State’s Tax System Takes Bigger Bite From Poor Study Says High Sales Tax, No Income Tax Favor High Incomes

Washington’s tax system hits the poor harder than any other state, with 17 cents out of their every dollar going to state and local taxes.

Middle-income families also pay disproportionately under the system, while the state’s most affluent residents come out ahead, according to a study released Wednesday by Citizens for Tax Justice, a labor-funded, Washington, D.C., advocacy group.

“That’s our tax structure for you,” said Rep. Lisa Brown, D-Spokane. “We’re one of the few states without an income tax. And we have these relatively high sales and excise taxes that take a bigger bite out of lower-income families.”

With no state income tax, Washington relies on consumption taxes - gas, retail sales, cigarettes and alcohol - to meet most of its money needs.

“You think you’re getting a hell of a deal here because there’s no income tax,” said David West, director of Washington Citizen Action, a Seattle consumer advocacy group. “But you’re getting nickle-and-dimed.”

Income-tax advocates long have claimed the current system hurts the poor and favors the rich, but state voters repeatedly reject an income tax. A recent Associated Press poll showed 66 percent of voters oppose such a tax even if other taxes were cut.

“Saying ‘income tax’ is like saying ‘abortion,”’ said Sen. Bob McCaslin, R-Spokane, explaining it’s a divisive issue. “People automatically say no because they don’t want to pay income tax along with all the other taxes.”

Dick Adams, a Spokane government-spending critic, said he can’t go along with a state income tax because he doesn’t believe other taxes would be cut. “I wish I could depend on the fact they’ll lower the others,” he said.

If all Washington taxes are combined, the study says, families earning less than $28,000 pay 17.1 percent of their income in state and local taxes - the highest percentage in the United States.

Middle-income families earning between $28,000 and $76,000 pay 10.5 percent of their income in state and local taxes. The richest Washington families - with average incomes of $717,000 - pay only 3.9 percent, the study said.

Rep. Jean Silver, R-Spokane, said the percentages are misleading.

“That’s too simple a way of saying it,” Silver said. “People who are low-income have a lot of other benefits…they have agencies that assist them.”

Grover Norquist, president of the conservative Americans for Tax Reform, said the study fails to consider the economic impact of various tax systems.

“If you look at states without income taxes, there’s more job creation and more growth,” he said.

The study, which compiled data from the Census and Internal Revenue Service, listed 10 states as the “Terrible 10”: Washington, Florida, Texas, South Dakota, Tennessee, Louisiana, Pennsylvania, Illinois, Alabama and Michigan. Those states rely heavily on sales and excise taxes and either did not have an income tax or had a flat-rate state income tax.

The study listed four states as least regressive: Delaware, California, Montana and Vermont. Those states had graduated income taxes and did not rely heavily on sales taxes.

Taxpayers in states relying on sales taxes also are at a disadvantage when it comes to federal taxes, the study says. State income and local property taxes are deductible for federal tax purposes, while sales taxes are not.

If voters can’t accept a state income tax, then the Legislature must consider property tax credits that include cuts for renters, West said. “You can imagine the outrage if our federal income tax had 3 percent at the top and 17 percent at the bottom,” West said. “Yet this happens in Washington state and no one says a thing about it.”

, DataTimes ILLUSTRATION: Graphic: Hitting the poor

The following fields overflowed: CREDIT = Kristina Johnson Staff writer Information from The Associated Press was used in this report.