King County (read Ron Sims) is looking at a series of plans to raise revenues- one of which is a slight increase in sales tax. Sims should consider this:

It's reasonable to assume that lowering the sales tax will increase revenues, as history has shown in many instances of tax lowering. The counties surrounding and including King already have sales taxes which are high. I don't know the exact numbers, but if I'm correct, all are over 7%, and possibly 8 percent. If King county were to lower sales taxes to 5%, people from the surrounding counties would flock to King County to do their shopping.

I can use myself as anecdotal evidence. I would actually start to buy high ticket items locally, instead of driving to Oregon, or getting them through mail order. The higher a regional sales tax, the less shopping people will do in that region.

There is proof that the Washington state government knows this: Oregon residents don't have to pay sales tax in this state. This is an admission that the relatively high sales tax of Washington, vs the relatively low sales tax of Oregon (none) will drive away the business which would be generated by Oregon shoppers.

If I may quote John F. Kennedy:

"It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut taxes now."

Another blurb:

In the 1920's the top rate was lowered from 73 percent to 25 percent. Between 1921 to 1928, tax revenues rose from $719 million to $1.16 billion, an increase of over 60 percent.

More evidence found at http://www.taxpayer.com/studies/cuttaxes.htm#_Toc435801528

When the previous Ontario government raised personal income tax rates from 53 percent of basic federal tax to 58 percent in 1992-93, the province saw its share of personal income tax receipts fall from $15.4 billion in 1990-91 to $13.5 billion in 1992-93. As Patrcik J. Monahan points out  a 9.5 percent increase in tax rates was accompanied by a 12 percent decrease in revenues. Since the reversal of higher tax rates in the province of Ontario, the province has received ever-increasing personal income tax receipts as the following chart indicates.*

* go to url to view chart-- couldn't duplicate here.

The problem really, is this: Ron Sims, like the rest of the western washington, king county, seattlesque political mentality is, that it's not about the revenue, it's about POWER. The higher the taxes, the more POWER the government has over our lives. It was only recently that a member of the Clinton administration admitted this (and I believe that it was Robert Rubin, anyone can try to check up on this, as I am right now)

Rubin, in an interview, basically stated that the primary purpose of the tax code was not to aquire revenue, but to set POLICY.

More Robert Rubin jewels (taken from "A Talk with Robert Rubin", a link from an article by: Owen Ullmann and Mike McNamee, with Richard S. Dunham and Amy Borrus, in Washington

Q: Isn't your fondness for targeted tax credits the antithesis of reform--it clunks up the code, has a hidden cost, is seems an inefficient way of altering behavior...

A: That [last point] is the question we've faced on each of our tax decisions. Does the proposal make sense, is it better to do it through an expenditure or a tax deduction? The tax code has always been used to influence behavior.

-- Paul Oss (jnaut@earthlink.net), January 05, 2000

Answers

Paul-

-- jim curtin (jcurtin@dellmail.com), January 05, 2000.

Paul-So I guess what you are saying is that if the tax rate was zero we would be swimming in revenue. Correct?

-- jim curtin (jcurtin@dellmail.com), January 05, 2000.

Well, Jim, would you maybe admit that a tax rate of 100% would very likely bring in zero revenue since nobody would waste their time working?

Actually, the curve of tax rate vs tax revenue is quite a complex thing. The traditional "Laffer" curve, going to zero revenues at both zero tax rate and at 100% tax rate with a smooth transition between, is a gross simplification of what actually happens. There is a large area in the middle of the curve where the tax rate vs tax income is rather chaotic - in that part of the curve it is almost impossible to predict what a small change in tax rate will do since there are a lot of other things going on. We all know that an increase of rates when taxes are low will bring in more revenue, as will a decrease in tax rates when taxes are high. The trick is to determine the rate that will bring in the most revenue. As yet I don't think that anybody has a real handle on that one.

For a short and clear description of all the above I'd recommend reading the book "A Mathematician Reads the Newspaper", by John Allen Paulos, to be probably found in your local library.

-- Albert Fosha (AFosha@aol.com), January 05, 2000.

You know this idea that an increase in the tax rate just discourages work is nonsense. We may think that but if they increased the tax rate tomorrow by 30% I would still have to go to work. Life is not free; I have to pay for my home, my car, my clothes, food, medical, etc. In the 50s the tax rate was upward of 90% and yet people still went to work and the economy was very robust. The people at the top had to pay more but guess what...they were still rich! Higher tax rates don't discourage work, rather it encourages those who have money to hire lobbyists to build in loopholes and hire tax lawyers to find shelters so they don't have to pay it.

