Speakers call for state tax reform

An income tax is touted.

Dropping the state sales tax while boosting the income tax would more equitably spread the burden of an increasingly malnourished state budget.

This was the thrust of featured speakers at the ninth annual Economic Vitality Conference held yesterday at the Wing Point Golf and Country Club.

Sponsored by the Bainbridge Economic Council, the event drew 60 people to hear officials explain tax issues impacting state and local governments.

“The sales tax is regressive and I don’t support it,” said Hugh Spitzer, vice chairman of the governor’s tax advisory commission. “Sometimes with taxes, you have to hold your nose.”

While an increased income tax might be disadvantageous for some, Spitzer said hitting low-income Washingtonians with a greater tax burden smells far worse.

Residents who earn over $130,000 per year pay only about 4 percent of state and local taxes. Those who net about $20,000 bear over 15 percent of the tax burden, according to Spitzer.

The state has a disproportionate dependence on sales tax revenue, with almost 60 percent of funding generated within the retail industry. Governments that lack a diverse tax base make their budgets vulnerable to boom and bust economic trends, Spitzer said.

Recession would tighten an already suffocating state budget, said state Office of Financial Management director Marty Brown.

“When (business) revenue goes down, our revenue goes down – but (the number of) our clients go up,” he said.

Brown said a sour economy thins the pool of money available for state services. At the same time, out-of-work residents become more dependent on these same dwindling services.

Initiative 695 stripped the state of an immense amount of funding just as Brown assumed his director role in 1999. Since then, he has struggled to maintain core services and keep up with growing demand while seeing little additional investment in programs.

Washington needs to invest state tax revenue in basic infrastructure that helps “get goods and services and people” to the markets that desire them, he said.

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