Almost all state and local tax systems take a larger share of income from the poor than from the rich. But Washington state is notorious for its “regressive” system that hits poor families the hardest and goes extremely easy on the rich.
According to a recent report from the Institute On Taxation & Economic Policy, the bottom 20% of Washington state’s non-elderly households who earn less than $21,000 a year will pay 16.8% of their income in state and local taxes this year. The top 1%, earning more than $507,000, will pay a mere 2.4% of their income.
Washington has no income tax, relying instead on sales tax. Because services that only the rich can afford aren’t taxed, the system translates into a much higher percentage of poor familes’ income being taxed.
Forbes recently reported that Washington Governor Jay Inslee, a Democrat, argued in his State of the State Address that Washington is being held back by “the nation’s most unfair tax system.’’ He’s calling for a 7% income tax on capital gains above $50,000 per couple. This tax would apply to gains from stocks and bonds, not from the sale of homes or farms. But the proposal is being opposed by Republicans.
And Republicans aren’t the only ones who have protested changes to the tax law in the past. The state’s wealthiest residents, such as Amazon.com founder Jeff Bezos, and Los Angeles Clippers owner Steve Ballmer, funded opposition campaigns against the most recent initiative to create a state income tax, in 2010.
Interestingly, Bill Gates, Washington resident the country’s richest man, doesn’t oppose raising taxes on the rich. In fact, his father, Bill Gates Sr., a retired attorney and philanthropist who guides the strategic direction of the Bill and Melinda Gates Foundation, was a booster of the 2010 state income tax initiative.