Northwest now is supported in part by viewers like you.

Thank you.

We've all heard the news.

Corporate departures and layoffs, high end homes for sale, lots of vacancy.

Downtown.

Conservatives say it's all in reaction to decades of exploding state budgets and the new state income tax for now targeting millionaires, but whose current rules can be broken as easily as a pie crust, according to Senate Majority Leader Jamie Peterson.

Tossing in school test scores, failure on child welfare, homelessness and addiction and the minority says enough is enough into this.

What's a small group of people forming a local version of the resistance, mirroring the national movement but struggling against the state's long dominant progressive politics and policymaking?

Conservatives going against the grain part of the discussion next on northwest now.

Music I think the claims that millionaires are going to leave our state are, like super overblown.

And if you know the ones that leave, like by.

That's Seattle's new socialist mayor, bidding a jaunty farewell and good luck to the region's business owners and entrepreneurs.

In Washington.

The conservatives are in the minority, and that hasn't been helped by a dysfunctional Republican Party that has at times failed to identify winning issues and field viable candidates.

Gone are the moderates on both sides, both the old Roadkill caucus on the Democratic side and the Dan Evans Republicans on the center right.

It's resulted in an $80 billion annual budget, vastly outpacing inflation and growth.

So Washington ranks dead last in the U.S.

when it comes to financial reserves, with a negative outlook from Moody's signaling that our current Triple-A bond rating might take a hit.

And that has, of course, huge implications for the future fiscal capacity of the entire state.

Meanwhile, an Association of Washington Business Study reports that business expansion plans have almost stopped and that 44% of the state's business leaders are considering moving their personal residences out of state, and 17% say they're contemplating moving their businesses to that number, almost doubling in a year.

And believe me, the incentive is under report because the first movers are going to get higher prices on the way out into this walks organizations like Let's Go Washington and the Citizen Action Defense Fund, starting with a single small step to challenge the new state income tax.

Thanks for coming to the northwest now.

Great to have a conversation about the, new income tax.

I mean, let's face it.

Let's call it that.

Here in Washington state.

And we'll go through some of the strategies and the legalities in one.

But I want to start with a little bit of a devil's advocate question for both of you.

Jackson, start with you.

You and I both know, the people that are being targeted by this nice boat up at can't say cap Sandy or maybe, Roche Harbor, Palm Springs.

Yes.

Telluride.

Yes.

Whitefish, probably Coeur d'Alene.

Nice lake house.

We are.

We know who that crowd is.

Why not hit them with another 9.9%?

Over a million bucks?

What's the problem?

Well, there's a couple problems with it.

First of all, the legislature has mislabeled this tax as a millionaires tax.

This is an income tax with $1 million deductible.

And you need look no further than the plaintiffs that are in our lawsuit challenging this tax to know who this affects.

We have a farmer.

We have a trucker, and we have a builder and their wives, and they work their fingers to the bone to provide for their families, to make sure that their employees are provided for.

They work extremely hard.

They are not fat cats on their yachts.

They're there doing the work every day.

We also have several, individual groups that are represented as well.

We've got the, the Ethnic Chamber of Commerce in Seattle that represents, thousands of businesses.

These are folks that came to this country to work hard, and live the American dream.

And they're now seeing this lifetime of work potentially threatened where they wanted to pass that on to their families, and to be able to, to allow them to enjoy the benefits of the American dream.

And they're seeing that endangered.

We also have other farmers and then two of the largest business associations in the state, the Building Industry Association of Washington, representing over 8000 business businesses in the homebuilding industry, as well as the.

Oh, shoot, just like that, the National Federation of Independent Business.

Yes.

NFIB NFIB so small businesses.

So a cross-section of industries across the state.

So this is who we're fighting for.

And this is about transparency too.

And accountability.

The Constitution says what it says.

And this lawsuit is about making sure that the 100 years of precedent where the state Supreme Court has said that you can't, do an income tax, that it violates the state constitution, that income is property and therefore subject to the restrictions of the tax that that is upheld.

And that's what we're fighting for, that it has to be uniform and it's subject to a 1% cap.

So you can do, an income tax, but the legislature doesn't want to do it.

They don't want to do it in the way that would be constitutional.

You know, we're also I'm also proud to be joined by, Rob McKenna, who is a former attorney general Republican, as well as Phil Talmage, a Democrat.

