Why a higher sales tax hurts the poor and prolongs the economic pain
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The Washington legislature cut $480 million from the state's budget during the recent special session(1) This is on top of $10.5 billion in cuts over the last three years that have targeted the poorest and most vulnerable, schools, and state employees. We are seeing the frightening reality of urgently needed services being ripped from thousands of people who are destitute, ill and disabled. And there's more to come. Legislators are expected to slash another $1.5 billion in the regular session.
Governor Gregoire hopes to avoid public confrontation over additional cuts by offering a referendum in the spring to "temporarily" increase the sales tax by 0.5%. A proposal from Senator Paull Shin advocates a 1% sales tax increase. Many desperate service providers and unions are anxious to see this as a solution for their constituents. But does a higher sales tax solve the state's problems? Sisters Organize for Survival believes the answer is no.
- A sales tax increase provides neither short- nor long-term answers
Gregoire's proposal would raise a mere quarter of the budget shortfall; Shin's would generate only half what's needed.(2) Resorting to a sales tax increase one more time just puts off the task of fixing Washington's unfair, broken tax system - repeatedly found to be the most regressive in the country. The proposed increases are supposed to be for a limited period of time. But there has never been a temporary sales tax increase in the history of our state.
- The sales tax benefits the rich
Washington's tax structure forces the poorest 20% to pay 17.3% of their income in taxes, while the wealthiest 1% pay only 2.6%.(3) This means fast-food workers, teachers, home care providers, and single parents pay more of their income in taxes than Bill Gates and Paul Allen! The very people whom social service providers aim to help are hurt the most by sales tax increases. But wealthier segments of society who can afford to pay for personal and professional services are benefited by the exemption of many services from sales tax.
- People, not corporations, pay sales tax increases
Businesses get around paying sales tax through more than 130 exemptions for particular activities.(4) These include investment services (reduces state income by $47 million per year), extracted fuel purchased by oil refineries ($26 million), custom software ($31 million), non-organic sprays and fertilizers ($44.6), and jet fuel ($55.2 million).(5) Rather than adding to the drain on individual wallets, the state should eliminate sales tax exemptions for industry and agribusiness.
- Sales tax weakens the state revenue flow
In 2002, the Washington State Tax Structure Study Committee found that the fundamental weakness of our state and local tax structures is their extraordinary reliance on sales tax and the absence of a personal income tax and corporate profits tax.(6) For instance, Boeing made $3.3 billion in profits from 2008 through 2010 and paid no taxes on them.(7) In fiscal year 2008, Washington received 63% of tax revenue from general sales taxes, compared with a 34% average for other states.(8) The instability of sales tax as the foundation for the state budget is shown by the downward spiral of sales tax revenue as the economic crisis continues.
- Washington already has the nation's most regressive tax structure
The reason public funds are depleted in this rich state is because of decades of tax breaks to banks and big corporations. In 2000, the state's tax exemptions totaled $27 billion — more than it collected in tax revenues.(9) And the giveaways have only gotten worse while corporations are reporting record profits.
Fight for real alternatives!
Both Democrats and Republicans are hiding behind the passage in 2010 of Initiative 1053, which required a 2/3 legislative majority to raise taxes. Lawmakers have refused to address the fact that ending special tax privileges isn't a tax increase, it is a standardization of existing rates.
Sisters Organize for Survival has repeatedly shown that ending business tax exemptions, canceling the state's interest payments for one year, enacting a tax on windfall oil profits and other measures would more than fill the income gap. (See "Tax the 1% — Stop stealing from the needy") We need to force legislators to take such bold actions rather than letting them get away with balancing the budget on our backs once again.
Defenders of education, public workers and the needy have a big task ahead of us. Many people are relying on us for their future and their very survival. We must not offer false, inadequate solutions that will only make their lives more difficult. The time is now to mobilize for solutions worth fighting for. The dynamic Occupy movement has changed the public discourse and consciousness. A year ago, only a few voices seriously called seriously for taxing the rich. Now there is deep and diverse opposition to the 1% reaping massive benefits at the expense of the 99%.
Join Sisters Organize for Survival in the struggle to defend women, children, workers, elders, the ill and disabled. With determination, bold action and an agenda that puts working people first, we can have a real impact on the state budget.
1. The Olympian, "Approval of $480M budget gap paves way for special session to end,"
2. Seattle Times, "Washington lawmakers to talk budget, gay marriage,"
3. Real Washington State Budget,
4. "Tax Exemptions - 2008: A study of Tax Exemptions, Exclusions, Deductions, Deferrals, Differential Rates and Credits for Major Washington State and Local Taxes, Washington State," Dept. of Revenue
5. Economic Opportunity Institute, "$2 Billion in Progressive Annual Revenue for Washington,"
6. The Real Washington State Budget, "No to Unfair Sales Tax: Sales Tax is an Unfair Tax,"
7. The Washington Times, "Top ten list: Tax evaders' wall of shame,"
8. Real Washington State Budget, "No to Unfair Sales Tax: Sales Tax is an Unfair Tax,"
9. The Center for Applied Ecological Economics, "Washington State Tax Exemptions: Unsustainable, Unjust, Undemocratic, Illegal and Just Plain Bad Economics"
Issued by Sisters Organize for Survival, a grassroots campaign of Radical Women
SOS holds public organizing meetings every 2nd and 4th Thursday of the month at
New Freeway Hall, 5018 Rainier Ave. S., Seattle WA 98118
206-722-6057 * RWseattle@mindspring.com * www.SistersOrganizeforSurvival.org
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