STATE INCOME TAX WOULD MAKE WASHINGTON LESS COMPETITIVE, HURT JOB CREATION

April 23, 2010

Proponents of a state income tax are gathering signatures for Initiative 1077, which for the first time would impose an income tax in Washington state.  The new tax would be imposed on people with annual incomes of over $200,000 for individuals and $400,000 for couples.  Research shows, however, that a state income tax would have a number of negative impacts on the economy and people of Washington, says the Washington Policy Center. 

Washington is one of only nine states that does not tax people's incomes.  Doing so would fundamentally alter the state's tax structure, changing it from one that mainly taxes consumption to one that also taxes productivity, says the Center.  

A state income tax is bad policy for Washington because: 

  • This month lawmakers raised taxes by $800 million; the government should not impose another tax increase, estimated at $1 billion, during a recession.
  • Raising taxes and creating a new tax structure lets lawmakers off the hook, allowing them to avoid the tough decisions needed to set clear priorities within existing revenues.
  • Initially 70 percent of revenues from an income tax would be earmarked for public education, but taxpayers already provide public schools with ample funding; increasing spending would not improve learning outcomes for children.
  • A state income tax would give lawmakers a new way to increase the financial burden they place on citizens; after two years the legislature can amend the income tax, just like any other law (history shows when lawmakers create a new tax, they usually raise the rate and apply it to more people). 

A state income tax would have a negative effect on Washington's economy, says Paul Guppy, Washington Policy Center's Vice President for Research.  Comparisons among states show that income taxes reduce state competitiveness, add cost and complexity to the tax code, and reduce the incentive for people to work, save and invest.  The absence of an income tax is one of the few clear advantages Washington's business climate has over those of other states. 

Source: "State Income Tax would Make Washington Less Competitive, Hurt Job Creation," Washington Policy Center, April 21, 2010. 

 

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