The problem with any discussion about taxes is that it inevitably settles upon the nebulous notion of fairness. Pay your fair share. Redistribute income fairly. Address inequality to make it fair. They all are catchphrases in the debate over how much is too much for people to pay — and none of them adequately define what is “fair.”
So, maybe you don’t see a problem with the fact that Washington’s tax system has been deemed the most regressive in the nation. In other words, poor people in this state carry a heavier tax burden than anywhere else in the United States.
According to the nonpartisan, nonprofit Institute on Taxation and Economic Policy, Washington households in the lowest one-fifth of income pay 16.8 percent of their income in taxes, while the top 1 percent of earners pay 2.4 percent. Those in the 61st percentile to the 80th percentile pay 8.5 percent of their income in taxes. The conclusion from the institute: “Washington has the most unfair state and local tax system in the country.”
The difficulty, again, is this notion of fair — or unfair. Who is to say what is a reasonable tax bill for somebody who earns $2 million a year? Or $60,000? Or $20,000? Washington, by virtue of having no income tax and a heavy reliance upon sales tax, has a regressive system, yet the state’s economy is booming, the business climate is warm and inviting, and the overall tax burden is about average.
All of which is a roundabout way of bringing up Initiative 1366, a Tim Eyman-backed initiative with which voters agreed last month to hold the Legislature hostage. The options for lawmakers: Place a constitutional amendment on the ballot that would force the Legislature to have a two-thirds majority to raise taxes; or have the state sales tax drop one percentage point, a hit that would reduce state revenue by about $1.5 billion annually.
What to do? “I don’t know; I really don’t know,” said state Rep. Jim Moeller, D-Vancouver.
Of course, it might not come to that. Initiative 1366 is under review by the courts, and even Eyman has admitted that it might not pass constitutional muster. As Moeller said, “Probably, hopefully, the Supreme Court will save our bacon again.”
Maybe, maybe not. While others have called for the court to strike down the initiative, I would never be so presumptuous. If it’s unconstitutional, it’s unconstitutional. To suggest that the court should rule one way or another out of political expediency would not be, um, er, fair.
There’s another way
But, as columnist Danny Westneat wrote for The Seattle Times: “Maybe there’s a third way — one that could be ‘win-win-win’ in that it preserves the state budget, makes taxes fairer and, most important, gives some relief to the poor and working class of the state.” His idea? The Legislature could take the reduction in the sales tax and replace that revenue with other taxes.
“This might just stir some tax reform in the Legislature,” Moeller said of I-1366. “There’s the B&O tax (business and occupation), there’s income tax, there are a number of taxes the Legislature could take action on.”
You know, like a carbon tax on polluting companies, which Gov. Jay Inslee supports. Or a capital-gains tax, which Inslee and Democrats both embraced this year before being pried loose by Republicans. Therein lies the problem, as Republicans have successfully clung to a “no new taxes” mantra and they are unlikely to alter that taxpayer-pleasing stance.
But while the public is easily distracted by a shiny pledge of no new taxes, it is time to admit that changes are necessary in how Washington extracts money from the public. While this state’s poorest people pay 16.8 percent of their income in taxes, in Oregon the number is 8.1 percent. While this state’s richest pay 2.4 percent in taxes, in Oregon they pay 6.5.
Similar gaps are repeated throughout the nation, and addressing that, it seems, would only be fair.
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