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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More analysis on Washington state’s outdated revenue system will be coming in the weeks ahead.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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HIGHLIGHTS

Watch the Poverty Forum Video

If you missed the half-day Poverty Forum that we co-hosted with Partners for Our Children in May 2016, you can watch it on YouTube now. It features a range of speakers and panelists talking about policy solutions for addressing income inequality and poverty in our state.

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:

  • Our testimony (at the 23:23 minute mark) on the House Bill that would take a two-generation approach to preventing poverty 
  • Our testimony (at the 1:54:09 mark) on the House bill focused on aerospace-related tax breaks
  • Our 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 

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