could easily kill more than 90,000 and leave a fair portion of their state uninhabitable for generations to come. People in other countries could easily suffer for their mistake. They don't make even 10% of what Ballmer does.

Airline pilots work crazy hours, rarely get to sleep in their own bed, and routinely have hundreds of lives in their hands. They would work more hours except that the FAA has determined that their job is sufficiently difficult that they cannot possibly do so without endangering lives. If they screw up, those lives will be over. Screw up enough and thousands more on the ground will die as well. Likewise they don't even make 10% of what Ballmer does. Instead, they keep getting asked to take pay cuts.

Meanwhile, Ballmer is "so confident" in his own ability that he wants to diversify in case MS flames out.

Re:And so what?

[Shakrai]

Or will use eminent domain or asset forfeiture to get the government to take it from you.

Guess who said it was ok to use eminent domain for the advantage of private enterprise? It was the left leaning Justices on the Supreme Court. The right leaning Justices all dissented in that particular case....

There's more to it.

[Starteck81]

The biggest reason why I-1098 didn't pass has little to do with Ballmer. I believe the biggest reason was that in only two years the law makers could modify the tax to include all Washington tax payers, not just the rich. There is quite a large distrust of the spending habits of the progressive law makers here so 60% plus of voters decided not to risk it.

Re:There's more to it.

[Totenglocke]

Which is exactly what happened with the federal income tax - originally it was just a 1% tax on the "evil rich" and then the government kept taking more and more money from more and more people. It's good to see that the people in Washington learned from history and didn't let the bill pass.

Also, income taxes are a very inefficient form of taxation because it discourages people from working (Economist Gregory Mankiw wrote an article in the NY Times recently about this). Consumption taxes (sales tax) are much more efficient and fair system of taxation.

Re:There's more to it.

[ltlasset]

If you would read the proposed national bill, it refunds 100% of the consumption tax to everyone making below the poverty limit, with an increasing amount for each dependent. Even if you are unemployed you would get a refund equal to the amount you would have paid, if you had worked. This effectively reduces the tax burden of the poor to absolute 0, and even gives them money had they not worked. I love how politicians (mainly democrats) who don't support it say it will hurt the poor. The reality is, if this bill passed it would help everyone, and politicians could no longer play class warfare with taxes. Why would a politician give away his greatest tool? Especially a group of politicians so dependent on the poor.

Re:There's more to it.

[lawnboy5-O]

But there is a pitfall my friend - and I think this is the angle the Dems take - unless of course you completely remove corporate influence - no more lobbying by companies, no more donations, no more money at all, if you own one, you cant serve in government at any level, but you get your one vote - as CITIZENS. Roll back the 1973 laws that grant companies individual status, let alone the recent Supreme court decision. Otherwise, the Poor will be hurt more - through governance completely at the mercy of corporations in a consumer -required economy.

If we seriously want to move in this direction, we need to first remove all the potential, and current, corruption that already exists.

If we can, I think the best capitalist markets are those best suited for being oriented toward such a tax-governance approach; but you cant let the fox guard the hen house.

Re:There's more to it.

[sonicmerlin]

So the ones hit the worst are the poor and lower middle class. How is that any better?

Re:There's more to it.

[Bananenrepublik]

Also, income taxes are a very inefficient form of taxation because it discourages people from working (Economist Gregory Mankiw wrote an article in the NY Times recently about this). Consumption taxes (sales tax) are much more efficient and fair system of taxation.

Consumption taxes mostly affect the poor. Why? Because they spend a larger fraction of their income on goods. So in that sense it's a much more unfair tax. On the other hand, concerning the argument that an income tax discourages from working: with an income tax you have more money if you work more. How's that discouraging? Could you expand on Mankiw's argument?

Re:There's more to it.

[drsquare]

Also, income taxes are a very inefficient form of taxation because it discourages people from working

This is actually total horseshit. For most high-paid jobs that end up in the top brackets, there are way more people willing to do the job than positions available. No-one's going to turn down a seven figure paper-shuffling job because they only get half of it.

Re:There's more to it.

[Bananenrepublik]

So his argument is that consumption taxes encourage saving money. But that makes it even more unfair to the poor who don't have money to save. Rephrasing his argument: people who can afford to save money can gain more with a consumption tax than with an income tax. In other word, it's a gift to rich people. Which was exactly my first point.

As for the second point and your reply (your sister). I would wonder if it's not actually a gain in quality of life for her that working overtime is discouraged. Her boss certainly won't expect her to do it if there's nothing in it for her. Maybe he'll hire another person -- it will certainly be cheaper for him to hire another person than to pay your sister adequately for the extra time if your numbers are correct. I.e. everybody benefits, it seems. And if she actually enjoys working so much and my point concerning quality of life doesn't hold, then she will certainly also enjoy working overtime without compensation ;)

Lastly, yes, if people benefit extraordinarily, I don't see why they should not also contribute extraordinarily (your point about the taxation quantiles).

Re:There's more to it.

