Evergreen Freedom Foundation Commentary
http://www.effwa.org/

Olympia, WA - 10/30/01 - 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).

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Evergreen Freedom Foundation
A Non-Profit Public Policy Research Organization
P.O. Box 552, Olympia, WA 98507