Seattle’s home state still has country’s most regressive tax system

regressive tax systemThis is not exactly news, but bears repeating. Liberal Washington State, of which Seattle is the largest city, continues to have the country’s most regressive–and therefore illiberal–tax system. That means the burden on the poor from state and local taxes is a lot higher than on, say, Bill Gates, Jeff Bezos, Paul Allen, Ken Fisher and the six others on the Forbes 400 list who call the Evergreen State their (tax) home.

Here’s how my long-time journalistic colleague Janet Novack summarized the latest research on Forbes.com this morning:

 Overall, the bottom 20% of Washington State’s nonelderly households, who earn less than $21,000 a year, will pay 16.8% of their income in state and local taxes this year, compared to the 2.4% of income the top 1% earning more than $507,000, will pay, according to the report from the left leaning Institute On Taxation & Economic Policy.

In a post here last year I noted Washington State’s No. 1 ranking in this regard, based on earlier studies before I became New To Seattle. The heavy tax burden on the poor is largely due to the absence of a state income tax coupled with the imposition of relatively high sales taxes. In Seattle, the sales tax rate of 9.5%, already the nation’s highest among big cities, is scheduled to rise to 9.6%.

Washington State also has a hidden system of business and occupancy taxes that acts as a sales tax add-on, in that it doesn’t appear on a customer’s receipt even though it is based on a percent of the bill.

Here’s the reason sales taxes fall more heavily upon the poor. They have to spend nearly all their income to buy the necessities of life–incurring sales taxes–while the rich can bank most of their income. In the special case of money manager Fisher, he lives along the Columbia River in the high-tax-California expatriate community of Camas, where he easily can cross into Oregon and shop sales-tax-free. So he gets the best of both tax worlds.

Five years ago, Washington State residents overwhelmingly voted down a proposal that would put an income tax on the state’s richest 1%. The state’s own bills, though, have to be paid somehow. So Gov. Jay Inslee, a Democrat, just proposed a capital gains tax on the rich. Given the hypocrisy between Washington State’s reliably liberal voting record on political candidates and its oppressive-to-the-poor tax system, it’s far from clear this will go anywhere.

Washington State vividly illustrates that old saying: Watch what they do, not what they say.

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