[rcw-home]

if she goes into overtime, she only gets about 10% of her overtime pay and the other 90% is taken in taxes, so it's not worth it for her to work

How do you figure? The top marginal tax rate (for income above $373650 in 2010) is 35%, not 90%. The way the tax brackets work is that higher rates kick in at higher thresholds of income, they kick in on only the income *above* that threshold. So, for example, below $34000 the rate is 15%, above that it's 25% (assuming you're filing single). If you make $36000, you're only taxed that 25% rate on the $2000 above the threshold. There isn't any scenario where you don't want to make another $100 because you'd be paying anywhere close to that $100 in taxes.

Granted, you can make a little more if you happen to be at the edge of one of the lines on the tax table and aren't pushed to the next one. They're $50 increments, so this gets you at most $13. Enjoy your movie and popcorn.

Not just Microsoft

[schnell]

It wasn't just Steve Ballmer or Microsoft fighting I-1098 ... this measure was very unpopular all across Washington State and failed at the polls by a 65% - 35% margin. Washington State is one of the few states in the US without a personal income tax (the sales taxes here are very high to make up for the revenue deficiency). I-1098 would have introduced a personal income tax on the "richest" residents (those making over $200K individually or $400K as a family), but the reason it failed by such a wide margin is that most Washington residents (including me) believed that once they introduced a personal state income tax here, the politicians would plead "necessity" and keep lowering the threshhold over time to the point where most residents would be paying it, and without any decrease of the sales tax to compensate. The majority of the population here is all in favor of education and healthcare, we just don't believe that a state income tax is the way to fund them.

FWIW, Microsoft and other large businesses in Seattle do have a legitimate interest in avoiding a personal state income tax, as for recruiting and keeping high-priced talent there is an advantage for them to come to Redmond and live in a state with no income tax vs. going to some other company - say, in California - and paying the tax rates there. An equivalent pay job offer in the Seattle area vs. many other states actually means more take-home pay here.

Re:Not just Microsoft

[lawnboy5-O]

These are menial obstacles to overcome - if you are aware of them - when negotiating your salary. Managers move companies all the time because certain tax codes benefit their businesses more than others. But its influence on talent?? for a tech company?? Maybe for an entertainment company (but they are in tax shelters in the worst state for taxes... hmmm.).

Talent arguments are not the bane - the real story is getting corporate influence out of our government. Sorry - but Business leaders in government should be the biggest red flag.

Re:Not just Microsoft

[queequeg1]

Precisely. You can see why 1098 failed in another initiative that passed: Initiative 1053 (which requires a 2/3 vote of the legislature to raise taxes). This is the third time Washington voters have instituted such a restriction. The legislature keeps getting rid of it after the requisite two-year waiting period. It's clear to most Washington voters that if an income tax in any form were to be passed, the reaction would be much like a junkie employed by a pharmacy: just wait until the boss leaves the store and then get your fix.

Microsoft's Lost Decade

[Anonymous Coward]

It is staggering to look back at the decade Ballmer has been in charge:

* Stock price has been effectively flat for an entire decade

* Lost hundreds of billions in market cap since Gates left

* The cellphone market failure

* The Xbox fiasco

* The search market failure

* The online services failure

* The portable music market failure

* IE's stagnation and market-share shrinkage

* The resurgence of OS X market-share

If Ballmer is soon to get dumped from the top spot at Microsoft it is bad news for Linux and Apple whoever replaces him can't possibly do any worse than Ballmer's disastrous decade at the helm.

Re:Microsoft's Lost Decade

[UnknowingFool]

What the OP means is that though popular, the Xbox is in the red for billions. All MS did was buy market share with money. Even with Xbox Live subscriptions it will take 5-8 years before the platform breaks even. Financially, it's not a success story for the company.

Re:Microsoft's Lost Decade

[UnknowingFool]

Basic accounting says that if you are in the red for $7-8 billion during the first 7 years of your existence, $1 billion profit in the last 3 years means that you are still in the red.

Re:Microsoft's Lost Decade

[UnknowingFool]

From 2000-2008, MS lost $7-8 billion on the Xbox. They've only made $1 billion in the last 3 years. So they have $6-7 left. At the rate of the increase in profits, like I said, 5-8 years to break even.

Re:Microsoft's Lost Decade

[dbIII]

You forgot Vista.

I tried to forget it as well but the nasty little thing still creeps in on users laptops every now and then.

419?

[Anne Thwacks]

As a Nigerian, I am deeply jelous of your corruption!

The other way to look at this...

[BearRanger]

Is that the biggest rat is deserting the sinking ship.

The payday comment is a lie

[Anonymous Coward]

> ...a $2B state income tax-free payday for its CEO...

He is selling the stock this year. The new income tax wouldn't be retroactively applied to this year. Whether it passes or not, it has no effect on the sale. Why lie and try to make it appear that they do? Your agenda is showing.

Re:I live in Seattle.

[LurkerXXX]

You are lying or out of your mind. A sales tax hurts low income people because they have to spend everything they make in order to live, and every cent they make is taxed. The rich can spend a tiny fraction of their income living in style, and keep the rest entirely tax free.

Anyone moderating his post as insightful is a moron.

