Will the people vote for an income tax that they won't have to pay?

An obscure law review article by a prominent Washington attorney is the intellectual oomph behind a new initiative to create a graduated-rate state income tax without amending the state constitution.

The legal theory expressed in the article is at the heart of Initiative 1077, filed last week by a loose-knit group out of Seattle that has Bill Gates Sr. at the helm. Its measure would trade some reductions in the state share of the property tax for a graduated-rate income tax on high earners.

Using an initiative challenges the long-held and previously well-accepted fact of political life in Washington – that the state constitution bans anything but an across-the-board income tax of 1 percent. Because such a tax would carry all of the political poison and not raise close to what a broader income tax would, it gets discussed but never pushed and Washington remains one of just four states without a personal or corporate income tax.

The constitution doesn’t specifically say no. Instead it requires that property taxes be uniform, and that regular taxes on property not exceed 1 percent of value. Toss in a 1933 state Supreme Court ruling that income is property and you have the ban on a graduated-rate income tax. That 5-4 decision tossed out an income tax initiative that had received 70 percent of the vote.

Amending the state constitution isn’t impossible, but neither is it easy. Two-thirds of both the House and the Senate must vote to place an amendment on the ballot, where a majority of voters must approve it. And the record of income tax constitutional amendments hasn’t been very good, having failed five times, most recently in 1973 by a 3-to-1 margin.

Still, Hugh Spitzer, an affiliate law professor at the University of Washington, thinks the conventional legal wisdom is wrong. Spitzer wrote in a law review article in 1993 that the 77-year-old Supreme Court decision was flawed then and would not bind a modern court.

Spitzer, who is advising initiative backers, argued that if something like I-1077 reaches the top court – as it certainly would if approved by voters – the court would not rely on Culliton v. Chase. That’s the 1933 case he thinks relied on both an incorrect interpretation of earlier decisions and on case law that has subsequently been overtuned by federal and state courts.

“The correct approach for Washington’s court will be to face the issue head on by reversing the two mistaken views that income is property,” Spitzer wrote in the Winter 1993 University of Puget Sound Law Review.

“When income is converted into an asset, it is then appropriately treated, and taxed, as property,” he concluded. “But as a number of court opinions in other states have observed, property is the tree and income is the fruit. Both income and property may be taxed under the appropriate rules, but it is illogical, and today quite rare, to treat them as one and the same.”

It is all conjecture until an initiative passes. And the current justices have not proved to be very adventurous, preferring to make narrow decisions and punt on controversial issues.

Besides, given the solid public votes against income tax amendments beginning shortly after the ruling in Culliton, the key hurdle is political, not legal. The motive behind the one successful public vote in 1932 was high property taxes during the Depression, and that was eased by property tax caps and the adoption of the sales tax and the business and occupation tax.

So why do backers of I-1077 think they have a chance? They think the Great Recession and cuts to state services and education might make voters willing to trade cuts in a tax they pay – the property tax – for creation of a tax they won’t pay.

Opponents are using a few key arguments that have worked quite well in the past – that the tax will hurt the economy and that it will likely, despite promises by backers, creep down to capture lower incomes.

Peter Callaghan: 253-597-8657

peter.callaghan@thenewstribune.com

blog.thenewstribune.com/politics