When it comes to taxes, Washington has the most regressive in the nation
The Supreme Court in Washington State is insisting that basic education be fully funded, and the group responsible for making that happen is the State Legislature. It’s not clear how exactly that’s going to happen.
It is clear we have a “revenue gap”—our state doesn’t collect enough revenue in taxes to pay for basic services and the McCleary decision will cost an additional 1.4 billion in this biennium. This comes on top of the .9 billion required to fund current educational obligations. So, simply in terms of K-12 education, we’re 2.3 billion short.
According to the Washington State Budget and Policy Center, if the legislature goes the route of NOT raising taxes, but tries to meet the demands of McCleary through cuts, we would lose all funding for:
- Public four-year colleges and universities (1 billion)
- Student financial aid (660 million)
- Cost of living increases for teachers (360 million)
- Early learning for young children (112 million)
- Housing assistance for individuals with disabilities (79 million)
- Offender supervision (65 million)
- Food assistance for vulnerable families (24 million)
Food assistance, offender supervision, housing assistance, early learning support, cost of living increases for teachers, public higher education and access to it through loans—these are essential pillars in a civilized society today. We can’t have a democracy without a strong system of public education, and given the same structural inequities that make public higher education a necessity, we also need to insure that qualified students have access to that education regardless of family income and wealth. Without fair wages, schools across the state won’t be able to attract and retain highly qualified teachers. Without teachers, students won’t thrive. Each item on this list depends on the others in order to be fully realized, and yet all are in danger.
And yet, we may give all this up. Unlike most states, we don’t have an income tax. The suggestion that we should vote one in never materializes into actual policies, in spite of strong arguments in favor of it. We voted ourselves into a pickle in terms of raising property taxes when we passed Initiative 747 in 2001, limiting increases in property taxes to 1% per year or the increase in inflation, whichever was smaller. We live in a tax averse state.
Regulated inequality in WA State
In January 2013, the Institute on Taxation and Economic Policy issued a report called “Who Pays: A Distributional Analysis of Tax Systems in all Fifty States,” and in it, they argue that Washington State has the most regressive tax policies of any state in this nation. Regressive tax policies are those that force families with the lowest incomes to pay high proportions of that limited income on taxes, while families with the highest incomes are allowed to pay a much smaller proportion of their incomes on taxes. In other words, with regressive tax rates, rich families receive a lower effective tax rate than do poor families. That’s the case in Washington State.
In WA State, the average income for families in the bottom 20% was $11,500. State and local taxes required 16.9% of their income. On average, across all states, families with the lowest incomes paid 11% for state and local taxes. At the other end of the income scale, families with incomes in the top 1%–average $1,131,500—needed 2.8% of that income to pay for state and local taxes. Across the country, families in the top 1% needed 5.6% of their incomes to pay state and local taxes. Because of our tax practices, we’ve earned the label “#1 of the Terrible Ten”—most regressive of all the states.
None of this is new news—it’s the situation we have been living with, and probably would go on living with, except the Supreme Court has ruled that we need to live up to our state Constitution in which we declare our commitment to providing every child in Washington State with a basic education.
In the upcoming legislative session, these fundamental contradictions in our state policies will come to a head. We can’t continue to tax the poor and shelter the rich while providing a basic education to all. Well, we can, if we cut all the things on the list named above.
Bill Stauffacher, the lobbyist for the Independent Insurance Agents and Brokers (IIABW), is ready to make those cuts. In a letter to members of the IIABW, Stauffacher explains that the lobby will face two big tax fights—an effort to increase the B&O tax rate on producer commissions, and an effort to create a state capital gains tax, which he argues, is the first step towards a state income tax.
Stauffacher writes, “IIABW-member agencies and producers who are concerned about their B&O taxes increasing or the possibility of a new state capital gains tax (yes, you read that correctly) should run right at the looming political hurricane with all the collective force and fury we can marshal. This requires a renewed commitment to supporting the Big I PAC, timely grassroots participation and support of IIABW’s lobbying efforts.”
The status quo that Stauffacher supports—that the Supreme Court objects to—is one the state has tried to address before. In the 1970’s, in Thurston County, Judge Robert Doran ruled that schools were too reliant on local levies for their funding, which led to inequities across districts. The Supreme Court agreed in 1978, and the Levy Lid Act was passed, allowing local levies to pay for no more than 10% of a district’s education. That was repealed, and replaced, and the allowable levy limit crept up towards 30%. Currently, local levies provide about 16% of school funding, and the state provides 66 % (Budget and Policy Center).
What this means is that schools are not equal. Opportunities for learning are not equal. Local levies in the Sumner School District in north Pierce County add $2578 per student per year to the district budget. Local levies in the Sunnyside School District in Yakima add $351 per student. What difference can $2227 per student per year make in a school, or in a district? That’s a $55,000 difference in each 25-student classroom, each year.
Bill Stauffacher and his PAC may win. Washington may continue to be a comfortable home for the wealthy, while at the same time taxing the poor and providing inadequate services. He’s organized, he’s focused, and he’s getting ready now. Are we?
Emily Lardner teaches at The Evergreen State College and co-directs The Washington Center for Improving Undergraduate Education, a public service of the college.