Gates vs. Ballmer

[harlows_monkeys]

The summary should have mentioned that the tax proposal was authored by Bill Gates Sr., and was supported by Bill Gates Jr., which is some pretty good evidence that Gates Jr. really has managed to separate himself from Microsoft.

As to why Ballmer is selling now, there's a pretty good chance it was for tax planning purposes. Many think there's a high chance the capital gains rate is going up soon, and so taking long term capital gains this year is indicated.

Re:I live in Seattle.

[dimeglio]

If you eliminate income tax, sales tax will have to increase considerably. Probably around 10-15 percent. At that price, people would likely shop elsewhere to avoid the state's sales tax. Especially on expensive items. Again, only the rich would have the means to do this. So you end-up killing local businesses as well as hurting those who have limited income.

Why I voted against WA state income tax

[XaXXon]

Right now in washington, the income tax is political suicide. In order to take more money, they're trying to get the voters to pass it. Sure, they can't adjust it for 2 years, but after that.. well, we'll just lower the threshold by 10%. It'll only affect a small number of people. The rich people will already be taxed (so why do they care), and people below $180,000 still won't be taxed, so why do they care?

Next year.. wash, rinse, repeat.

That's why I voted against it even though I wouldn't have been taxed.

Stupid question in summary

[harlows_monkeys]

All of which might make a cynic question what was really important to Microsoft — public education, or a $2B state income tax-free payday for its CEO?

If the measure had passed, the tax would not have started until 2012, so that was a pretty stupid question. Ballmer's stock sale was income tax free regardless of what happened with 1098.

Re:I live in Seattle.

[reboot246]

That sounds like part of the Fair Tax proposal. It eliminates taxes for low income citizens entirely.

I'm in favor of the Fair Tax. It's one of the best and fairest tax plans I've seen in my 57 years.

Re:I live in Seattle.

[SpyderVR4]

I live in Wisconsin too, and my house is worth more than double that and my property tax is $6500 a year. My state income tax doesn't come anywhere near my federal income tax. Even the example property tax bill on the Wisconsin Department of Revenue FAQ site shows a $367,000 home/property paying $5741. http://www.revenue.wi.gov/faqs/index-pt.html State sales tax is 5%, and some counties tack on another .5%. Highest counties in the state tack on .6% for a maximum sales tax of 5.6%. http://www.revenue.wi.gov/faqs/pcs/taxrates.html#txrate2 So yeah, I'm guessing you are exaggerating a wee bit.

Re:I live in Seattle.

[MrEricSir]

Or maybe you've just elected poor leaders who've squandered all your money.

Re:I live in Seattle.

[dreamchaser]

You, moron, need to read the national fairtax bill. It reduces the taxes on the poor to absolute 0. If you make below the poverty limit, you get a 100% refund of the taxes, with an increase for each dependent. If you did not work at all this year, you would get a refund of taxes up to the poverty limit, as if you had worked (the same refund, for doing nothing). So your argument is null. Under that tax system, the poor would pay absolutely nothing, and would even get paid, if they didn't work.

Now if you are rich on the other hand, the tax would apply to all kinds of luxury expenses. Buying a ferrari? Well then you are paying 23% of the purchase price in a tax. Buying a plane? The same.

By all means, keep supporting the progressive tax system. I will be more than happy to make millions I can keep shifting through tax loopholes because you are unwilling to close them. The reason a consumption tax is better, is because you can determine your tax overhead at the beginning of the year. No need to manage taxes for your employees paycheck, figure out your deductions, find tax credits, buy your car with your company, buy your vacation home as a company asset. It would no longer matter, because all of these things would become moot points. You would pay taxes on them, end of story.

It's a shame that you started an otherwise cogent retort with 'You, moron', because that typically makes people tune the rest out. Try civil debate sometime; you may find that you get better results.

Maryland has a state income tax

[magamiako1]

I'm not really sure what you guys are concerned about. I get taxed out the ass but I don't really see much of a problem with it.

Amusingly enough....Maryland has also been a leader in the nation for job growth for a large duration of the "recession". We were far less hit with it than anyone else around us.

Re:Maryland has a state income tax

[TopSpin]

Amusingly enough....Maryland has also been a leader in the nation for job growth

Yep. That is mostly due to huge deficit spending by the Federal government, a lot of which somehow failed to make it out of the "Washington area", including Maryland, which surrounds D.C (for those unfamiliar with the geography.) You can see the effect of this here; the Baltimore–Washington Metropolitan Area has seen far less decline than the rest of the nation.

Government hiring, spending spurs D.C.-area job creation

Choice quotes:

"The hundreds of billions of dollars of stimulus money -- that was an enormous shot in the arm, and we really benefited from it in this area,"

Federal hiring accounted for roughly 19,700 of the D.C. area's new jobs...Federal spending also led to increased hiring in D.C.'s private sector. Professional and business service firms, which often provide contract work for the government, added about 13,500 new jobs last year thanks to an estimated $84 billion in government procurement spending.

