Washington Business Winter 2019 | Washington Business | Page 48
business backgrounder | taxation
competition that would lead high-income taxpayers facing progressive
tax policy to relocate to other states reduce their tax burdens.
The steeply progressive federal income tax swamps state and
local tax burdens. When it’s included in the calculation of tax
burden, as it should be, all states, including Washington have a
progressive tax structure.
Sjoblom also dismisses charges that Washington’s tax structure
is “upside-down” or the nation’s “most regressive,” noting that
the analysis supporting the charge rests on a single, flawed study
from 2015 produced by a progressive think tank. The flawed ITEP
study looks at burden by income group, but limits its study to “non-
elderly taxpayers.” As a result, Washington gets zero credit for its
generous senior citizen property tax relief program. In 2018 alone,
that program provided $200 million in state and local property tax
relief to 113,000 low-income taxpayers. Clearly, that magnitude
of relief should be considered when evaluating the fairness of
Washington’s tax structure.
Among additional problems with the analysis: It overestimates
consumption spending by lower-income taxpayers (the study has
them spending twice what they earn), fails to properly account for
income from social welfare programs, and overstates how much of
48 association of washington business
“Washington state’s tax system has
contributed to the state’s run of economic
growth.”
— Clay Hill, government affairs director, AWB
the B&O tax is passed on to consumers. While the errors affect
all states to some degree, the effect is magnified here because of
Washington’s high sales tax and unique business tax.
Again, all state-local tax structures are regressive. And, when
federal taxes are included, taxpayers in all states face a progressive
tax burden.
the system works and will always need work
Tax policy is never perfect and cannot be static in a dynamic
environment. Economies change, priorities change, and policy
will always evolve to address new realities. As lawmakers address
the various demands for tax reform, though, it’s important to
begin with an appreciation of the current system’s considerable
strengths.