In the quest for success, small business owners and middle-class families deserve a level playing field. Instead, they are penalized by a Washington State tax code that is stacked against them.

The business and occupation tax requires hundreds of thousands of small business owners, even if they don’t make a penny in profit, to pay tax on gross sales of their services and products. That makes no sense.

Middle-class families pay more than 11 percent of their income in state and local taxes, and low-income families pay 17 percent. Meanwhile the state’s wealthiest residents pay just 2.6 percent of their income in state and local taxes. That disparity is clearly unfair.

At the same time, we’re shortchanging the very areas that support our state’s long-term economic competitiveness and create the foundation for a strong middle class. From 1991 to 2006 in Washington, per pupil spending on K-12 education fell from 17th to 37th in the nation. Funding for research universities fell from 75 percent of the cost of instruction in 1981 to just 38 percent in 2008. As a result of the economic crisis, our schools are facing teacher layoffs and increasing class sizes, while skyrocketing tuition costs are putting the cost of a quality college education out of reach for many of our young people.

These problems have been ignored for years – but no longer. This year we’re working with a broad coalition of small business owners, labor, civic groups, and community leaders to put a responsible tax reform measure before Washington voters this November.

Our proposal: exempt every small business in Washington from the B&O tax with a $4,800 business tax credit; reduce the state portion of the property tax by 20 percent; create a modest income tax on income over $400,000 per year (for couples) or $200,000 per year (for individuals) – the wealthiest 3 percent of households – and invest the net revenue in education and health care.

The vast majority of state residents will see a tax cut under these reforms. More than 133,000 small businesses now paying the B&O tax would be newly exempted, and 37,000 others would receive a substantial tax cut. Businesses would also pay lower property taxes, while the average homeowner in King County would see a property tax reduction of about $180.

By taxing the wealthy more equitably, this measure will also raise about $1 billion a year for a trust fund dedicated to funding education and health care, helping to ensure the benefits of strong public education and health systems are available today and for future generations.

To us, this initiative seems like common sense. But we know people have questions, and we’d also like to address some of the claims put forward by those who oppose it.

They claim rich people will move out of the state. Well, the wealthy people we know are not going anywhere. And plenty of wealthy people live in the other 43 states with an income tax (like Oregon, Idaho and California).

They claim we’re taxing success, even though this proposal will make it possible for many more businesses to succeed than ever before in Washington.

And based on an old and outdated court decision, they claim the measure is unconstitutional. But the precedents underlying that 1933 decision have all been overturned, and some of the leading constitutional experts in the state have examined our proposal and believe it will be upheld by the courts if voters approve it.

Strict provisions for accountability and transparency are also incorporated into this measure – any change to the income tax thresholds or rates is subject to a public vote, and regular public audits of all spending are required.

We believe that this proposal offers a clear choice to voters: assist small businesses, cut taxes for the middle class and support much needed investments in our schools and in health care – or keep the status quo, which penalizes small business and shortchanges our children and families. We hope you’ll join us in supporting this long-overdue tax reform for the state.

William Gates Sr. is a retired Seattle attorney and was chair of the Washington State Tax Structure Study Committee in 2001. Gerald Grinstein is a part of Madrona Investment Group. Michael Debell is a business owner and current president of the Seattle School Board.