A new report shows Washington is number one - but probably not in a way most residents appreciate. Among all 50 states, Washington’s poor and middle-class residents pay the highest share of their income in state and local taxes, compared to their wealthier counterparts.
As state legislators gear up to write next year’s budget, tax increases will be necessary in order to prevent severe cuts essential public services during the national economic crisis. But local and national experts on Washington’s budget and economy say more dramatic action is needed in the future to ensure the state’s long-term economic health.
As a result of the worst economic downturn since the Great Depression, the state’s general fund revenues have fallen by over $6 billion just since June 2008.
To maintain public structures like education and environmental protection the state will need to look at a broad range of revenue options, especially after last year’s budget cut many services to the bone. Options for lawmakers include reducing or limiting tax exemptions and preferences; general business tax increases; sin/non-essentials taxes; pollution taxes; a general sales tax increase (like HB 2377), and targeted assessments on service providers to fund reimbursement for their own services.
“Our focus needs to be on getting through this recession while preventing cuts to essential public structures,” said Remy Trupin, executive director of the Washington State Policy and Budget Center. “But clearly more work needs to be done in the future.” Trupin noted that the Working Families Tax Rebate proposed by his organization, which would offset the costs of last year’s retail tax increase for lower income families.
According to Marilyn Watkins, policy director of the Economic Opportunity Institute, “The fact that low income people pay more than their share, while the richest pay so little, is just one of the problems with our state’s antiquated tax system. We’ve got a structural deficit - over the long run, public revenues haven’t grown enough for us build the kind of education system and other shared structures people need for prosperity in the future. As we start climbing out of this recession, we need to find ways to address fairness, adequacy, and accountability.”
Matthew Gardner, executive director of the Washington, DC based Institute for Taxation and Economic Policy and lead author of the report, says: “The lack of a progressive income tax to offset regressive sales and excise taxes, as well as property taxes, is the most important factor in making the Washington tax system so regressive. Taxes ought to be based on people’s ability to pay them, which means that the share of income paid in tax should rise as income grows, not fall sharply as is the case in Washington.”