Thing to keep in mind is that we just had an election here in the US. The stated goal of our newly elected House of Reps leadership (the folks actually responsible for writing the budget) is to revert discretionary spending to pre-TARP/stimulus 2008 levels. That 'discretionary' spending is the part that has propped up your local economy.

I suspect the next few years may be less 'amusing.'

Re:I live in Seattle.

[EllisDees]

Agreed 100%. I live in Washington and voted this down because the sales tax is already at 10% for us living in Seattle. No way I'm giving the legislature the ability to add an income tax on top of that. If they want to make the tax system fairer, they should pass a constitutional amendment removing all sales taxes and instituting an income tax. Like you said, one or the other, Not Both!

Strange bedfellows

[93 Escort Wagon]

The income tax initiative was pushed by Bill Gates Senior, the father of Slashdot's favorite person. His son also (eventually) came out in favor of it. But Ballmer and Allen were both against it, IIRC.

Washington state has a very regressive tax structure, with a stupidly high sales tax rate that IMO puts way too much of a burden on lower income people. But the stupid thing was that the income tax measure didn't really address the sales tax inequity - instead, it was going to lower parts of our property taxes and also cut the B&O tax - neither of which would directly benefit low-income people. I voted for it anyway because I thought it was a small amount fairer than the current system - but it didn't really get at what I see as the underlying problem here.

That's the thing about the income tax initiatives that've come through our state. There've been a few in the last 30+ years, and they never make a significant dent in the sales tax rate.

Re:National or state makes quite a difference

[lul_wat]

In other words, you actually paid the plumber $65, and of course, that's as much, or more, than the service you got, and you paid the government $35;

You just desribed a tax on INCOME rather than a tax on PROFIT.

That's not how it works. Nice try though.

I doubt 1 million people in WA make 200k

[sycomonkey]

I voted for the income tax, though I didn't expect it to pass legal challenge. Rich people can buy a lot of lawyers. And in the end, we are back where we started: An antiquated, recession-prone sales tax that hits poor people a lot harder than rich. Washington's the sort of state I thought would be daring enough to perhaps someday implement a negative income tax, but if we can't even pass a traditional income on less than 2 percent of the state, then I really don't know about that. I'm just appalled people are willing to accept the status quo. But the most interesting point here is that this also say something about certain (but not all) macroeconomic theories. Some theories rest on the idea that individuals will always make decisions based on their own personal interests. Passing that income tax would have been in the interest of any person that made less that 200k a year, that is to say, about 98% of the state. The prop lowered taxes on these people. They would have received a direct financial benefit. And yet they voted it down by something like 60%. That either means that people are incredibly concerned about the welfare of rich people, or that people are more than willing to make decisions that harm themselves if they are convinced to do so by advertising.

Re:I doubt 1 million people in WA make 200k

[DerekLyons]

'm just appalled people are willing to accept the status quo.

No, we didn't vote for the status quo - we sent a clear message to Olympia to trim state spending. The state budget has grown 80% in the last decade, and we're tired of paying for it. We're tired of the Legislature overriding the express will of the people (by twice removing the limits on tax increases put in place by initiative). We're tired of the Legislature raiding earmarked funds for other purposes. Etc... etc...
 

That either means that people are incredibly concerned about the welfare of rich people, or that people are more than willing to make decisions that harm themselves if they are convinced to do so by advertising.

Or maybe we seen the pig-in-his-trough behavior of the Legislature down in Olympia and are appalled at it - and have no faith that the tax will remain limited to the 'rich'.

Taxes are going up on your entire net worth

[roman_mir]

Don't you worry about income taxes.

I am against income and payroll taxes (that's my bias) I am also pretty much against all government.

---

Realize that taxes are going up. Not only taxes on your income, don't you worry about your income, taxes are going up on your entire net worth.

Gov't is printing money.

Fed is printing hundreds of billions of dollars.

This automatically takes away your purchasing power.

Inflation is rampant.

Fed is causing rampant inflation by printing money. By printing money they are taking away your savings in form of dilution of your purchasing power.

---

Your purchasing power is going down with every new dollar the Fed is printing.

Note, that the Fed came out (helicopter Ben) with a promise to print 600 Billion dollars more over the next 7 months.

That's just by June and it's about equal to the amount that the Federal gov't will borrow over the same amount of time. This means they are the lender of last resort to themselves. This also means that they know the US bond is on its last legs - nobody wants to buy more.

US gov't is broke. It's monetizing its debt and it's trying to cover that they are doing it, but it's not working as a cover, it's too "in your face".

Abandon ship, get rid of your US holdings, they are becoming worthless fast.

Re:National or state makes quite a difference

[psmears]

Income tax is precisely how it works, son. Welcome to the real world.

If you genuinely think that's how it works, I suggest you ask an accountant what "tax-deductible" means... briefly, you're paying a plumber $100, and as part of the same transaction he has to pay an electrician $65, then he does not get taxed on that $65.

Why be cynical?

[djlowe]

All of which might make a cynic question what was really important to Microsoft — public education, or a $2B state income tax-free payday for its CEO?"

