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We're Number 1! (But Not in A Good Way)

Posted by Andy Nicholas at Jan 30, 2013 07:20 PM |
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Updated January 31, 2013:  Income ranges were added to the graph.

While most state tax systems take a larger bite out of lower-and middle-income family budgets than those of high-income households, this gap remains larger in Washington state than any other state. The latest version of the “Who Pays?” report from the Institute on Taxation and Economic Policy (ITEP) finds that, once again, Washington state has the most upside down, or “regressive” tax system in the nation. 

The graph below shows that state and local taxes amount to nearly 17 percent of household incomes among the poorest fifth Washingtonians, those earning less than $20,000 per year. Taxes paid by the middle fifth of households ($38,000 - $60,000) account for a bit more than 10 percent of family incomes. But among the richest 1 percent (more than $430,000 per year) of Washingtonians – those who have benefited the most from economic growth of the past four decades, and who suffered least during the Great Recession – state and local taxes amount to less than 3 percent of families incomes.

UpsideDownRevenue_2013

In addition to the latest edition, Washington state held this dubious honor in each of the three previous editions of Who Pays?. And, we will continue to top the “terrible ten” list of most regressive state tax systems until policymakers act to remedy the situation. The report finds the lack of a state income tax coupled with an excessive reliance on sales taxes to be the major culprits behind Washington’s deeply flawed and inequitable revenue system.

ITEP’s findings are broadly consistent with results of a study performed last summer by Washington state’s own Office of Financial Management. That study found that the bottom 10 percent of Washingtonians pay up to 23 percent of their incomes in state and local taxes while the richest 10 percent pay only 5 percent.

We have put forward a number of reforms – including full funding for the Working Families Tax Rebate and a capital gains excise tax -- that would create a more robust and equitable revenue system for all Washingtonians.

Read the full ITEP report here.

More analysis on Washington state’s outdated revenue system will be coming in the weeks ahead. Stay tuned to schmudget.

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Join us and Partners for Our Children for "Forum on Poverty: The Impact on Children and Families" on May 26, 12-4 pm, in Burien. Our policy analyst Elena Hernandez will be a speaker at this forum that will discuss how we can advance policies that prevent intergenerational poverty. THIS EVENT IS FULL, but you can email Partners for Our Children to get on the waitlist. 

Our Legislative Agenda

Our agenda for the 2015-2017 biennium calls for an equitable, sustainable revenue system in addition to state investments that: promote a world-class education system; sustain a strong middle class; produce living-wage jobs, and ensure that all Washingtonians have equal opportunity to get ahead. 

Testimonies in Olympia

We testified in support of a number of important bills during the 2016 legislative session. Take a look:

  • Policy Analyst Elena Hernandez's testimony (at the 23:23 minute mark) on the House Bill that would take a two-generation approach to preventing poverty 
  • Associate Director of Fiscal Policy Andy Nicholas's testimony (at the 1:54:09 mark) on the House bill focused on aerospace-related tax breaks
  • Research and Policy Director Lori Pfingst's House testimony (at the 9:25 mark) and Senate testimony (at the 1:44:54 mark) on the two-generation approach to poverty prevention bill 

Budget Matters Summit

Thank you to all who attended our our Budget Matters 2015 policy summit. If you missed it (or would like to relive it), you can watch a highlight video of the summit or watch the full summit panel -- which featured a range of community leaders talking about how to advance racial equity in state policymaking.