Building an Economy that Works for Everyone

An Income Tax for Washington: Questions and Answers

Washington State has been losing ground on education for 15 years, slipping towards the bottom of national rankings in class size and school funding. Our children, workers, and businesses deserve better. The recession highlights how difficult it is to raise additional revenues to maintain and improve public services, given Washington’s outmoded and regressive tax structure. Could now be the time to implement a new tax structure including an income tax in Washington State?

Q.WHY CONSIDER AN INCOME TAX FOR WASHINGTON?

A. With an outmoded public revenue system, Washington cannot provide the foundation of high quality public services state residents and businesses need to thrive in the modern economy. Sales taxes provided 56.5% of Washington’s General Fund in 2007-09, and 49% of all state revenue. Washington is one of only  seven states with no income tax. On average across the states, individual income taxes contribute about 35% of state revenues, and sales tax just 31.5%.

Not having an income tax and relying too heavily on sales tax makes Washington’s tax structure:

  • Regressive. Low- and moderate-income residents pay particularly high portions of their income in state and local taxes, while the wealthy do not contribute their fair share.
  • Inadequate. With the gap widening. In the 2005-06 school year,  Washington ranked 37th among the states in per pupil funding for public  schools, and 46th relative to state personal income.4 Public revenues in the  state grow more slowly than the economy and need for state services, as  people spend more of their income on services which are not subject to  sales tax.
  • Unstable. While all state budgets have taken a hit in the current recession, Washington’s public revenue stream has been particularly devastated by the collapse of consumer spending and the housing market. The more diversified a state’s revenue stream, the better able it is to hold up as the economy changes.
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