Why be so cynical? Can't it be both? I know that so many here are incapable of anything other than binary reasoning, and want their moral conundrums to be perfectly black or white, right or wrong, good or evil, and that is pretty much what drives the "wannabe nerd" moral outrage 'round about these parts, these days... but the real world isn't binary, you know.

Hell, the real world isn't even digital - it's analog. And let's face it: Analog is messy, at best.

And, I think I just created my new sig *grin*

"Life isn't binary... Hell, it's not even digital. Life is analog, and analog is messy, at best".

Regards,

dj

Re:I live in Seattle.

[larry bagina]

Wikipedia must be wrong, but I was trying to specifically exclude county/municipality sales taxes since the question at hand is state income tax vs state sales tax.

Re:I live in Seattle.

[rahvin112]

Ah, Moron's calling Moron's Morons. Seeing as that's the game this Moron will join in. You Moron.

The beauty of any tax proposal is to convince everyone else to raise their taxes so you can pay less. If all things are equal and the same "tax" revenue is required, the only way to lower taxes for ANYONE in the system is to raise taxes on someone else. More than 50% of the population doesn't even pay federal income tax right now. In fact a significant percentage pays "negative" taxes through the earned income credit.

Your "fair"-tax proposal would raise the taxes of everyone between the poverty level and middle income earning levels. That's a fact. This income group is also the largest group of tax payers, it's also the group where children are most likely to be present and comprises the largely of blue collar workers. The benefit of a tax increase on this large portion of the population that is barely making end's meet is to decrease the tax level of the highest 1% of earners. The irony of this is to call the tax "fair", this is the typical game the highest earners play because by percentage they pay the highest percentage of taxes, ignoring of course that they pay a lower percentage of total income than anyone else.

I won't argue that the tax system is hideously broken, but the solution isn't to butt fuck the blue collar workers in the name of a tax cut for the ultra-rich. If you want to fix the tax system in a fair way eliminate ALL deductions. Mortgage, children, charity, etc and make all earnings income (eliminate the idea of capital gains being different than income) and you will restore the fairness. The progressive tax is fair because everyone pays exactly the same rate for every dollar earned, the system is gamed with "deductions" that congress added at the request of special interest groups. Those deductions create the loopholes to allow those with the means to game the system and reduce their tax bill.

There's a lot more to this than Ballmer

[mschuyler]

I live in Washington. Here's the deal. The State has increased its spending 80% in the last ten years when inflation and population growth has been 40%. No one can see a 40% increase in services. They just spent more money. Now that the recession has reduced the state coffers the State is whining that it has a deficit. If the State went back to a 40% growth rate over the last ten years there would BE no deficit.

Now, this is like the umpteenth time the voters have said NO to s state income tax. Why? Because we know it's just the camel's nose in the tent. They're trying to get a class war going so all the people will want to tax the "rich," then when that is implemented, in two years the state legislature will reduce the threshhold so that we all pay or inflation will be so bad we'll all be in the 'rich' bracket. No one trusts the legislature.

One of the ploys was to say "it's for the children." Right. Just like the lottery was supposed to be for education, the legislature has shown its stripes so many times by raiding earmarked funds that it makes a travesty of the claim.

Voters also passed, for the third time, an initiative calling for a 2/3 vote of the legislature to raise taxes and fees. The legislature has managed to override the last two. One of the complaints was, why should 51% vote for a 2/3rds majority? OK. This time we approved the intitiative by 67%. Capiche? We don't have a revenue problem in Washington. We have a spending problem.

I don't care one whit what Ballmer & Co do with their money. I just know my money is more precious than his because I don't have anywhere near what he does. And I'm tired of having it confiscated by a state that doesn't understand it has to live within its means.

Re:There's a lot more to this than Ballmer

[SEAL]

There's an even more pressing concern. The income tax proponents state it as only taxing the rich (i.e. 200k+ income per year). Just like the AMT in federal law, though, it is not indexed for inflation. So even if the state legislature left it unmodified by some miracle, people would start falling into the tax trap.

Anyone who believes we're not in for some massive inflation is in a fantasy world. The Fed is printing money left and right.

FUD

[Mr2001]

I believe the biggest reason was that in only two years the law makers could modify the tax to include all Washington tax payers, not just the rich.

Bullshit, bullshit, bullshit. That's one of the talking points the anti-1098 campaign was using before the election. It was FUD then and it's FUD now.

Here's why: if the legislature wanted to pass an income tax, they would've done it already.

"Only two years" is how long it takes after an initiative passes before the legislature can change it. The anti-1098 campaign baselessly speculated that the legislature would extend the tax to cover everyone, even though they've been free to do that all along and have never taken the opportunity. But it's just as likely that the legislature would repeal the tax after "only two years": after all, the tax would only have impacted high income earners, and that's who the legislature listens to.

Re:FUD

[Starteck81]

When has this legislature ever repealed a major tax without replacing it with another tax that will generate even more money for them?

Re:FUD

[DerekLyons]

if the legislature wanted to pass an income tax, they would've done it already.

You are obviously not a Washington State citizen or resident, or if you are - you are profoundly ignorant of the political situation here.
 