He actually supports the income tax, but he says it should be done constitutionally.

You need to do a constitutional amendment if you want to do it in the way that that the majority wants to do.

And quick point of order, because I think you made a good point that people don't quite understand that million dollar exemption on your tax return isn't per family.

That's per individual.

Correct?

Correct.

It's so so you've got two LLCs or something going.

The Department of Revenue has hired 300 employees, and they're not doing it to enforce it.

Just on the few, individuals that are subject to the tax.

Now, this is going to come for every single individual in the state.

It already applies.

We just have a deduction.

And that can be changed with the stroke of a pen by a future legislature if a pie crust breaks.

Correct.

You know, I thought it was very ironic that Senator Peterson, you know, made that comment about, you know, prior legislation that they passed.

And that's a pie crust promise.

And I think that this current legislation represents that as well.

And that's why we're fighting Washington state has a huge economic and, advantage that we don't have an income tax.

That's why we have this innovation economy.

And we're already starting to see folks, you know, vote with their feet.

And so, you know, they've relied on these decades of precedent, they've relied on this great economic climate that we've we've had here that the legislature has slowly been chipping away at.

And so this is really a last stand in why we filed this lawsuit.

Steve, same devil's advocate question for you.

You're you're one of the plaintiffs in this litigation.

I am not you're not you.

Okay.

Same question though, you know, wage slaves, why should they care whether, you know, the guy who owns a big trucking company or sells a big practice of some kind or a surgery center or whatever it is?

Why do they care if he pays an extra, a few extra bucks on his million plus dollar income?

Yeah, I mean, that's that's the framing they're trying to establish with this.

But, first of all, the so-called millionaires get a vote and they're voting with their feet.

You know, a lot of people are leaving the state capital flight is real.

And I think, you know, those folks that have been targeted and, you know, the talking points that were being distributed to sell this were villains, those that aren't paying their fair share.

Villainess does.

That really is a strategy to broaden your tax base to villainy is a small group of folks.

So a lot of people are saying, hey, look, I've had enough capital gains tax hit me.

Property taxes are high.

There's a lot of other, costs to live in Washington.

If we're going to have California's tax policy, I might as well move to California and get there.

Sunshine.

Let's say with the weather.

So.

Great.

Yeah, well that's it.

It's like we've kind of forgot.

Like we we created a good tax environment here.

It was to attract businesses.

And we've done that spectacularly.

And the other interesting thing too, people who live here have always had a very I've always been struck, I moved here in 1970 and has lived on and off of the state, but I've always been struck by the fact that people kind of have this view that Seattle is kind of the center of the universe here.

They don't realize that 90% of the country really sees this as a remote corner of Alaska as far as they're concerned.

And the idea of picking up and beating up 167 in the rain to a job in a cubicle to invent something or to create the next Amazon, maybe not without the tax incentives.

How important is being a tax haven to Washington state historically and going forward, do you think?

Jackson.

Yeah, I think it's incredibly important.

As I said before, that's I think one of the reasons we've had Boeing and Microsoft and all of the all of the other companies that have, you know, taken up root here for so long, and created so many jobs and so, you know, relying on settled law, relying on the fact that we have this 100 years of precedent that we have repeated, you know, every time an income tax has been presented to the voters, it has been rejected.

And so that is what is the climate?

The economic climate is what has allowed us to benefit, in the state.

And, you know, I think that there is a real danger that the legislature could kill the golden goose here, and see all of that go away and that that our state will really suffer as a result.

My hunch tells me there will be no political consequence for this.

Put this to an end initiative.

The voters are going to reject an income tax again.

I feel pretty confident of that.

Why won't there be a political cost paid?

Why?

Why, what's your theory?

I mean, if you had the answer, of course, you know, you'd have a you have questions hat on.

But, what's your theory about why there's no political consequence for doing this kind of thing?

You know, I think that until it hits people personally like they feel it.

You know, the old saying that it's a recession when my neighbor loses their job, it's a depression when I lose my job.

Yeah.

I mean, it kind of applies.

And so unless the company you're working for decides to move out of state or, you know, your member of your family decides to leave, then it becomes a lot more real for people.

And until that happens, I think it's hard to say translate the frustration over this policy into results that, you know, change the political landscape in the state from an elected state.

Officer standpoint, Steve, you work for the states, I'm sure, in the state planning and whatnot.

