OPINION: Washington should replace sales tax with wealth fee

Income tax unlikely in state of Washington; current system needs change

Sales tax is the same for everyone, which lets the wealthy off the hook. An income tax or wealth fee would fix this problem.

COURTESY OF FLICKR COMMONS

Sales tax is the same for everyone, which lets the wealthy off the hook. An income tax or wealth fee would fix this problem.

GUS WATERS, Evergreen columnist

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The sales tax in Washington state is backward, and we should replace it with a fee on excessive wealth.

Every time you buy something in Washington state, except for food, a 6.75 percent sales tax is added to that purchase. Local governments like cities and counties can increase this sales tax by up to 4 percent if they please. This means you must pay as much as 10.75 percent more than you should for everything you buy.

“It’s a regressive tax,” said Mark Gibson, WSU professor who specializes in macro-economics. “Lower-income households tend to devote a greater share of their income to expenditure services”

A regressive tax impacts people with less money more than it does the wealthy. The current sales tax makes poor folks pay a higher percentage of their income and rich folks pay less.

A fee on wealth is not without its drawbacks. Multi-millionaires and multi-billionaires worked hard for their money and taxing what they have worked for, sometimes from bottom up, is unfair. The desire of people who have worked for their money to not give it up is valid. Rich people are not evil, greedy or conniving. They are people, and some of them are people who are willing to contribute more.

“I need to pay higher taxes,” Bill Gates said in an interview with CNBC.

The sales tax harms families in all of Washington, but right here in Whitman County, it hurts most of all. A sales tax of 7.8 percent is levied on all non-food purchases. Whitman County has the highest poverty rate in all of Washington. The sales tax here is like pouring swamp water onto a wound, it is simply inexcusable.

Aside from being unfair, the sales tax discourages spending.

While far from the only factor that stimulates the economy, consumer spending drives economic growth. Revenue from consumer purchases enables companies to continue to exist and allows companies to hire more workers and expand the economy.

Needless and reckless spending harm economies and proponents of a sales tax argue that it discourages this kind of spending. Having a tax on some kinds of spending is logical, but discouraging all spending makes little economic sense.

While the sales tax has a slew of issues, it is important to our state government. In 2016 it accounted for over $22 billion of revenue for Olympia. This is a staggering amount of money to replace, and it is the single largest source of income for Washington.

If the sales tax were to be repealed, it would need to be replaced with another source of revenue to pay for infrastructure and education.

One option is to adopt an income tax to replace the sales tax. This might sound good on paper, but it has a few notable downsides. In the Washington state constitution taxes on all property, which include income, must be uniform across all people. This means that Washington cannot do what the federal government does: taxing people using the bracket system, where people that have a higher income will pay a larger percentage and those that have a lower income will pay a smaller percentage.

It’s feasible, but it would be a heavy lift, said Travis Ridout, a professor of political science at WSU.

Efforts to change the Washington constitution to enable an income tax have failed the past 10 times, as it requires a statewide ballot to change the constitution. The last time this was attempted was in 2010.

If the sales tax hurts the economy, and a income tax is unrealistic, then what can be done?

The sales tax should be replaced with a wealth fee on accumulations of over $50 million, a threshold for fees on super accumulations. This would encourage spending and drive the economy. It would also lift the burden on Whitman County taxpayers, who have for too long paid more than their fair share in taxes.

Unfortunately, the wealth fee would likely run into the same problems as the income tax in terms of getting by a ballot.

The criticisms of a wealth fee are valid, and it is no magic bullet to solve all of Washington’s problems. Yet continuing to be the state whose taxes hurt poor people the most in the entire nation is inexcusable, and the wealth fee is a step in the right direction.