Nobody in the State House or Senate will ever propose an income tax. Ever. It's a third rail issue here, and even proposing an income tax could be a career ender. Voting in favor of an income tax would be political suicide.
 
  Every time an income tax has been placed before the voters it has gone down in flames by a wide margin.
 

But it's just as likely that the legislature would repeal the tax after "only two years": after all, the tax would only have impacted high income earners, and that's who the legislature listens to.

If you live here, you may trust Olympia and place your naive faith in them 'listening to' the high income earners... But your fellow citizens, after suffering through the past decade and a half, are not so trusting and naive. We've seen, again and again, how the people have attempted to rein in State spending - and how again and again the Legislature has tried to work around the will of the people.

Re:I live in Seattle.

[MeanMF]

Income: $30,000
Standard Deduction: -$5,700
Taxable Income: $24,300
Tax on first $8,375 @ 10%: $838
Tax on remaining $15,925 @ 15%: $2,389
Total Tax: $3,227

Did you look up what current tax rates are? That person would pay about 37% more in tax under your plan ($4,409 vs $3,227). They'd have to put nearly $5,000 per year into savings just to end up with the _same_ tax burden.

On the other hand, a person making $250,000 per year and spending $150,000 of it would end up paying less than half of what they do now ($65,736 vs $32,009). Even if they spend every penny, they'll still only pay $55,000 for a savings of over $10,000.

Re:National or state makes quite a difference

[jbssm]

Well, there is an easy solution to that, and we have had that in Europe for ... hum, let's see, in some places 100 years now ... strange how much time these radical ideas about a more equal society take to arrive USA.

The solution is different sales taxes for different kinds of goods. A very high one for luxury goods (an iate or sports car), a normal one to non absolutely necessary goods (plasma TV for instance, cars, etc.), and a very low one, or complete exemption for indispensable goods (non processed food, water, heating, etc). Really, it's not rocket science people.

Re:I live in Seattle.

[Anonymous Coward]

Run the numbers for Fair Tax over a longer term period. It continues to shift wealth to the wealthy, further increasing the income disparity between classes in our nation. The bottom line is that money makes more money, and the only way to stabilize disparity is to raise taxes on those with more money. I'd be happy if we could keep the ratio of class wealth consistent, instead of watching the rich get richer and the poor get poorer.

Re:I live in Seattle.

[InFire]

Ditto. I also live in Washington. We already have one of the highest sales taxes in the country - almost 10% in some areas already.

While Washingtonians may deserve the politicians they elect, we are not totally stupid. I could care less about how this affected Ballmer and a few other people. It was very clear that this was a tricky way to slip an income tax on top of the sales tax and that it would hit everyone before long. The politicians have tried this several times as they desperately want to control more of the citizens money. For our own good of course. ;-)

The problem with "progressive" taxes is that the government only has to inflate our currency to increase our tax rates. No nasty unpopular voting needed...

Re:I live in Seattle.

[MRe_nl]

Fuck anybody ever for suggesting that people should be getting money for doing something.

There are enough doers, fuck in the ass anybody who wants to produce and pollute incessantly, filling the world with crap and ways of making people buy more crap, for their own personal profit.
I'd shoot anybody in the head for this proposal alone.

Re:I live in Seattle.

[hedwards]

Sigh, it always amazes me that people are this willfully ignorant.

Fair tax isn't what they're suggesting. This is a way of allowing Billionaires to pay even less tax than they do currently. Under it you'd pay absolutely no tax on investment income or income of other sorts. Meaning that as long as you don't spend it you don't pay tax.

The problem with that is that at some point somebody has to pay taxes. This is the same sort of incompetent tax policy that the GOP has been pushing for years. Cut your taxes and then we'll all have more money. The problem is that you can't cut taxes and have an out of control military budget. You get one or the other, not both.

The best plan I've heard that we could reasonably see implemented was Steve Forbes' flat tax proposal. The tax as I understand it is actually lower than what most folks pay now, with generous rebates for people in lower income brackets that are behaving responsibly.

Re:National or state makes quite a difference

[fyngyrz]

Where in the constitution is the federal government authorized to implement a national sales tax?

It isn't. It would take a constitutional convention to legitimately gain such authority. I have no problem with that. In fact, I think it's something we've needed to do for quite a while, for any number of reasons. And it's a far better thing than what they do now, which is whatever they want, regardless of what the constitution says.

Any further questions? That was a pretty good one, by the way. Not that the mods are likely to pay any attention, sorry... :)

Re:National or state makes quite a difference

[dryeo]

My provincial government has been implementing something like this, cutting income tax and broadening the sales tax.
The way it's working is businesses don't pay sales tax (actually reimbursed it at 100%) which is the selling point, attract more business. So it's only regular people who pay taxes.
And people don't get pay raises anymore because with the lower income tax they have more money. In practice wages are dropping as in the plumber example up the page. Before he charged a $100 and took home $65. Now he charges $80 + sales tax and takes home $65 which has depreciated by 12% due to having to pay sales tax when he spends his wage. The customer is still paying $80 + 12% tax but as his take home pay has actually dropped due to inflation that is a bigger chunk of his income.
Meanwhile big business, while saving money due to simpler accounting and dropping wages, keeps raising prices.

