[Editor’s Note: Sales consultant and former startup founder Ron Davis is a candidate for the Washington state Legislature, who has written for GeekWire previously on startup sales hiring practices. GeekWire publishes guest opinion pieces representing a range of perspectives. The views expressed are those of the author.]
If you open a local discussion about Washington state taxes on LinkedIn, you might think Olympia is on the verge of wiping out Seattle’s state economy with excessive taxes. There are exceptions, but most of these posts are far from rhetoric, short on substance. Given Washington’s pressing needs, we must do better. And given the power of our data-driven thinking community, we it can be do better.
Contrary to popular myth, our taxes are low, they have never skyrocketed, and they are nowhere near causing significant damage to the trade sector.
Washington taxes are low
Consider why a conservative economist recently called Washington a “tax haven, like the Cayman Islands,” when it comes to the wealthy. First, we have recently reached the highest level among states when it comes to taxes as a share of their economy, and our taxes are actually taxes. down from a few years ago. We have the lowest taxes of all other blue states, and nine red states as well, including Kansas, Kentucky, Utah and West Virginia.
Second, our taxes disproportionately burden the wealthy, while at the same time squeezing working families. Until recently, Washington was the leader retroactively taxed status in society, which means that the poor pay a much larger share of their income than the rich. Due to the tax on capital gains exceeding $250,000 per year, we are now only a group. secondly reduced tax – just above Florida.
Currently, the top 1% of earners in Washington pay 4% of their income in state and local taxes – less than Texas or Idaho. He belongs to the nation average it is 7.2%, almost double that of Washington. In Massachusetts, California and New York, the top 1% pay 9%, 12% and 14% of their income. At the other end of the spectrum, the bottom five earners in the Evergreen State pay through the nose — 13.8% of their pay. The national average is 11.4%. Low-income families are taxed more than their peers in other states, but this is not part of the discussion on LinkedIn.
Let’s remember the context of the country and the world. United States taxes, including state and local, are much lower than many rich countries – 32nd out of 38 in the OECD. We pay 25%, while the rich Danes, Dutch, Japanese and Austrians, or the rapidly growing Spanish and Poles, all pay 35%-43%. No wonder our life expectancy, inequality, health care provision and infrastructure are so bad! The only countries* with lower taxes than ours in the OECD are Costa Rica, Turkey, Colombia, Chile and Mexico.
In other words, the idea of taxation burden – especially for the rich, especially in Washington state – it’s a myth.
Washington’s budget growth is steady
One often hears depressing claims about Washington’s growing budget. It is true that if Washington’s budget had grown at exactly the same rate as population and general inflation combined over the past decade, it would have been 29%. But as any public finance economist can tell you, that information is next to useless.
Cost disease means that service inflation in both the public and private sectors is higher than overall inflation. Since government work requires service, government spending rises faster than normal inflation. Governments build things, too – so they buy more land and land also becomes more expensive in a growing economy. That is why the cost of maintaining government services flat it usually rises much faster than inflation. So, economists instead look at how much the government’s gross domestic product (GDP) takes.
You might think we’ve spent an exorbitant amount of money over the past few years. Think again. In 2019, taxes were 10.6% of our economy. Today they are 8.47%. Maybe we should look back to the depths of the recession, 2010? It was 9.9%. Taxes as a share of our economy have shriveled. They are flat since the last 25 years, and down since the 1970s, 1980s and 1990s.
And if you think that GDP numbers are somehow distorted or do not represent the experience of each individual, the same analysis is true for personal income. Taxes are low, and our economy grew exponentially when our taxes went up more.
A millionaire’s tax will not hurt the economy or cause more people to leave
In online chats, for all the talk about tax flying and comparative vibes, there is surprisingly little discussion in our community about the original, measuredthe economic impact of higher taxes on the wealthy. So what is the cold, hard evidence?
Well, putting aside the question of whether keeping every last rich person is the highest goal of public policy, the evidence is clear that the rich on balance are not as close to the price as we are told. In fact, millionaires are on the move Underneath than all the others.
Researchers estimate that eliminating all tax differences between states would reduce the migration of billions of people nationally by only about 250 families per year – out of a total of about 12,000. Regions like ours are “sticky,” as the product people say.
Furthermore, research shows that when the rich move, they move mostly move to other high tax areas! Of course others people file taxes when they move to Wyoming and some people buy additional homes and play domiciling games to avoid taxes. But the macros, net effect it looks good – little.
Unfortunately, a survey of millions of people seems to have little effect on people’s beliefs when “everyone they know” is “thinking” about moving.
So let’s put this in terms of some specific issues. New Jersey raised taxes on the wealthy and Massachusetts raised taxes on millionaires. New York raised taxes on the wealthy twiceso does California. In all those cases, entrepreneurs predict the economy the apocalypsethen they discuss how the people they know are doing. Then the number of rich people in all those places increased significantly. In fact, in California – where taxes are going up a lot – their “market share” of US millionaires even increased.
It’s almost as if “the economy” is a more complex emergent phenomenon, instead of a simple equation where prosperity is entirely tied to the taxes of the rich or the analysts’ vibes about them.
It’s a serious problem that these kinds of facts are rarely announcements about the imminent collapse of our domestic economy every time we do something like raise the minimum wage, labor standards, or taxes. While there is a lot of room for discussion on the appropriate type and level of taxation, it is time to stop having a discussion that lacks fundamental strength.
Washington’s taxes aren’t high, they haven’t grown, and raising them for the wealthy risks recession. This community has built companies that are changing the world by following evidence wherever it leads. It is time we demand a common standard in our political discourse.
* Ireland is officially on this list, but its tax rate is very distorted, because GDP is increased mostly by companies that shift profits there on paper for tax purposes. Ireland has faced this distortion in the number of national incomes and this puts its actual tax rate between 35% and 40%.
Note: I used these numbers of people, budget history and this accounting inflation.
