It’s Time to Turn Our Tax System Right-Side Up

In Washington State, households making poverty wages pay six times more in state taxes than our tech billionaires. We’ve got to balance the tax code so it works for everyone.

We have a lot to be proud of here in Washington. We are both the number one state to do business in and the number one state for workers. If you listen to the trickle-downers, you might think that it’s impossible for an economy to be good for both employers and workers, but Washington state is proving them wrong. Let’s tick through a few reasons: nearly 5,000 business startups, eight Fortune 500 companies in the Seattle metropolitan area alone, the nation’s highest minimum wage, the nation’s best paid family leave program — it’s no secret that what’s good for workers is good for business, and here in Washington we know we are all better off when we’re all better off.

But all of this is threatened by a more infamous quality in which we are also number one: Washington state has the single most upside-down tax code in the country. That’s right: our tax code is more regressive than 49 other states and Washington DC. We’re worse than Texas and Florida, as well as both of our Pacific Northwest neighbors, Oregon and Idaho.

A Washington state family earning just $20,000 a year pays almost 18 percent of its income in state and local taxes, while our millionaires and billionaires pay less than three percent. This is not only upside-down — it is anti-growth, eroding the spending power of working- and middle-class consumers while making it impossible for the state to adequately fund education, healthcare, transportation, housing, and other crucial public investments on which a thriving economy is built.

Washington’s booming business environment is shackled to an antiquated 20th century tax system that was built to tax a 19th century economy. It’s unfair and inadequate, and it’s putting our future at risk. I can’t think of one reasonable person — Republican or Democrat, businessperson or labor activist — who disagrees with the idea that we owe it to ourselves, our children, our neighbors, and our businesses to do what’s right to build a more prosperous and inclusive Washington.

It’s time to balance our tax code.

The Washington State Senate is taking the first step with their new budget. The Senate proposal would close the tax break on capital gains — affecting just just 8,000 of the wealthiest Washingtonians — while offering tax relief to the vast majority of working families in the state.

Washington is one of only nine states that give the ultra-wealthy a pass on capital gains taxes. Under the Senate proposal, if someone turns a profit of more than $250,000 on the sale of high-value assets like stocks, bonds, or commercial real estate, they will pay a tax of 8.9 percent on profits above that threshold. Anything from retirement accounts or the sale of homes would be exempt. Revenue generated by the capital gains tax would be used to provide tax reductions for the vast majority of Washingtonians.

This is exactly the right instinct: the wealthiest among us pay more when they make windfall profits on Wall Street, and everyone else enjoys relief from the state’s most regressive taxes. There’s more to be done to fix our upside-down tax structure, but this is an important first step — many would argue the most important step.

You can check out more details on the Senate Democrats’ website.

As amazing as Washington is, we can be even better. Fixing our upside down tax code is good policy and even better economics. Lifting the burden on working families while asking the most wealthy to pay their fair share will be good for growth. After all, a billionaire in Medina can’t spend enough to sustain our small businesses in the way that a neighborhood full of Washingtonians in Renton could. That’s why fixing the tax code is good for everyone.