In the upcoming legislative session, our elected officials will need to take a hard look at revenue increases necessary to maintain essential public services. Possibilities include ending special tax breaks, expanding the sales tax base, increasing sin taxes and taxing pollution.
But we also need to tackle reform of Washington’s tax structure.
According to “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States”, Washington is number one – but not in a way many of us appreciate. Washington’s poor and middle-class residents pay a higher share of their income in state and local taxes than anywhere else in the nation:
- Washington residents earning less than $20,000 – the poorest fifth of non-elderly taxpayers – pay 17.3 percent of their income in state and local taxes.
- Middle-income earners – with income between $37,000 and $62,000 – pay 11.2%.
- Washington’s wealthiest taxpayers have an average income of $1,795,000, and pay just 2.9%.
The fact that low income workers pay more than their share, while the richest pay so little, is just one of our state’s budget problems. Washington has a structural deficit; over the past several decades, public revenues haven’t kept up with the demand for public services.
That means that in 2010, our legislators should focus on raising revenues in ways that 1) expand the tax base; 2) will be mostly paid by those with higher incomes; and/or 3) encourage behavior that reduces public costs. Funding the working families tax rebate will also lessen our tax system’s regressivity.
In the long run, we need to increase public revenue through progressive taxes that enable our state to invest in new infrastructure and rebuild our education, health and social insurance systems.
Doing so will put Washington on the road to a sustainable 21st century economy where opportunity and prosperity are more broadly shared in the economic recovery to come.