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.