How much longer will Washington’s lack of income tax be a relocation incentive?

We don’t usually do a lot of celebrity news in this corner, but a recent item provokes a renewal of one of Washington’s favorite business brawls: a state income tax.

The item in question comes to us from the Friday real estate section of the Wall Street Journal called Mansion, an appropriate name for a look at how the other one half of 1 percent lives. It concerns the sale of a house — mansion, really — in California by Gene Simmons, a member of the face-painted rock group Kiss, and his wife, actress Shannon Tweed, whose body of work some readers of the literary journal Playboy will remember from the early 1980s.

The Simmons family, it is reported, is “moving to a 24-acre estate in Washington, near Mount Rainier, to escape the tax burden of living in California.”

Well, howdy, new neighbors. We think you’ll find we treat celebrities pretty well up here, mainly by leaving them alone. In that spirit of neighborliness, we need to warn you not to get too comfortable with the perceived lower tax burden of living in the Evergreen State.

Gene Simmons elaborated on the reason for the couple’s relocation thusly: “California and Beverly Hills have been treating folks that create jobs badly and the tax rates are unacceptable,” he said. “I work hard and pay my taxes and I don’t want to cry the Beverly Hills blues but enough is enough.”

A few comparisons are in order. California’s base-rate sales tax (what the state itself charges) is the highest in the U.S. at 7.25 percent. Washington’s is 6.5 percent, but it allows for higher local add-ons, as much as an extra 4 percentage points. Some locales in this region are already above 10 percent total. California is at 2.5 percent maximum for local sales taxes.

Property taxes are a lot trickier to compare because there’s so much variation and so many different entities getting their cut of the bill, depending on where the specific property is located. It’s a safe bet that the tax bite on a 16,000-square-foot residence (listing price $22 million) in Los Angeles is kinder than what’s being levied on a home in rural western Washington, no matter how elaborate that latter property is. Still, Washington’s property tax ask has been climbing in recent years.

The real point of tax differentiation, though, comes with income taxes.

California’s graduated income tax ranges from 1 percent for a married couple filing jointly and with adjusted annual income of $17,618 to 13.3 percent for those earning more than $2 million, according to H&R Block.

Washington, famously, has no income tax.

That status has been under challenge at least since 1933 when the state Supreme Court narrowly struck down a state income tax. Since then court decisions and the voters have kept an income tax at bay. Some cities have openly lobbied for a return, and some politicians at the local and state level advocate for it, arguing that the current system is “unfair” or “regressive” or that an income tax would only be for rich people or that “we need/want the money.”

Even among those who advocate for a state income tax there’s an awareness of the public’s historic distaste for one and that even Washington can have its moments of tax revolts. That leaves them to making calls for “tax reform,” which is code for “income tax.”

If an income tax isn’t going to come through legislative channels, that leaves it right back where the controversy started nearly 90 years ago — at the state Supreme Court.

State Supreme Court races don’t get a lot of attention from the electorate, in part because it’s a crowded ballot, but also because judicial candidates are discouraged from taking specific stands on issues that would indicate a pre-existing bias should a case on that issue come before them. You would not hear a Supreme Court candidate proclaim, “You bet I’m going to slap down that 1933 ruling the first chance I get,” even if that’s precisely what they believe.

At some point in the not-too-distant future such a case will wind up on the court’s docket. At some point the court is going to reverse that ages-old decision and rule that an income tax is not in fact in violation of the state’s constitution (that’s a prediction, not a guarantee). The voters could, as they have in the past, reverse that reversal or any legislation that follows, provided that demographic and political-strength shifts in the state haven’t overwhelmed traditional antipathy to an income tax.

If the state does wind up with an income tax, that will test how significant taxes are to those who pay a lot of them and can afford to move to less burdensome states. The Washington Policy Center, which saw the same WSJ story, noted that the state’s own economic-development promotional material has cited the lack of corporate or personal income taxes as one of the reasons for relocating to Washington. The lack of an income tax has also been credited for making the state attractive to retirees, especially places like Sequim with favorable weather to go along with a more favorable tax climate.

Those advantages go away with an income tax. Those tempted to relocate will have to decide whether to stay put, be it in California or Washington, or look for another haven, such as one of the eight other states without an income tax (Nevada and Alaska being the closest). Even people who have made a career of rocking and rolling all night (or “nite” as Kiss would spell it) and partying every day on occasion pay attention to the financial ramifications of where they do their rocking, rolling and partying.

This story was originally published October 31, 2020 at 7:05 AM.