Oliver Wendell Holmes Jr. famously said “Taxes are what we pay for civilized society.” But who pays and how much? Resolving these questions is complicated and divisive. At the end of the day, national or state tax policies tell you a lot about society’s values.
Washington’s state budget is in shambles. Our tax structure was created in the 1930s and is heavily dependent on the sales tax. The economy has changed dramatically in the last 80 years, with consumption shifting from durable goods to services, but our tax system has remained largely unchanged. The result is a wider gap every year between the declining revenues from our tax base and the increasing costs needed to fund the essential services provided by the state.
At Real Change, we see the face of unfunded infrastructure and human services every day. Recently, speaking at the Downtown Seattle Associations’ 2015 State of Downtown Economic Forum, Mayor Ed Murray referenced the scarcity of mental health services in the state. He cited the fact that Washington is 47th in the country in funding for mental health beds and drew the connection to the rising numbers of people living on the streets in Seattle. He said that “Seattle cannot solve the issue of homelessness, we cannot solve the issue of mental illness ... unless we have partners at the state level.”
On April 1, I attended a summit on revenue in Olympia sponsored by Washington United for Fair Revenue, a statewide, grassroots campaign fighting for new revenues to cover our escalating costs. At the summit, researchers presented new polling data that suggests that voters’ long-standing allergy to the words “revenue” and “taxes” is starting to turn as voters are seeing the extent to which the tax system is both unfair and ineffective.
Interestingly, it’s not that the majority of voters feel like they pay too much in taxes, but rather that they feel like businesses and wealthy people are not paying as much as they should. In fact, just 7 percent of the 513 voters surveyed thought that the wealthy pay their fair share. Their perceptions about the inherent inequities in the system line up with reality. According to data released this year by the Institute for Taxation and Economic Policy, the wealthiest people in the state pay a measly 2.4 percent of their income in taxes. Middle-income earners pay four times more, and the people earning the least pay seven times more as a percentage of their income.
Washington’s upside-down tax system has again earned it the ignominious distinction of being ranked as the most regressive (i.e. least fair) tax system of any state in the entire country. Moreover, the revenue it generates isn’t keeping up with the needs. Meanwhile, there’s a massive influx of new wealth in Washington state, and in Seattle in particular. The money is here, but we are not asking those with the ability to pay to fulfill their responsibility. Until we do, the gap between what we take in and what we need is only going to get more dire.
With tax-filing day around the corner, there are some very concrete and simple ways you can act. For starters, visit fairwarevenue.org and sign the petition for fair, accountable and shared revenue sources. You can also make a difference by calling your state legislators on April 15, Tax Day. Tell them that you support the Democrats’ budget proposal, released last Friday, which proposes a modest capital gains tax as part of nearly $1.5 billion in new revenue in an overall budget of $39 billion. Rep. Reuven Carlyle, a Democrat from Seattle who is chairman of the House Finance Committee, aptly says of the proposal: “It’s not about high taxes, or raising taxes, it’s about fair taxes.” Tell your legislators that you’ve paid your fair share and that you want the wealthy and corporations to do the same.