Re:National or state makes quite a difference

[dryeo]

And once income tax is eliminated you only pay the plumber $65 cash to avoid the service tax so he has the same take home cash. Of course when he spends that $65 at the grocery store he discovers that the bill is actually $75 due to the sales tax.
So you're ahead $35 due to only paying $65 cash instead of a $100. Which is lucky as your employer has cut your pay to keep your take home the same. The plumber is behind $10 due to sales tax. And the government is behind $25 due to the underground economy that springs up due to people avoiding the sales and service tax.
The only winner is your employer who now has an extra $35 to invest in China.

Re:I live in Seattle.

[dryeo]

The other thing about the poverty level is it varies a lot depending on where you live. Generally it seems to cost more to live where there is any work.

Re:I live in Seattle.

[jwhitener]

I've always found it odd that Washington has such a regressive state tax (only sales tax), while just south in Oregon we have a very progressive tax (only income tax).

There must be some historical reason because overall the demographics of each state are very similar.

Re:I live in Seattle.

[Anthony Mouse]

Run the numbers for Fair Tax over a longer term period. It continues to shift wealth to the wealthy, further increasing the income disparity between classes in our nation. The bottom line is that money makes more money, and the only way to stabilize disparity is to raise taxes on those with more money. I'd be happy if we could keep the ratio of class wealth consistent, instead of watching the rich get richer and the poor get poorer.

I think you'll find that this is impossible. Richie Rich has a billion dollars and makes 20 times more interest in a year than he spends. His net worth goes up over time unless you tax him at over 95%, and if you do anything even resembling that, he moves to a country with a lower tax rate. Joe Sixpack makes $35,000/year and spends all of his after tax income, regardless of whether his tax rate is 100% or -100%.

The trouble with class warfare is that it isn't really a war. Poor people are never going to have as much money as rich people short of some communist utopia. The goal should be to benefit everyone, not some poorly planned "redistribution of wealth" zero-sum game. Measures aimed at punishing rich people rarely do anything other than screw over the middle class (see also: Alternative Minimum Tax not indexed for inflation) and thereby push more of the middle class into the ranks of the poor instead of the opposite.

Re:I live in Seattle.

[jimmydevice]

To clarify the tax situation, There is NO income tax in Washington State. Sales tax is NOT applied to food and prescription medication. The proposed income tax was on income over $250,000.00 a year.

Re:National or state makes quite a difference

[nedlohs]

There are a bunch of arguments for why the rich should pay more (not just dollar wise but percentage wise).

Off the top of my head:

1. They can afford to. It costs $X to run the government and lowering the burden on the poor by increasing that on the rich is considered a reasonable thing to do by many people (not you obviously).

2. They use more government resources and hence it's fair they pay more. The military provides more benefit to the rich - they lose more if the Russians invade and confiscate all the property. The legal system provides greater protection (in terms of the value protected) for their property.

3. The marginal propensity to consume falls as income rises. If you think the economy is demand driven then taking more money from the rich and less from the poor will be better for the economy.

4. Income exhibits diminishing marginal returns in terms of utility (a person earning $100,000/year gets less utility from an extra $1000 than a person earning $25,000/year does). Hence taxing the rich at higher rates than the poor will result in higher total utility than a flat percentage system.

Re:National or state makes quite a difference

[fyngyrz]

You don't need to tax them at higher rates. Percentages already do that. Just tax them at a flat rate.

Do the math. You get taxed 10% on $25,000.00, they take two thousand, five hundred bucks from you. They tax some rich person at 10% on twenty million dollars, and they take two million dollars from them.

Flat tax, two people contributing, one is you at about two thousand, five hundred bucks the other is the rich guy at two million dollars. Total is two million, two thousand five hundred dollars. Of which YOU paid about 1/800th of the total. Say they build a highway from this taxation. Now you and the rich guy can drive on it. Does that feel like you're not "redistributing the wealth"?

Isn't that enough, without the rich guy paying an even higher percentage?

You're certainly entitled to your opinion, but me, I'm not rich, yet a flat tax rate seems pretty severe already, and I'm perfectly satisfied with it. The problem as I see it is that the rich aren't paying that rate. Look at what Google just paid in taxes. And it's perfectly legal, by which I mean to say it's perfectly broken.

WA sales tax

[Compaqt]

Well, Washington won't have to increase their sales tax after eliminating income tax because they never had one in the first place. The sales tax is 6.5% in Washington, with counties adding from 1.5% to 3.5%.

For most states and municipalities, things were going swimmingly before the bust. With revenues up, they double-downed on spending: half-billion dollar schools, $1.5 million city manager salaries. The problem is they refused to cut the fat during lean times.

Even if you believe in Keynesian economics, spending money to promote economic activity is the prerogative of the one government (the Feds) that has a printing press.

Re:I live in Seattle.

[cherokee158]

I agree with you that the military budget isn't the only villain when it comes to out of control spending.

