Dear Senators and Representatives
Would like to find how the Washington State budget will be balanced. Could you indicate to me the method which you will be using. Please mention a bill or how much of a particular program you would be cutting off. Of course a dollar amount should also be indicated.
My method is to
1) Save $1 bilion by passing Initiative 1043 – illegal immigrants initiative.
2) Cut $2 billion from the medical insurance to children. The amount which it has grown by in the last several years could be cut back and the parents would have to assume their childrens health care insurance amounts.
3) Cut $3 billion by implementing State Auditor Brian Sonntag’s performance audit recommendations. Although many will take several years to get this type of a savings it is really a sound step in the start of this process.
4) Cut $2.5 Billion from the state nursing home care portion of the budget. This would be accomplished by making senior citizens either pay for their own nursing home insurance and by electing out of state coverage or by starting to pay for nursing home state insurance at the age of 65 and taking out 15% of the monthly amount from the senior citizens social security checks monthly and automatically. The exact numbers on this I have not received back from my own representative, Mr. Scott White, but they should be close.
Total savings of about $8.5 Billion
Please indicate some recommendations which you would recommend. If you wish to include only a minimum of $1 Billion please advise. Will keep your information private for your purposes but will include as a whole for party declaration purposes. Will not send this to your opposing party however except in the format of a blog or newspaper article unless you specifically say not to include your information. Again, not from an individual basis but from a collective basis. So if three representatives say they would cut $75 million and another says $400 million and another says $300 million then the amount indicated would be $75 million – $400 million or the highest/lowest amount showing from a party collectively. amount.
Dear Senators and Representatives
Senate Bill 5104
Senate Bill 5104 will cost almost everyone more money. So a supposedly regressive sales tax is actually a progressive tax compared to a sales tax couple with an income tax. Below are some of my findings.
I used the federal sales tax tables from Pub 600 to help in the calculations of the sales tax. The Washington States
Sales Tax Tables in the IRS publication starts at 6.5% so I had to use a numerator of 6.00 and a denominator of 6.5 and multiply this quantity by the equivalent sales tax table amount.
I used an income of $40,000, $35,000, $30,000 and $25,000. My filing status criteria was Single with no additional dependents, married filing jointly with the taxpayer and spouse each claiming an exemption and also maried filing jointly with the taxpayer and spouse each claiming an exemption for a retired couple with no earned income and a head of household with one dependent so claiming two exemption.
Here are my findings:
income tax present sales tax difference
40,000 1358.25 839.00 519.25
$35,000 1109.25 727.00 382.25
$30,000 971.20 727.00 244.20
$25,000 774.20 590.00 184.20
Head of Household with one dependent or two exemptions
$40,000 1229.40 947.00 282.40
$35,000 1035.40 821.00 214.40
$30,000 925.40 821.00 104.40
$25,000 717.90 674.00 43.90
Married Filing Jointly Two exemptions Adequate Earned income.
$40,000 1163.40 947.00 216.40
$35,000 969.40 821.00 148.40
$30,000 859.40 821.00 38.40
$25,000 651.90 674.00 -22.60
Married Filing Jointly Two exemptions but no Earned Income/Retired
$40,000 1383.40 947.00 436.40
$35,000 1189.40 821.00 368.40
$30,000 1079.40 821.00 258.40
$25,000 871.90 674.00 197.90
And as you can see the only negative is with a $25,000 married filing jointly couple claiming themselves. The differnce is $22.60 at a $25,000 income which would not pay for the difference in the tax preparation charges.
Senate Bill 5104 – Washington State Income Tax.
page 3, line 9-10. Claims the state of Washington as the individual’s tax home for federal income tax purposes.
That this really means is that a domicile can be in Washington State and the tax home can be in Oregon and the individual would be claiming as a resident of Oregon. This is counter to all of the other states which go according to residence and not according to “tax home”.
Page 6. line 7. The amount of business and occupation tax paid.
