Lower tax burden? Depends on your definition
Tax collections have increased by 97.8% since 1986

Much has been made of the state Department of Revenue’s release late last week of 1999 Census data pointing to a decrease in Washington’s overall local and state tax burden. We can’t help but question the motives behind releasing this report two weeks before the election when the Department has had the numbers since September. But regardless of motives, the real question is: Has Washington’s tax burden truly dropped to its lowest level since the 1980s? Frankly, that depends on your definition of tax burden.

If the overall tax burden is determined by comparing income levels to tax levels, you can conclude that Washington’s tax burden has dropped. Citizens now pay an average of $107.30 per $1,000 of income, the lowest since 1986 when they paid $105.90.

On the other hand, if tax burden is determined by its rate of increase, the story is much different. Washington’s tax collections have increased by 97.8% since 1986, while personal income has only increased by 96%. That means the tax burden is growing faster than personal income. At no time since 1980 has there been a decrease in the growth of the state’s overall tax collections. Even during the 1999 fiscal year overall tax collections increased by 4.8% over 1998.

What did happen in 1999 is that average personal income increased 2.9% more than the state’s tax collections. This is not consistent with the pattern of the last 15 years, where tax collections generally outstripped personal income growth. Either way you look at it, the state government’s tax coffer continues to get bigger.

It is also worth noting that the Department of Revenue’s report compares the tax collections of the 1999 fiscal year with the personal income of the 1998 calendar year. Since 1998 was the year of the dot-com boom, income levels included now devalued stock options. Thus, calculating the tax burden by the correlation between tax collections and value of personal income did not take into account actual realized income.

That being the case, the best way to get an accurate measure of the state’s tax burden is to consider whether tax collections have increased or decreased.

Using this determinant, Washingtonians have faced almost a 100% increase in tax collections since 1986. This hits those with lower incomes hardest as tax growth rates increase faster than their income growth rates, especially given Washington’s reliance on the regressive sales tax.

While on paper Washington’s tax burden may appear to be improving, given the current economic crisis in the state it would be prudent not to base tax decisions on an elusive personal income figure. Instead, the state’s tax burden should be judged by the rate at which tax collection is growing. Unfortunately for Washington citizens, that rate has been growing steadily and continues to grow. According to the Tax Foundation, Washingtonians have to work longer than citizens in 45 other states to pay off tax bills and reach Tax Freedom Day (the day citizens finish paying government bills and start earning money for themselves).

Contact: Jason Mercier, Deputy Communications Director, (360) 956-3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org