Washington over-taxes low and middle income residents and under-taxes our wealthiest citizens. The lowest income 20% of non-elderly taxpayers pay over 17% of their income in state and local taxes, while those in the middle pay about 11% and the wealthiest 1% pay less than 3%. Repeated studies have found that Washington’s tax system is the most regressive in the nation.
Percentage of Income Paid In State and Local Taxes, Non-Elderly Taxpayers
Washington’s tax system also disadvantages small and new businesses. Small businesses pay a higher percentage in taxes than mid-size or large companies. And because the business and occupation tax is on gross receipts, firms have to pay it even when they make no profit.
State Taxes Paid by Washington Businesses (As a Percentage of Gross Income, By Firm Size)
How I-1098 will help
I-1098 proposes reducing the state portion of the property tax by 20%, eliminating or reducing B&O taxes for 157,000 small businesses by raising the small business credit from $420 to $4,800 per year, and creating a modest income tax on high incomes. Taken together, these three steps will help reduce the regressivity of Washington’s tax structure for most Washington families and businesses.
Estimated percentage of income for state and local taxes:
Current system and proposed reform under Initiative 1098
Want to read more, view citations, or see full size graphs? You can find the full brief (from which this post was excerpted) here: Why I-1098 is Right for Washington ».
Looking for more information about Initiative 1098? Visit the Economic Opportunity Institute website.