This is really a double taxation system whereby one must still pay a business and occupation tax and on the final tax return adjust the difference between the income tax and the final business and occupation tax. This should be a waste of paper for filing purposes but is just a method of collecting on-going estimated taxes from an individual and business and occupation taxes from a business. This gives the state massive funds during the first year and creates a massive cash flow burden on small business owners. They would be pay a double taxing system for the first year.
page 6, line 32. Carryforwards and Carrybacks.
There shall be no carryback or carryforward of any unused excess credits.
A federal NOL would still generate income for the state in this situation.
page 5. Line 1 and 2.
a credit against the tax imposed under this title for the amount of any income tax imposed by another state.
This calculation is not the normal type of calculation for other state taxes paid. With this a higher state tax from say California would wide out the tax from Washington State. So if the amount of the tax in California for an equivalent amount of income was $1000 then the tax here was $225 then no state taxes would be owed to Washington State. However looking at this from another viewpoint the income from Kansas for the same income was $150 and Washington State was $225 then an additional tax of $75 would be owed. Income from Arizona could be lower than Washington State with oh let’s say an income of $10,0000 for Arizona and a tax of $5000. In Washington a tax of 6,000 from $50,000 and only $1000 would be owed. Total income from both states being $150000. Most all other states base the other state income on a proportional basis based upon the equivalent Washington State tax amount of that income. This method can be punitive to the low taxing state and aggressive for the high taxing state.
page 5. line 20 – 22. payment of income taxes on income earned for personal services performed in such jurisdiction, then the director is authorized to enter into a reciprocal agreement.
Here this is not normal with other states treatment of reciprocal agreements. The meaning of earned income includes wages or items on line 7 of Form 1040. Earned income would also include amounts of business income and amounts from some pass-through entities such as S-corps and partnerships. Trusts and estates would not be earned income. But the other reciprocal agreement states only include wages earned in their states while a Washington State resident would be working in Oregon for example. But again if we are referring to tax home the tax home could very well be Oregon while a resident lives in Washington State and then the resident would only be subject to wages earned in Oregon in the subsequent years after one year of commuting.
page 5, line 25 – 30.
If an individual is regarded as a resident both of this state and another jurisdiction for state personal income tax purposes, the department must reduce he tax on that portion of the taxpayer’s income which is subjected to tax in both jurisdictions solely by virtue of dual residence, if the other taxing jurisdiction allows a similar reduction.
From the above and immediate above for the above meaning and the reciprocal agreement Oregon law is special with respect to all other states. A special agreement must be signed with Oregon State for allowing of any reciprocal agreement or allowing state income taxes to be deducted from payments to other state for income tax purposes. Oregon may be punitive for border workers in this situation.
page 4. line 6-27. Filing status tax rate tables.
Unfortunately this is a very questionable area. This part of the law could be promoting domestic partnerships to flourish or not to flourish. I am not seeing anything in the prior lines to the page and in the bill which specifically address domestic partners or domestic partnerships or civil unions. My conclusion by reason of the absence is that although the wording says that IRS Code takes precedence with not included provisions for domestic partners, etc. then is the state specifically not going to tax these individuals. The state recognizes domestic partnerships, etc. and I would assume that all domestic partners would say they are domestic partners and not single and thus not subject to any type of income tax because the bill does not identify them in the bill.
page 4. line 28, 29. Taxable income of a taxpayer exempt from taxation by internal revenue code section 501 is exempt from taxation by this title.
This is the nontaxable items mention in the law. Here Indian income on a reservation from wages is exempt. Is this the intent of the state income tax bill. Public Activity Bonds are specifically taxable in the federal but does the state not want to tax this. All of the other states have provisions to exclude this as being taxed. The bill is silent on excluding this as income. The bill does not allow an adjustment from the income tax on this issue. It does allow for an addition adjustment for municipal from other states bonds to be added to income for the state if a state resident.
page 7. line 6-10. Sec 402 State and local obligations.
Again this section does not subtract PAB because these would be federally taxable. This section acts to add back income only which has previously been excluded under section 103 of the internal revenue code. This section was actually from a court case which the IRS code later adopted.
page 7, line 18-24. Net Operating Loss.
May not include a loss carried back from a future year.
