Washington state is a great place to live if you’re wealthy. But the state’s tax system — which does not have an income tax and is heavily reliant on sales taxes — isn’t too sweet if you’re poor.

That’s the conclusion of a new report issued this week by the Institute on Taxation & Economic Policy, which found that Washington has the “most regressive” tax system in the country. The poorest families in the state pay 16.9 percent of their total income in state and local taxes — compared to just over eight percent in neighboring Idaho and Oregon.

Washington is joined in what the report’s authors dub the “terrible ten” — described as states where the poor pay six times as much of their income in taxes as wealthy counterparts — by Florida, South Dakota, Illinois, Texas, Tennessee, Arizona, Pennsylvania, Indiana, and Alabama.

“We know that governors nationwide are promising to cut or eliminate taxes, but the question is who’s going to pay for it,” said Matthew Gardner, Executive Director of ITEP and an author of the study. “There’s a good chance it’s the so-called takers who spend so much on necessities that they pay an effective tax rate of 10 or more percent, due largely to sales and property taxes.  In too many states, these are the people being asked to make up the revenues lost to income tax cuts that overwhelmingly benefit the wealthiest taxpayers.”

That’s an argument that Seattle venture capitalist Nick Hanauer has been making for years, noting that his tax rate and others in his wealth class (he was one of the original backers of Amazon.com and founded aQuantive) should be raised. Hanauer, along with Bill Gates Sr., led an effort in the state in 2010 to pass a measure that would have instituted an income tax on state residents who made more than $200,0000.

I-1098 was defeated with about 65 percent of the vote, including support from large segments of the tech industry which argued that not having an income tax was a competitive advantage in recruiting employees and new businesses.

Here’s the full report from the Institute on Taxation & Economic Policy:

Who Pays report

Comments

  • Guest

    Congratulations to Washington! I’m glad to live in a state that rewards success and actively encourages the poor not to be poor anymore. By monetising job creators, Washington enjoys a 7.6% unemployment rate, 20 basis points better than the national average.

  • tryingtocalmdown

    Gosh John, I’m sure if you tried you could’ve found an even farther left wing publication than ITEP. Nor did you make any attempt at using other indices of taxes from the myriad group that look at stuff like this.

    Sure, the sales tax is “regressive” but the basics–food and medicine are not taxed. And if you are poor in this state, there are so many social programs and public health programs an overly generous welfare type programs that you can be “poor” in WA and survive fairly well.

    If you are advocating for an income tax, you have gone off the deep end. As you stated 1098 failed miserably and it is obvious that the voters (outside of Seattle) do not trust the pols with more money.

    An income tax will make this state a rainy version of California–in other words much less attractive place to start or run a business. If anyone really thinks education would improve or that higher ed would get better funded has no idea what is really going on Olympia. Plus, states that rely on sales taxes more than income taxes fare much better during downturns. Calif and Oregon got hit much harder than WA in the latest recession becuase they are so dependent on income taxes.

    Maybe you should try to present more than just one far left viewpoint.

  • 12th Man

    Yet another set of reasons why WA is a great place to start an entrepreneurial pursuit; success is rewarded in Washington State. Hippies move to OR, please.

  • yespleasedocalmdown

    Gosh, tryingtocalmdown, maybe you should try harder. John is reporting on a new study that relates to an issue of importance to the technology sector. He isn’t presenting a leftist viewpoint. You do know that he posts multiple times a day on all different topics, right? It’s not meant to be a treatise on tax policy; it’s an article on the contents of a report released this week. Chill out. I’m sure tomorrow someone will release a report on why it’s good not to have an income tax and he will write about that, too. Hopefully without expressing a far-right, anti-tax viewpoint.

    • johnhcook

      Couldn’t have said this better myself. Thanks for the comment.

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