I'd like you to give me a little perspective on this.

You know, there were reductions in the back and sales taxes, a little rollback on the top estate tax, which was a huge deal.

I mean, that's a big deal.

But they rolled that the back a little bit.

And but then in came this expansion of the sales tax, the capital gains tax, the Climate Commitment Act, the real estate excise tax that that is was up substantially to those things balance each other out at all.

I mean, can you make an argument?

Well, few things did get rolled back a little bit.

Or is it.

No.

This soul is so overwhelming and and it affects the ownership and entrepreneurial class so deeply that there's just no there's no way to nibble around the edges of this to to fix it.

It's kind of an almost all or nothing deal.

What do you think about that?

Yeah, I, I think as we raised in our lawsuit, I mean, you have the, the issues with the, the fact that it violates, the state constitution, the cap on, you know, the 1% cap on, property taxes as well as, as well as the, the uniform uniform.

And it has to apply to every state.

But also we've raised the issue of single subject, and that's aimed at log rolling, that's aimed at, transparency in the, in the legislation.

And, you know, some of the things that you pointed out that are in there, they simply don't relate or aren't necessary, to the overall goal of the bill.

I think there's a little bit of a cynical ploy here, this, this effort to try to say, well, this is about hungry children and whether children get lunches.

If the legislature wanted to fund hungry children and make sure that they had free lunches, they had $40 billion last session in which they could have made that the top priority, instead of having it dependent on an unconstitutional tax that doesn't take place for three years.

So the idea that they're going to trot out hungry children is the excuse for this, I think, doesn't hold water.

And I hope people see through that sent me straight a little bit on where the litigation stands.

Just a little bit of a news update here where it is.

And then I also been wondering this why Klickitat County.

Sure.

So Klickitat County was chosen in part because, we are representing both the farmer I mentioned.

He has property, in that area and also the Yakima and Klickitat Farm Association, as well.

So, you know, against farmers, you know, a lot of times they've worked their lives and they want to be able to pass on their farms, to the next generation.

And so they are, you know, affected by this tax and certainly concerned about it being lowered and applying, to lower incomes.

In the current state of the litigation, as we filed the suit about a month ago, we just filed an amended complaint, adding that single subject argument that I just mentioned.

And, the state has, entered their notices of appearance for their lawyers.

And so we'll have an answer from them, probably have some preliminary, motions back and forth, and we'd like to get this before the judge, in a summary judgment motion, hopefully within the next few months.

Really?

I'm surprised to hear that.

I would think you'd want to slow play this a little bit to get past the Supreme Court election coming in November.

The longer this can go, the more chance there is for some change on the Supreme Court when it finally works its way there, which is the goal of this whole thing.

Am I is am I, is my strategy off for talk to me how you guys are thinking?

Well, I do think that there is an interesting opportunity with the current election.

I mean, this is the first time in state history, I believe you've had a majority of the court as opposed to just three justices, every two years that are on there.

So this is a real opportunity to make sure that the justices that are up for election really reflect, the will of the voters and, and all of that.

So I'm sure, you know, I'm sure this, in many other cases will come into play as people are thinking about who to vote for in this coming election.

You know, but in terms of the overall strategy of the case, like, that's, you know, there are a lot of different factors that we take into account, and we really just want to be able to have the argument in the best position to be able to make before this particular trial judge.

And so we'll take the time necessary to be able to do that.

Yeah, yeah.

Because I would think that at least, you know, as they said in, Dumb and Dumber, at least there's a chance.

So you mean I got a chance?

With the new Supreme Court election?

Steve, talk a little bit.

If I could push back a little bit on that.

So the current, Supreme Court, although there are a couple of new appointments.

The last time this issue came before them was with the capital gains tax litigation two years ago.

And a majority of the court, although they were asked to refuse to overturn that 100 years of precedent.

Okay.

So even with the current court.

So it's not as hostile as maybe we it's a majority that have rejected some of the same arguments that we anticipate in this case.

That said, you know, I do think that this election will be one of the most significant in the state Supreme Court, you know, elections that we've had in the state in state history.

I think it's important also to notice the Supreme Court ruling that disallowed a referendum on this said in their decision that this is an unbroken line of precedent that they did not want to to, to sever.

You would think that same logic should apply to an income tax and income as property, which they've also had an unbroken line of precedent since, what, 1930, 1933.

