Bull Semen, Private Jets, and Other Good Ways to Tax Washington's 1 Percent

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Occupy protestors are laying siege to Olympia, demanding that lawmakers close the state's $2 billion budget deficit by taxing the state's richest residents. An income tax is out of the question for the special legislative session, but a pair of policy experts say there are other ways to make the 1 percent to pay their fair share.

Last year, Washington voters had the chance to solve the state's budget problem themselves in the form of I-1098. The ballot initiative pushed by Bill Gates Sr. would have taxed individuals earning more than $200,000 annually and married couples making more than $400,000 combined. Along with a couple other tax tweaks included in the initiative, this could have generated an additional $2.2 billion in revenue per year for the state -- the amount lawmakers in Olympia are desperately trying to cobble together in order to continue funding education and services for the poor, elderly, and disabled.

The initiative failed miserably, losing 64 to 35 percent during the year of the tax abhorrent Tea Party. Presumably, if I-1098 were reintroduced this year it would pass by a solid 99-1 majority, but in the meantime its rejection virtually guarantees that lawmakers will not be implementing a state income tax anytime soon. Why would they choose to enact something that nearly two-thirds of their constituents oppose?

The popular political solution to the budget debacle is a temporary half-cent increase on sales tax. This, of course, spreads the burden equally among the poor, middle-class, and wealthy. Two experts say there are more progressive ways for the state to make ends meet.

Both Marilyn Watkins, policy director for the Economic Opportunity Institute, and Eric de Place, a senior researcher at the Sightline Institute, recommend closing as many of the 567 tax loopholes currently afforded by the state to various corporations and industries.

Watkins is particularly opposed to tax breaks for the farm industry. While farmers are hardly the stereotypical Wall Street fat cats, Watkins says the largest beneficiary is industrial agribusiness, not mom-and-pop homesteads.

"We almost completely exempt farms from taxation in our state," Watkins says. "That made sense back in '30s when it was family farmers slammed by the depression and in financial crisis, but there's not a good reason in this day and age to exempt big agribusiness from taxation."

According to de Place, several farm tax loopholes border on absurd. They include caveats for the propane used to heat vast chicken coops, and fine print that favors bull semen traders, he says.

"You name it there's an exemption," de Place says. "They live in this weird tax-free environment, Maybe that makes sense from public policy standpoint, I don't know, but do we really need tax-free bull semen? Is that hugely important?"

When it comes to specifically targeting top-end of the tax bracket, Watkins proposes increasing taxes on luxury vehicles like yachts and private aircraft, and upping the state's estate tax.

"The estate tax is paid only by a handful of estates of wealthiest people that die every year," she explains. "The federal estate tax went down over the last year, if we increased our estate tax it wouldn't be more tax, so much as recouping what the federal government has not been collecting."

Speaking of vehicles, the loophole that is most galling for de Place is the one that gives an exemption to people who trade-in used automobiles to a dealership. While many 99 percenters have probably traded-in a car at some point in their lives, those reaping the most spoils are from the upper crust.

"If you drive only the latest BMW and are trading them in every couple years thats a big beneift," de Place explains. "It might have modest benefit for the middle class but definitely not for low income people. And that's worth several hundred million dollars, about 20 percent of current budget shortfall."

Watkins recently outlined a way for the state to raise "$1 billion in progressive revenue," and de Place compiled a Twitter feed of tax loopholes that need closing. But they both acknowledge that state lawmakers will have to show some spine in order to follow through on their suggestions.

"The reason we have 567 tax loopholes is because special interests are really good at opening up and maintaining them," de Place says. "It tips the scales in their favor. There's a car dealership in every legislative district in the state, and they'll fight to keep things the way they are. And I'm sure the bull semen lobby would come out in favor of that loophole too if they proposed changing it."

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