This would not allow carrybacks as permitted from federal law to be included. So in affect a dual accounting of books would have to be included in all taxing amounts. Also, if AMT amounts are included then an additional set of books would be to be “carried forward”. This provision is a carryback were allowed would have no affect from earlier years of not having a state income taxing system for the state but would be catastrophic for the individual. This would require retroactively an additional bookkeeping system from NOL carrybacks from prior to the bill creation to be kept. A 2005 NOL created and carried back to 2003 would carry forward and if carried forward would affect the calculations to be adjusted based upon the 2005 NOL amount adjusted for the state income taxing system.
page 7, line 25 to 28.
This section specifically disallows carried over amounts created from taxable years ending before the effective date of this title. So the carryover amounts have to be first created in the year of the creation of the bill.
page 8, line 8-12. Section 407.
Joint return or a surviving spouse, seven thousand dollars if only one spouse has earned income and seven thousand dollars plus the earned income of the spouse with the lesser income, not to exceed ten thousand dollars in total, if both spouses have earned income.
What this is really saying is that the retired and those who are not working but have other sources of income besides earned income will not be allowed to have a standard deduction. The definitions are all taken from the IRS code and earned income as previously mentioned is wages or amounts reflected to Form 1040, line 7, Form 1040A,
line 7, Form 1040NR, line 7 or Form 1040EZ, line 1. Business income is also included in earned income. Also, income from partnerships and S-Corp pass-through amounts reported on Schedule E would be included as earned income unless a passive partner or member. All the other states include gross income or adjusted gross income in this instance. However, for Revenue Canada purposes I have seen this and this mimics the Canadian Income taxing system whereby a spouses earned income is included when making a calculation for an additional deduction proportion. Do we really want to be mimicking Canada is this context. Please advise.
The standard deduction for married filing jointly is not expressed if the couple does not have any earned income thus the amount of the standard deduction would be zero in this case.
page 8, line 17-19. A personal exemption deduction in the amount of two thousand nine hundred dollars is allowed for each individual for whom a personal exemption deduction is allowed for federal income tax purposes.
This provision is both gratifying to the higher income tax levels and punitive to the higher income tax levels. The provision does not allow for a phase-out of the personal exemption but when the exemption is at zero or not allowed by the federal income taxing system the personal exemption immediately cuts off and is zero. All or nothing.
page 8, line 20-29. Personal exemption for a no-income spouse who has not filed then the other filing spouse taxpayer can claim an additional personal exemption on their return.
This provision is demanding that only one of the married couple have income. The standard deduction in this case would be $7,000 and the over sixty-five personal exemption would be increased from one thousand to two thousand. The senior citizen with no gross income is being punished here.
Back to page 8, line 8-12. Earned income.
This is a community property state so the requirement of having earned income from wages in a community property state are shared equally by both spouses. I see a provision often in non-community property states for such a split as being allowed or demanded here for the test of the amount of a standard deduction being given. This is also a provision in the Revenue Canada system which requires everyone to file an individual income tax. There is no provision for a married couple filing on one income tax return. The only exception is an additional amount as provided if the other spouse does not have any income.
For the standard deduction and married the requirement is to have earned income and if not then no standard deduction is allowed. But for the other filing statuses no earned income test is required and the amount is a set standard amount.
The married filing jointly additional exemption and is over 65 an additional exemption is allowed. The bill is silent and thus would not allow an additional exemption for the spouse if the spouse has attained the age of 65 or over and a joint return is filed and the other spouse has some gross income. This could be income from interest for a rainy day fund. This is extremely punitive for the married senior citizen.
The same test seems to be included for an additional blind exemption as relating to the calculations for the married and the spouse with no income versus some income. Again, this is extremely punitive to those who are married filing a joint return.
page 14, line 6-15. Sec 604. … exemption declaration filed for federal income tax purposes does not properly reflect the number of withholding exemptions to which the employee is entitled.
This provision only allows the department to increase the number of exemptions and only by one as I am reading the bill. “an additional withholding exemption” The problem with this provision of the bill is that if too many exemptions are being declared for withholding purposes then a smaller amount of money is going into the state withholding system. So in affect the amount owing at the year if overstating exemption is a greater amount owing to the state at the end of the year. For the state to be requiring an additional exemption being included would be to further reduce the amount in withholding from the paycheck and further increase the amount of taxes owed at the end of the year.