It's the year my family moved to Washington State, so our families never had to pay tax here.

And I sure don't want to start now.

Well, you make a good point.

And maybe, maybe my thinking, you know, isn't quite right on in terms of trying to slow play it.

I know the Democrats slow played it a little bit to try to eat up some time for signature gathering and, and some of that.

So, you know, both sides have strategies they're playing.

Speaking of strategy, and I'm glad you brought up the idea about the referendum has been that ideas on the side.

So here comes the initiative process.

You guys plus, let's go Washington.

And a lot of, the usual suspects in that talk a little bit about, the initiative process.

Steve, I would guess that you'd be somebody out with all your contacts in the business community that, that are you already discussing?

This is what's what's going on?

I co-chair let's go to Washington as well.

So, I'm kind of the silent co-chair.

Brian Haywood, obviously is the guy out front and leads that, but I, I help advise and work behind the scenes and and so, yeah, we're out talking to the business community.

And I think you touched on two important things earlier that that, resonate with the business community, the the cut, the tax cut for businesses.

It's advertised in 63, 46.

Right.

You know, eliminating, you know, tax for $300,000 or less, grossing businesses.

Think about what size of business that is.

It's not super meaningful.

And God bless.

And I'm I'm glad they got it.

Yeah, but if I didn't need 100,000, that's that's you maybe have 1 or 2 employees in the city of Seattle in no storefront to support a business that size.

Yeah.

So it's you know, it's not really that applicable across the way.

The other thing that I think we're hearing back from supporters of the initiative effort in the business community is they want some tax certainty.

You need to be able to plan for the future and how you're going to allocate capital, what your inflows are going to be, what your outflows are going to be.

And when you're monkeying with tax policy every cycle.

Now capital gains tax, income tax being no tax, real estate, excise tax, all these little things go into that complicated algebra equation of how you plan your future capital allocation with no certainty what the tax policy is going to look like next year, let alone this new tax this year.

It's really hard for businesses to find the stability they crave to stay in the state.

And that's what we're hearing repeatedly from the folks that some recent survey data says that business owners who may not be ready to pick up and leave, although a significant percentage are thinking about it, but almost across the board, 80 something percent are certainly not expanding, not investing, not doing more.

So, I mean, we're out meeting with potential, contributors to the campaign effort and the signature effort.

A lot of folks that I've reached out to that are fellow business owners in, in the western Washington.

And even yesterday we were some in eastern Washington.

They're moving.

I've had a couple of people.

Heck, I'm left the state.

I'm sorry.

I'm really sympathize with what you guys are up against are I now have moved to Las Vegas.

I'm moving my business to Idaho.

I'm moving my business to the Midwest.

It is happening with people we all know in the business community.

And I was going to say, you know, this, this I don't want to package this as it's all about business.

And business people are the only consideration we have.

It's not it's average folks.

It's wage, W-2 workers.

Yeah, but but I don't think enough people make the connection between the job you have and the success of the people who are operating the businesses that you work for.

There's a connection there.

Yes.

Exactly.

Right.

Well, and it's interesting, you know, the framing is it's a millionaire's tax.

There's been years of, you know, ville and ising again, large Seattle businesses that have contributed specifically to Seattle being successful Starbucks, Amazon, Microsoft.

Yet none of those are included in this tax.

So the the very villains that they've created as the foil in this, they escape this tax entirely.

Their income is not on the chopping block because their C Corp's it's only S Corp's.

And pass through organizations that you know, it shows up on your personal it shows up on your personal return.

But I mean that's business income.

That's not cash necessarily.

No.

And so you have to go make the cash to pay the tax somehow, which means, you know, not paying your employees as much of a bonus this year, not, having as generous of benefits, only increasing wages by 3% instead of 5%.

Those are all the trade offs you have to make.

So you're not buying a new car.

And then the car dealer who's got lower sales plus higher tax burdens.

Yeah.

Yeah.

Well and and what happens is businesses and people that have made their money are leaving the state.

Yeah.

And the people that have brick and mortar here, they can't pick up and leave like our family's truck, dealership, you know, we're we're cemented into this region.

We can't just pick up that dealership and leave.

Those are the businesses are going to have to stay and then watch this tax burden be lowered and lowered to more and more people.

I mean, you end up in a wind down.

Yes.

