Washington state’s regressive tax system fuels economic racism

On May 4, Washingtonians from each of the 49 legislative districts came together for a “People’s Hearing” in Olympia to demand a budget that works for everyone. (Photo by Heather Moore)
On May 4, Washingtonians from each of the 49 legislative districts came together for a “People’s Hearing” in Olympia to demand a budget that works for everyone. (Photo by Heather Moore)

It wasn’t too long ago that Washington state showed the nation a $15 minimum wage can be a reality. Our state has the largest city with an openly gay mayor, a widely supported marriage equality law and legalized marijuana.

Yet, this bluest of blue states also bears an ominous distinction: the most regressive tax system in the country.

Because of our high reliance on the sales tax to fund our schools, infrastructure, health care and other vital public needs, our state Legislature demands that low- and middle-income Washingtonians pay a higher percentage of their incomes to cover these costs than in any state in the country. This includes a disproportionate share of people of color and immigrants.

A study by the Institute on Taxation and Economic Policy finds that low-and middle-income Washingtonians pay 17 percent and 10 percent of their incomes, respectively, in state and local taxes. And what do the richest 1 percent of income earners pay? Less than 3 percent.

But it doesn’t have to be this way. The Washington United for Fair Revenue coalition, which includes more than 100 organizations around the state, is calling for a revenue structure that is fair, accountable, shared, stable and sufficient. As the House and Senate engage in budget negotiations during the ongoing special session that started April 29, legislators have an opportunity to directly impact the inequity of our revenue system.

By enacting a capital gains tax on the stock market profits of our wealthiest residents, we can raise $800 million annually, mostly from the top 1 percent of households. Washington is one of just nine states in the country that does not tax stock market income, which tends to be enjoyed by our wealthiest.

This would be a very targeted way of undoing oppressions that have plagued our communities for generations. A University of California Santa Cruz study found that the wealthiest 20 percent of households in the U.S. own 95 percent of all financial assets, or stocks. Currently, our wealthiest are barely contributing their ample funds to a system from which they benefit. In effect, taxing capital gains is a way to lessen this freeloading.

Washington state’s current House budget proposal would institute a review process on the state tax breaks enjoyed by large, profitable corporations. This is an essential step in establishing a level playing field for Washington’s small businesses suffering major economic disadvantages coming out of the recession.

Anything short of that is a failure to serve our people.

In addition, a recent Alliance for a Just Society analysis of Census Bureau data finds that those asked to bear the brunt are disproportionately people of color. This is an issue of equity.

And as Washington’s families have gone from making a living to just scraping by, the very people who are struggling to make ends meet are the ones asked, through our broken revenue system, to shoulder most of the responsibility of paying to keep Washington alive and vibrant.

The Alliance’s Job Gap Economic Prosperity Series of studies on living wages finds that two-thirds of Washington’s white population earns a living wage for a single household, or $15.99 an hour statewide. Meanwhile, 56 percent of Washington’s people of color earn enough to make ends meet, according to our analysis of American Community Survey data. The disparity is even more significant for Latinos, 36 percent of whom earn that living wage, compared to 67 percent of households overall.

A system that disproportionately and persistently leaves people of color in low-wage work is tantamount to economic racism. And, every year it does not take action to correct this injustice, the Legislature enables a system that oppresses those who are struggling the most to survive.

Nearly 80 years ago, President Franklin Delano Roosevelt set a standard for how America should generate revenue.

“Here is my principle: Taxes shall be levied according to ability to pay,” he said in 1936. “That is the only American principle.”

We need a tax structure that works for Washington. And the Legislature needs to stand up for the people it serves.

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