-- jim curtin (jcurtin@dellmail.com), January 06, 2000.

Actually no, Jim. What I'm saying is tax rates are too high. My proof is the sheer volumes of people with which I associate which buy no high ticket items in the State of Washington because of the oppressive tax rates. Lower the tax rates, and maybe I'll start spending my larger dollars in the state. But until then, I win, Gary Locke loses.

The other point I was making which obviously went waaaay overhead is that politicians don't have it within their DNA to think this way, or to view the history. They don't care as much about revenue as they care about the 'influence of behaviour' which translates into a power grab. This somehow actually doesn't bother some people. They know who they are, and more importantly, I know who they are.

It takes a thing called vision to run a government and at the same time, keep people free. The kind of people we have in government... all levels of government, have no vision. They're beaurocrats, administrators etc. They did well in school, show up for work on time, have some organizational skills, and most look good in front of a camera. But they have NO vision.

But! All is not lost, Jim. In fact, those of you that don't think we pay enough taxes, can pay higher taxes through the VTSW (voluntary taxation system of washington). This way you'll not only keep revenues up, but you'll also have the warm, comforting knowledge that you, and the people like you are doing your moral part to maintain government. You will command the much coveted 'moral high ground' while directly participating in the maintenance of the revenue stream for the State of Washington. Or... is it not about choice, and more about 'influence of behaviour'?

-- Paul Oss (jnaut@earthlink.net), January 06, 2000.

Oh, and one more thing, given the lack of response to whether one would shop in King County and avoid the surrounding counties if sales tax in king were say, 5% instead of 8+%, I have to assume that my point was extremely well made there.

-- Paul Oss (jnaut@earthlink.net), January 06, 2000.

"So I guess what you are saying is that if the tax rate was zero we would be swimming in revenue. Correct?"

Ummm. . .who's we?

In any case, this is a classic example of a strawman argument with a bit of the "slippery slope" mixed in. As another poster replied, there is academic evidence (the Laffer curve) to support the original poster's assertion (lower tax rates -> higher collected revenues).

-- Brad (knotwell@my-deja.com), January 07, 2000.

Actually, one of the problems with the pure mathmatical model is it doesn't take circumstantial demographics into account. We can calculate king county in a vacuum and come up with numbers-- they probably wouldn't mean much, even if the math was solid- can anyone say "statistical sampling"? What this means is that, if the tax is reasonably lower in King than it is in the surrounding counties, then people who are in a position of convenience will flock to king county-- avoiding the sales tax of their own county to shop in king. Although there's probably no solid math model to prove this, it's a reasonable assumption of human behaviour- using history as a guide (and present circ's as a guide as well).

Now, what this means is that king county starts to compete for sales tax revenues with the surrounding counties. Snohomish, Pierce et al start to LOSE shoppers and sales tax revenues to King County due to its lower tax. Good for King, bad for Pierce and/snohomish. Result: Snohomish and Pierce might have to lower their own sales tax to compete with King- hmmm, we may be onto something here.

No one would ever argue that a tax of 0% would bring in more revenues, but I admit it does make for good soundbite arguments. However, what few would argue is that lowering tax rates most often do stimulate the economy. A good parallel system is the prime rate. The Fed understands that if you 'lower rates' you stimulate the economy, raise rates, you slow the economy down. There are of course, problems with this as well. How do you stimulate an economy when interest rates are at 0 percent? That's a little condition called "deflation". Most people know about "inflation" but most average citizens have never learned or even consider the concept of "deflation". But I digress.

Lower tax rates in King County, and I would bet even money that tax revenues would go up. They'd sure get more tax revenu from me, but until then, I'm going to Oregon this summer to buy my wife's Kayak, cause if you think I'm spending that kind of money in King County, you've got another thing coming. Oh, I'll also be upgrading my computer... via mail order.

-- Paul Oss (jnaut@earthlink.net), January 07, 2000.

If sales tax was lowered in King County and since most people in the surrounding either work or visit often King County would with absolute certainty steal revenue from the other counties.

But when had government cared about competition????

-- Dan Campbell (dila813@hotmail.com), January 08, 2000.