Come on guys you have to start reading what you are writing and if you do not understand the provision you need to seek “professional help”. Attorneys and story telling are supposed to be scenonamous. Get our act together boys.
page 14, line 20-26. Any employer, … fails to collect the tax herein imposed or having collected the tax, fails to pay it to the department, the employer or responsible person shall, nevertheless, be personally liable to the state for the amount of the tax. The interest and penalty provisions of chapter 82.32 RCW shall apply to this section.
Absolutely no state is this punitive to a bookkeeper. Is the payroll clerk now needing to collect personal income tax returns to verify the accuracy of the number of exemption required. Is the payroll clerk needing to continually get information from other employers as to the income earned so as to know when to start including income after the taxpayer has indicated they are exempt from state income tax withholding and now have enough earning in order to pay income tax to the state. This provision is meaning to say one thing but while reading it the phrasing is clearly in the addressing of civil penalties. Even the wording of “responsible person” is included and the bill states that definitions of words are copied from the Internal Revenue Code. So if a withholding amount is not caught the department can tax the bookkeeper to the extent of the amount of the withholding not included to cover state income tax. Whoever pays first or whoever is garnish or levied first would then be having to file a lawsuit to collect the income taxes due. See also Sec 701 later.
page 15. line 5-10. Threshold for estimated taxes and attachment of penalties.
less than five hundred dollars.
This provision is average. Some states are wanting a $100 or $200 minimum before tax penalties are attached. A five hundred dollar amount is a safe amount of money. The federal government has $1000 minimum and above an interest penalty is attached. Other safe harbour tests are given. A 90 percent and a 100 percent test which is the same as the safe harbour test for the federal income tax.
page 15, line 20-26. Section 701. Crimes
…required to collect tax imposed…is guilty of a class C felony. …knowingly fails to pay tax…is guilty of a gross misdemeanor.
So for not collecting the taxes as an employer or a bookkeeper not only would civil penalties apply but a class C felony would apply. Not filing an income tax return would just be a gross misdemeanor. Seems like these two should be reversed or further clarified.
page 16, line 32-34 At the later of thirty days following the final determination of the adjustment or the date of the filing of the corrected return.
These are the provisions for the start of the statute of limitation after the correction. Even though I see the wording for the statute-of-limitations I am not seeing what the time is for the statute to run out. If it corresponds to the federal return great.
page 17, line 10-13. Notwithstanding the limitation of RCW 82.32.090, in the case of the late filing of an information return, there is imposed a penalty the amount of which is established by the department by rule. The penalty may not exceed fifty dollars per month for a maximum of ten months.
So if I have 20 employees and not enough money to pay the bookkeeper the amount of penalty would be $12,000. Or would some of the previous provisions require the bookkeeper who produced the w-2s but has not been paid as of yet to hand over the w-2s in order to avoid the $12,000 penalty.
page 15, line 23-25 states the following.
(3) Any person who knowingly fails to pay tax, pay estimated tax, make returns, keep records, or supply information. as required under this title, is guilty of a gross misdemeanor as provided in chapter 9A.20 RCW.
My conclusion now is that the bookkeeper who has not been paid could be subject to the responsible person rules and thus civil penalties and thus subject to a class C felony and also if not paid and withholding documents subject to a $50 per month fee and a gross misdemeanor. Four separate items and never being paid for any of the work. I can see the expense for bookkeeping or at least for a payroll clerk at large corporations with questionable finances exceeding the pay of some of the top attorneys in the nation. This is also part of the reason of why CEOs and CFOs get big payment packages. The CEO and CFO would also be subject to these same risks. Civil penalties are determined by who makes out the checks and signs the checks and now who assembles the paper work so the checks can be signed.
The bill allows for the continuation of the sales tax but at a lower rate. The bill also if the bill SJR….(S-0560/09) is not approved and ratified, this entire act is null and void in its entirety.