Washington is one of seven states that currently has no personal income tax. But our state is more of an outlier than even that number would suggest — because of those seven states, six have an alternative source of revenue(opens in new tab) that Washington lacks.
Alaska, Texas and Wyoming collect taxes on oil and minerals. Nevada taxes gambling, and Florida tourism. South Dakota applies sales tax to a broad range of services. But Washington, for all its abundant resources, doesn’t have huge mineral or gas reserves, white sand beaches, or a sprawling collection of desert casinos and hotels – and most services are exempt from sales tax here.
As Governor Gregoire attempts to engage voters in “transforming Washington’s budget(opens in new tab)“, it’s also worthwhile to note that in comparison to the other 49 states:
a) Washington’s state and local taxes are below(opens in new tab) average(opens in new tab), and funding for K-12, higher education and health care is slipping(opens in new tab).
b) Washington soaks the poor(opens in new tab) like no other state — that is to say, our low-income residents pay a higher effective tax rate (over 17%, compared to 2.3% for the state’s wealthiest residents) than in any other state.
c) As shown in the chart above, Washington State draws a higher than average percentage of revenue from sales, business, and property taxes. (No surprise, really — after all, education, transportation, health care and public safety aren’t free, so without an income tax, our other taxes have to take up the slack.)
But if passed by voters, Initiative 1098(opens in new tab) would take steps to remedy all of these imbalances. The measure would eliminate business taxes for 80% of Washington’s businesses (and reduce taxes for another 12%); cut the state portion of the property tax by 20% for residential and commercial property alike; and tax income over $200,000 (single-filer) or $400,000 (joint filer).
I-1098 isn’t going to be a cure-all for our fiscal and economic woes — there are many pieces to that puzzle. But it would be a step in the right direction for Washington State.
Note: These graphs were created based on data provided by the Tax Foundation and the National Federation of Tax Administrators.
Looking for more information about Initiative 1098? Visit the Economic Opportunity Institute website(opens in new tab).