Whitman County Gazette - Serving Whitman County since 1877

By Frank Watson
Gazette Columnist 

Fairness and Taxes

 

August 16, 2018 | View PDF



A few weeks ago, I was in a serious discussion with a young friend who claimed that the Washington State tax system is unfair to the poor. I asked how he came to that conclusion, and he said the rich in Washington pay a lower percent of their income in taxes than the poor. I pondered that for a second and asked where he came to that conclusion. You guessed it. He said, “Well, everybody knows that.” I told him that I didn’t know that and would need to think on it. He got mad and stomped out.

I knew that his claim had to have some basis, so after some internet search, I found an old column in a Seattle newspaper advocating a state income tax. The columnist quotes an annual study by the Institute on Taxation and Economic Policy. This non-profit think tank is openly opposed to supply side economic theory and uses a microsimulation computer model, whatever that is, for their analysis. Their conclusions include the claim that all state tax systems are regressive and unfair to the poor. They claim the only “fair” system is a state income tax with rates that increase with income. I could not say their organization is biased, but I will say that some of their conclusions defy logic.

It would appear to me that a property tax system would have a higher impact on those who own property. Washington State school districts receive a major share of their income from real estate taxes. Those in the district who own homes are taxed while those who rent are not. I may be missing something here, but the rich guy who owns the apartment building is taxed while his tenets are not. I can’t see how this could possibly place a lower tax burden on the rich.

The foundational piece of our state tax system is the sales tax. If both the rich and poor spend their income, the tax burden should be proportionate to their respective incomes. I don’t have access to microsimulation models, but I do understand mathematics. If all Washington taxpayers spend their income, all tax payers are taxed at the same rate. If the rich are taxed at a lower rate, they either don’t spend their income or have a significant portion of their purchases tax exempt. The only tax-exempt purchases I am familiar with are groceries. Lower income shoppers pay more of their income for groceries, so they should have a higher exemption rate and lower taxes. The rich vacation in the Bahamas, drive around in private limos, and pay the applicable sales tax. I am not rich, but I did buy a new car a few months ago and paid over $3000 in sales tax. The tax on my last house was over five times that. Those who rent and ride the bus avoid the sales tax on houses and new cars.

I am not saying our tax system favors either the rich or the poor, nor am I saying that we should never consider changes. I would just like the argument to make sense. The microsimulation taxation model and down-home logic are miles apart. The only argument I can think of for an income tax is that it would be easier for legislators to answer the cry to, “Sock it to the rich” or “make Amazon pay for it.” There is no tax that will please everyone. But then, everybody knows that.

(Frank Watson is a retired Air Force Colonel and a long time resident of Eastern Washington. He has been a free lance columnist for over 18 years.)

 
 

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