But your assertion that the military budget has been decreasing for the past fifty years (except for post 9/11) is not a convincing argument. "Post-9/11" means the past decade, during which the budget has increased a LOT. A good portion of military spending has not even been recorded in official budget figures, because it was in the form of emergency funding rammed through congress to support the war on terror. Our intelligence budget alone has tripled in the past three years, thanks to the additional fiscal drag of new organizations like the DHS.

Prior to 9/11, the Cold War saw our military spending ramped up so high that just trying to keep up with it bankrupted the Soviet Union.

All of which is irrelevant, because your argument is based on the assumption that spending only slightly less on defense than we were during a global war is somehow acceptable.

Military spending is vital, but it is largely non-productive. The military consumes vast quantities of resources and, under ideal conditions, does very little. When it is busy, it can bankrupt whole nations, or plunge them into political chaos. Unrestrained military activity has preceded the fall of almost every government in history.

It will likely do so again.

Re:National or state makes quite a difference

[psmears]

I didn't say it was part of the same transaction. You did.

Actually you said:

So the net tax rate on the plumber for that transaction is 57.75%.

...implying that there was a single tax rate of 57.75% on one transaction.

Poor choice of wording aside, the argument still falls down on a number of grounds:

1. Basic economics fail. If you pay a plumber $100, then you get back $100 worth of service in your estimation. Otherwise you either would have found a cheaper plumber or just not had the work done. That's what a market economy is all about. (Yes, the cost to the plumber may be less than $100in his estimation—that's why he agreed to do the work in the first place (and is true whatever the system of taxation). But the idea that there's a fixed amount of work worth $100 is a myth.)
2. Ignoring that for the moment, and assuming that there is such a thing as "an amount of work equivalent to $100", the existence of a sales tax affects how much work that corresponds to: presumably the electrician is working to feed, clothe and house himself and possibly his family. In your sales-tax scenario, the plumber might end up with $100 and the electrician with $65, but that $100 and that $65 buys proportionately less food-clothes-housing—so nobody's actually better off!
3. Does your sales tax apply to businesses producing goods? If so, it would put up the price of goods enormously, because when a "contraption" is made out of "widgets" made out of "doobries" made out of raw materials, each stage of production would be taxed at the full rate. And if not, then this just gives the rich a great opportunity to avoid tax, by setting themselves up as a business (of course, there are plenty of similar scams in existence today...)
4. You mention that there is a massive loophole if the system is state-wide and not federal. But even with a federal system, this assumes that nobody travels (or has any economic contact with) the world outside the US. In practice he rich can simply do their shopping in Canada (or whichever country is closest/cheapest—or indeed pay someone to do this for them; this will only work out cheaper for those with a lot to spend i.e. the rich again :-)
5. The biggest reason a sales tax system is more regressive than income tax is that there's less opportunity for having multiple tax rate bands. Yes, your initial handout is equivalent to a zero-rate tax band of $1000—but where I come from there are multiple income bands, and the more you earn the more you get taxed on it (up to a certain limit). You have to be earning quite a comfortable amount for the effective rate to approach or exceed 35%. Yes, you could mimic this in a sales-tax system by giving a handout that varies with one's income—and assuming you could close the international loophole it would be a workable system. But in the end it would work just the same as income tax, but me much more complicated to run and more prone to fraud :-)

Wrong. California is no longer a jobs magnet.

[Nova Express]

You're wrong. High tech companies are fleeing California for low tax states. In fact, high earners inevitably flee high tax states for low tax states:

Examining IRS tax return data by state, E.J. McMahon, a fiscal expert at the Manhattan Institute, measured the impact of large income-tax rate increases on the rich ($200,000 income or more) in Connecticut, which raised its tax rate in 2003 to 5% from 4.5%; in New Jersey, which raised its rate in 2004 to 8.97% from 6.35%; and in New York, which raised its tax rate in 2003 to 7.7% from 6.85%. Over the period 2002-2005, in each of these states the "soak the rich" tax hike was followed by a significant reduction in the number of rich people paying taxes in these states relative to the national average. Amazingly, these three states ranked 46th, 49th and 50th among all states in the percentage increase in wealthy tax filers in the years after they tried to soak the rich.

Here's a comparison between California and Texas that explains, in great detail, how and why Texas is kicking California's ass.. This is also why more than half the new jobs created in the last twelve months were created in Texas. Another reason is strong vs. weak or no public sector unions. One thing that articles notes:

Renting a 26-foot U-Haul truck to go from Austin to San Francisco this July would cost you about $900. Renting the same truck to go from San Francisco to Austin? About $3,000. In the great balance of supply and demand, California has a large supply of people who are demanding to move to Texas.

High tech employees are fleeing California for Texas, because they can keep more of what they make, the government isn't going bankrupt, and the roads and schools are now better in Texas. Despite all the money California spends on a a bloated public sector, the actual core services delivered are worse in California than they are in Texas:

“Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”

Here's a slightly older analysis from 2007. Since then, of course, things have gotten better (relative to the rest of the nation) for Texas and worse for California.

Low taxes and small government create jobs. High taxes and big government destroy jobs.