WA revenue system is unfair and inadequate
We have the most unfair and most regressive tax system in the country, and it results in stagnating revenue even as personal income for the top 10% of households soars in our state.
To put this in perspective, low income taxpayers spend over two months working to pay their share of state and local taxes, while wealthy people with incomes in excess of a half a million dollars spend less than a week and a half to pay their share of state and local taxes.
A comprehensive compilation of data on Washington’s regressive tax structure comes from the Institute for Taxation and Economic Policy.
In addition, this regressive and unfair tax structure does not keep pace with costs over time. State revenue to support schools and other vital government services has declined as a share of the state’s economy – not keeping pace with growth and inflationary costs.
A Tax Fact Toolkit for 2017
Knowing the problem – that we have the most unfair tax system in the country and one that does not keep pace with the need to provide ample resources for the education of Washington’s students and rising costs for other essential government services – is the first step. Once we understand the problem, how can we enter into revenue discussions with policymakers and community members? Many educators have indicated an interest in WEA compiling a tax toolkit that will provide greater detail on financial issues facing Washington. A dynamic resource that they can turn to for context and background as they advocate for sensible changes to our upside-down and stagnant tax system.
The Economic Opportunity Institute has assembled several websites, both explanatory and interactive, to enable educators to better understand our current tax system as background in proposing systemic public revenue reform.
- Background on the State’s Revenue System
Let’s start with this summary of Washington’s regressive and stagnating tax system.
- Details on Tax Exemptions and Loopholes
The Department of Revenue issues a comprehensive report every two years on tax exemptions and loopholes. But we offer caution in understanding the categories. For example “taxpayer savings” references the benefit/savings to the industries or individuals benefiting from the loophole. That description of enabling selected industries and companies (think Boeing) to avoid millions and billions of dollars of taxes disguises that these loopholes are actually robbing from the revenues for public services for the people of our state.
- Here is the summary.
- Here is an appendix that lists all tax exemptions.
- Here is the complete report.
- An example of what you can find out is copied below detailing the Boeing exemption, which is costing the state of Washington $270 million in the next two years. You can also find it on page 34 of the PDF of the complete report.
- Background on the State Budget
Note: this a discussion of expenditures, not revenue.
The Economic Opportunity Institute has compiled some historical background and context on the state budget and education funding crisis from EOI:
EOI has also created an interactive website to explore the increases and decreases in Washington’s operative budget from 2004 to 2017. With this site, you can dig down into each area and sub-area of Washington’s budget.
For example, here is the historical funding record for K-12 Education.
For some detail on higher education tuition and funding, we developed this Interactive spread sheet on tuition in Washington’s public universities, colleges, and community colleges, from 1965 to 2017, with proportional state support from 1989 to 2017.
The State’s Office of Financial Management has also created an interactive tool to dig down into the budget and expenditures by category for the Governor’s proposed 2017-2019 Biennial Budget.
- Recent Governor’s Proposed Revenue Solutions
- The Governor has proposed revenue solutions in recent budgets. Read highlights from the Governor’s proposed budget for 2017-19, in particular, his discussion of revenue and closing some tax loopholes and instituting new progressive taxes (pages 13 – 17).
- In addition, the Governor included fact sheets for his proposed tax changes for the 2017-19 biennium.
- For a discussion of possible new revenues, and in particular closing some egregious tax exemptions that have been proposed in prior years, this 2015-2017 budget gives the dismal and regressive and slacking context of our current revenue system and focuses on proposals for closing tax loopholes (these proposals were not voted in law).
- Here are fact sheets on each of the proposed loopholes targeted by the Governor in 2015-2017:
- Capital Gains and Income Tax Modeling
For those who are interested in modeling different tax scenarios, EOI has created this interactive tool to estimate new revenues from capital gains or income tax scenarios. Instructions are embedded in the Excel model.
- State Bank Proposals
There have been periodic proposals to create a State Bank, which are aimed at creating efficiencies in state financial transactions and leveraging these resources to benefit the people of Washington State. The latest proposal was introduced in the 2017 legislature by Senator Bob Hasegawa and Representative Noel Frame. Senate Bill 5464 had a public hearing on February 9 and House Bill 2059 was heard on February 15, but neither bill moved out of committee by the cut-off deadline. A fiscal note has been completed. There will be some administrative costs to run a state investment trust, but there will also be profits on those investments that can support public programs. With such a large overhaul of a financial infrastructure – most of the significant elements of the fiscal note (operations costs and profits) are listed as indeterminate costs and revenues to the state.
Update: House Democrats Revenue Package
The House Democrats have introduced a revenue package (HB 2186) to support their budget, which includes significant education investments while maintaining other key government programs. While raising revenue, their goal was to make Washington’s tax system more fair for low income and middle income families as well as small businesses. The following documents provide further information on the House Democrat’s tax package.
- Read HB 2186
- Read the HB 2186 Bill Report
- Read the Bill Summary Table with Fiscal Estimates
- Read the House Democratic Caucus’ Summary
This content was prepared by the Economic Opportunity Institute.