The joys of not having a state income tax

By Bruce Ramsey, Seattle Times columnist

December 18, 2003

William Gates Sr., head of the Washington State Tax Structure Study Committee and father of the state's richest man, recently said, "Washington has the most regressive tax structure in the United States. That is appalling to me. And that is the basic reason the commission felt we needed an income tax."

That is not reason enough to swallow an income tax.

A "regressive" tax means that the less you earn, the higher percentage of income you pay. That sounds pretty bad, but it is true of virtually all prices, including the 25 cents for this newspaper. Some of the most popular taxes the cigarette tax, particularly are regressive.

In addition to its morally neutral meaning, "regressive" has a highly flavored meaning that connotes backward, reactionary, bad the opposite of "progressive," which connotes forward-looking, advanced, modern, good. You cannot use these words in a morally neutral way. They're rigged.

It is true that Washington's taxes are regressive, technically. It is also true that federal taxes are progressive, technically, and that the combination of federal and state taxes is progressive.

When Gates spoke Dec. 4 to the progressive Rainier Institute "progressive" in a third, political sense of the word I asked him whether he ought not include the federal numbers in his argument.

"Are you implying that all state tax systems should be regressive?" he said. "It's nonsense as far as I'm concerned."

I was implying that. A state may want to offset the unfairly progressive federal income tax, which makes the top 50 percent of tax filers pay 96 percent of the taxes. Several other states, including Florida, Nevada, South Dakota, Texas and Wyoming, do that by relying mainly on sales taxes.

It depends on what you think is fair. I think the "ability to pay" principle ought to hold at the low end, where it means what it says. A flat percentage ought to hold among higher incomes, where "ability to pay" means a tax on success. Penalizing success is neither fair nor smart.

To me, having no state income tax is one of the delights of Washington. I think it also encourages venture capital, high tech and high wages in this far corner of America. Maybe I am wrong. Maybe we would attract entrepreneurs here by taxing them more. But I doubt it.

A final thing about a state income tax. The political purpose, meaning the real purpose, is not to achieve some Platonic idea of fairness. It is to get the state more money. And that is the main reason why a majority of voters oppose it. Said Seattle pollster Stuart Elway in his August newsletter:

"Most voters do not trust the politicians and reformers who say that an income tax will be offset by reductions in other taxes. Most voters do not trust that state government would exercise fiscal discipline if it were to get more revenue spending would just go up, creating demand for ever-higher taxes. These beliefs are widely held. 'Most voters' means 60 percent to 80 percent."

Most voters lack Gates's sense of public obligation. They are against a state income tax because they don't want to pay it. And because their consent is required in order to have it, this state will go without it.

Hurrah.

Bruce Ramsey's column appears regularly on editorial pages of The Times. His e-mail address is bramsey@seattletimes.com