1. Funding Public Services for the 21st Century
Tax Reform in Washington State
by Marilyn Watkins
Economic Opportunity Institute

2. Why we have taxes
“To establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.”
- U.S. Constitution

3. Why we have taxes
“It is the Paramount duty of the state to make ample provision for the education of all children residing within its borders, without distinction or preference on account of race, color, caste, or sex.”
Article IX, Section 1, Washington State Constitution

4. It’s not just the recession Washington’s rank in school spending
Source: U.S. Census Bureau

5. Needs of state residents growing Growth of Age 85+ Population
Source: Office of Financial Management

6. State General Funds as % of Personal Income
Sources: National Assoc. of State Budget Officers & U.S. Bureau of Economic Analysis

7. Total State Expenditures as % of State Personal Income
Sources: National Assoc. of State Budget Officers & U.S. Bureau of Economic Analysis

8. Washington’s structural deficit
Our need for public investment is growing
Our tax base is shrinking

9. Washington’s shrinking tax base
Funding Education for the Long Run

10. Washington has the most regressive taxes
Source: Institute on Taxation and Economic Policy

11. Why other states are doing better Sources of state revenue
Source: 2007 state tax collection by source, taxadmin.org

12. We can’t fund 21st century education system
with an early-20th century tax structure
Funding Education for the Long Run

13. Goals Means Keep our kids and our state competitive
Raise $1 billion per year for new education and other critical investments
Means
Expand tax base to growing areas of the economy
Make tax system fairer

14. Context Tax-averse Governor and legislators Severe recession
1933 Supreme Court ruling
I-960

15. A fair share tax: Revenue for biennium $1.7 billion
Exempt first $200,000 ($100,000 for individuals)
3% $200,000 -$499,999
5% over $500,000
7% over $1 million
$1.7 billion
Source: Institute on Taxation and Economic Policy based on 2006 income levels for Washington taxpayers

16. Reduce other taxes: Net new revenue $1 billion Annual Revenue Change
Reduce state property tax by quarter
($413 million)
Increase small business B&O credit (exempt gross revenues up to $1 million at retail rate)
($261 million)
Total loss
($674 million)
Net new revenue
$1 billion

17. Results for taxpayers
8% of Washington households would pay new Fair Share tax
All households would pay less property tax
88% of businesses would be exempt from B&O (now 48%)
All would benefit from better schools

18. Reform will require citizen activism
2010 initiative?
Court challenge
Implementation in 2012

19. When If Not Now?