You know, whether you want to be or not.

Talk a little bit, Jackson, I'd like you to add a little bit to on the initiative process.

What's that look like?

What's the is the organization forming?

What's in what's in action?

When can people start to see something out at the grocery store to sign?

I mean, talk about that a little.

Yeah.

So to my organization is the Citizen Action Defense Fund.

We're not we're not actually involved in the initiative process, just the litigation, just the litigation side where, we're a C3, so we're not engaged in any political stuff.

Let's go.

Is so Steve could speak a little better.

Yeah.

So we are printing, petitions right now, starting to distribute.

We've got the ballot title, and we are actively, getting our 400,000 signatures that we need by July 2nd.

Yeah.

Let's go back to the litigation that I don't want to get you in hot water with a PDC here.

Yeah, that's a good, good call.

Don't want you to don't want to get get sideways there.

With the litigation.

And could you draw it a little bit.

We've mentioned it a couple times about the fact that income is the big decision here.

If I, if I understand this is either income is property or it's not property.

I think people just assume that I want to make sure people aren't sitting there.

Go.

What do you mean, not what is he talking about?

Of course, the income is my property.

Talk a little bit about that and that and explain it to folks.

So when they're reading the paper or listening to other news reports, they can go, oh, yeah.

Yeah.

The language in the Washington State Constitution is very, very broad, and very, very clear that that property is anything tangible or intangible.

And since 1933, the first time that this came up, the state Supreme Court said, well, income falls within that very broad definition as something, you know, tangible or intangible, and therefore it is property, therefore, subject to the requirements under article seven.

And so, you know, that is the unbroken line of case law, that we're emphasizing, and that, that we're trusting the court will uphold how, and what was the argument if you just articulated because I know when you make arguments in this case, what was the argument?

It says no, income isn't your property.

How does that work?

I think there was the last time the legislature tried to frame it.

And and I think part of the frustration here, is, is that the legislature seems to be engaged in word games and semantics to try to, you know, get around this issue.

Yeah.

Last time it was framed as an excise tax on excess income.

Wasn't that in Olympia, city of Olympia?

I think it was a city.

Olympia tried that a few years ago and that was struck down.

Yeah, because the court applied and said, no, this doesn't fly.

There was a similar argument made with regard to the capital gains tax.

And so now they certainly have identified it as an income tax here.

And I don't think there's any, you know, any disagreement about that, but they're trying to frame it as a millionaire's tax and everything else.

So Olympia is more interested in playing games and, in trying to, you know, trying to position it politically as opposed to, to following the Constitution, following the law.

And that's what my organization's job is, is to make sure that government is held accountable and follows the rules and the Constitution, like everybody else has.

The last 40s here.

How can people I know you're not working the political side, but if people want to learn more, Jackson about this and get some of this and read about it, where can they go?

Sure, if they'd like more information, or I'd like to make a tax deductible donation to my organization.

It's, citizen action.org.

And, they're welcome to check our website.

And Steve, same with you I know let's go on is let's go.

I was actively out getting signatures.

And then if you just want to get educated on income tax washington.com has all the facts figures, information on the lawsuit what this tax will mean.

Income tax washington.com.com okay.

So it was citizen action defense.org.

Thanks okay.

Yeah.

Citizen action defense lawyer.

Yes okay.

Perfect.

Good.

Well great conversation guys.

We had a little education.

We had a little strategy.

I think we're up to speed on what it all means.

And I'm really glad to be able to share this with our viewers.

Thanks so much for coming.

Thanks.

Great questions.

Thank you.

Yes.

Discussion.

Progressives have a very carefully choreographed pathway to what some fear will be an increasingly broad income tax.

And the first step is winning in the courts.

Because of that, what may be one of the most important state Supreme Court elections in recent history for both sides is coming up in November with five seats up for grabs.

The bottom line get informed about what the candidates stand for.

The Supreme Court may be the last thing standing between the end of the state's entrepreneurial economy and a further descent towards insolvency, as the state's liabilities rapidly outpace the ability or willingness of the ownership class, and someday, possibly the working class, to pay for it all.

I hope this program got you thinking and talking.

You can find this program on the web at kbtc.org, stream it through the PBS app or listen on Spotify and Apple Podcasts.

That's going to do it for this edition of northwest.

Now until next time, I'm Tom Layson.

Thanks for watching Music