Washington state is infamous for its regressive taxation system, which places the highest burden on the state’s poorest residents while taking a smaller share from its wealthiest. Though the state constitution and law closes some avenues to turning that around, advocates say that policymakers do have options to fund critical services without hurting the least fortunate.
Policy wonks gathered at the Northwest African American Museum at the beginning of October to talk taxes, emphasizing the disproportionate impact of regressive taxation policies on marginalized groups and how the tax code could be used to create more equitable outcomes.
“It’s always about race, and it’s always about taxes,” said Misha Hill, a policy analyst with the Institute on Taxation and Economic Policy (ITEP). ITEP is the source of the frequently cited statistic that Washington has the most regressive tax system in the country.
In fact, Hill said, there are no states in the union that have a truly progressive taxation system — Washington just happens to be the worst. While states lean heavily on regressive sales taxes and property taxes, the federal tax system is actually successful at redistributing wealth from top earners to low-income people.
Part of that success rests with the Earned Income Tax Credit (EITC), a powerful tool that results in a dollar-for-dollar reduction in overall tax liability and can be the source of tax refunds for working families.
One strategy to improve Washington’s tax structure would be funding a state version that the Budget and Policy Center calls the “Working Families Tax credit,” which mirrors the federal policy but extends the benefits to groups that don’t qualify for the EITC such as immigrants, domestic care workers and students, said Misha Werschkul, executive director of the Budget and Policy Center.
“It’s a tool that’s targeted directly at the problem we are trying to solve,” Werschkul said.
Washington families are expected to claim more than $1 billion from the federal government in 2020, according to estimates by the Center on Budget and Policy Priorities (CBPP). Much of those benefits would flow to communities of color whose members are more likely to be low income and receive the most benefit from existing tax credits, according to the CBPP.
Using the tax code to relieve the burden on communities of color is critical because for a long time, the tax code was used explicitly to keep them down.
In the years after the Civil War, state and local governments needed revenue to rebuild the south, said Michael Mitchell, senior director and counselor of equity and inclusion at the CBPP.
Initially, those policies were put in place by a coalition of newly emancipated Black people, poor White people and transplants from the north who moved to the south after the Civil War. They targeted land owned by wealthy White people as their source of tax revenue, a policy which was met with a backlash from that group, Mitchell said.
“Through any means available — terrorism, policy to redisenfranchise Black folks — Democrats were going to regain power,” Mitchell said.
They passed laws requiring supermajorities to pass new taxes. In Mississippi, three-fifths of the legislature had to sign on to pass taxes used to benefit poor people. At the same time, the population of people needing taxpayer-funded services ballooned as Black people were given the chance to access those programs for the first time.
In Washington, the state government was explicitly racist, writing in support of the Dred Scott decision that prohibited Black people from petitioning the court for their freedom and attempting to discourage Asian settlement by charging predominately Chinese workers for settling in the area.
In more recent history, Black communities were redlined into specific neighborhoods through federal home-buying policies, and the lack of a state income tax means that local governments rely on regressive property and sales taxes to pay for public goods used by low income families such as schools and public transportation.
The problem can’t be solved without acknowledging the past and the disparate impacts on marginalized groups, said Andy Nicholas, associate director of fiscal policy at the Washington State Budget and Policy Center.
“Lawmakers need to accept the reality of this history and think about how that continues to play out today when they’re thinking about crafting a number of policies,” Nicholas said.
Just lowering taxes won’t be enough, however. Washington’s schools, mental health programs and infrastructure are woefully underfunded, creating a scramble each budget season to try to fund policies and programs that tend to help poor families.
That’s going to mean finding ways to tax rich people, Werschkul said.
“We should be challenging ourselves to do more than one thing,” Werschkul said. “We can create a tax credit that helps a million working families and make sure there’s enough revenue to fund services. We can do both things.”
Ashley Archibald is a Staff Reporter covering local government, policy and equity. Have a story idea? She can be can reached at ashleya (at) realchangenews (dot) org. Follow Ashley on Twitter @AshleyA_RC
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