Tag Archives: Tax Foundation.

Eyman Continues to Use Erroneous Information to Support I-1033 Overtaxed Rant

Part of the impetus behind Initiative 1033 according to Tim Eyman is his repeated rant that Washington State is overburdened with State and Local Taxes. Hence his claim that Washington State is 8th highest in terms of tax burden. He cites a recent Forbes magazine article as his source of information.

The problem is that the information is wrong and was miscalculated by Forbes. It’s even noted by a number of people in the comment thread that the article presents erroneous information like saying Hawaii has no property tax when it does and someone else noting that Washington’s ranking is calculated wrongly.

Here is Washington State, the Department of Revenue looked at the figures and came up with the following analysis entitled “Tax Rankings can be Misleading

Tax rankings are a popular way of comparing tax burdens among states, but the results can be misleading. A recent report by Forbes Magazine that Washington ranked eighth-highest in personal taxes per capita is an example of how apples sometimes get compared to oranges.

The Forbes comparison purports to only count personal taxes paid by state residents, but erred by mistakenly counting Washington’s Business and Occupation Tax as a personal tax while excluding corporate income and other business taxes paid in other states. That error occurred because the Census Bureau classifies the B&O tax as a sales tax, and the Forbes analysts failed to notice that. Excluding the B&O tax as it should have done would have dropped Washington’s ranking substantially. In addition, because the ranking only compares certain state taxes and leaves out local taxes, the Forbes ranking fails to take into account some unique aspects of Washington’s tax system.

Washington has a state school property tax levy that flows into the state general fund only to be redistributed to local schools. In other states, all property taxes for schools remain at the local level. The ranking also assumes that only individuals pay sales and property taxes, when in fact businesses pay a substantial share. The only accurate way to compare tax burdens is by comparing both state and local taxes among states. By that measure, Washington ranks 19th-highest per capita and 35th-highest in taxes as a percentage of personal income, http://www.taxfoundation.org/files/sr163.pdf. Economists generally prefer measuring as a percentage of personal income because it takes into account economic activity and demand for services. Rankings have become a popular staple among certain national publications, but they can be misleading. The most recent Forbes ranking is one of those. After being contacted by the Department, Forbes subsequently published a tax ranking based on the Tax Foundation’s analysis.

In its August 2008 report, entitled “State – Local Tax Burden Dip as Income Growth Outpaces Tax Growth” the Tax Foundation ranks Washington State as 35th (with 1 being the highest) in terms of state and local tax burden per capita. Eyman of course ignores this analysis because its pretty hard for him to continue has rant of saying we’re overburdened with state and local taxes when we rank 35th in terms of state and local tax burden compared to other states.

A similar analysis of some of Eyman’s false claims can be found on the Northwest Progressive Institute Advocate.

see also our earlier post “Tim Eyman’s Initiative 1033 Overtaxed Hoax

Tim Eyman’s Initiative 1033 Overtaxed Hoax

Washington’s state and local tax burden last year was ranked 35th (1 is highest) according to the conservative Tax Foundation. These figures include both state and local property taxes in their calculation.

These and other figures below are taken from data available at the Tax Foundation’s website and point out the misrepresentation of Washington’s tax situation as espoused by Tim Eyman and Initiative 1033.

The preamble of I-1033 claims that it is “to protect taxpayers by reducing our state’s obscene and unsustainable property tax burden by controlling the growth of government to an affordable level.” An another point it references “our state’s crushing property tax burden.”

Yet is it such a crushing burden compared to other states?

Analysis by the Tax Foundation showed Washington State ranking 23rd (1 is highest) in terms of property taxes on owner occupied housing. The figures are given in terms of median real estate taxes as a percentage of median home values. Washington State had a value of .82% for 2007, which came in 23rd when compared to the other states.

Some other higher state values for comparison are Texas 1.84%, Ohio 1.3%, Pennsylvania 1.39%, Illinois 1.53% and Michigan 1.38%.

Two comparable neighboring states were Oregon at .80% and Montana at .82%. California came in at .50%, below the national average which might explain some of their budget problems.

Another table compared state spending per capita. In 2007 Washington State spent $5780 per capita. This ranked us number 19 (1 is highest). Again not an alarming figure.

Another interesting figure was looking at income per capita. Washington State ranked 8th highest in income per capita at $48,574 in 2008. Income is obviously an indication of ability to pay taxes.

Ironically Washington State does not have an income tax even though an income tax is a fairer tax than a sales tax or property tax. If you have no income you pay no income tax. But property tax you have to pay whether you’re working or not. This is also the case with a sales tax when you buy goods. And the business B&O tax is on gross receipts not net.

It is easy to demagogue issues like taxes which no one likes to pay. But taxes pay for basic services like police and fire protection, public safety, transportation, parks, education, health care for children, libraries, colleges, environmental protection, and help for the disadvantaged and elderly.

People want these services while not wanting taxes. But just like it costs money to maintain your home so it doesn’t fall apart, taxes help to maintain our society. While taxes may be a burden, it’s questionable whether they are an overburden for most people in Washington State.

We certainly could use a fairer tax system. An income tax is one you pay only if you’re making money but people like Eyman have demagogued against that and politicians are afraid to make a change. Yet it is fairer than a sales tax which hits lower income people the hardest.

But I-1033 is not the answer to tax reform. It only makes things worst because it transfers money collected by sales taxes everyone pays to reduce taxes on property owners. This includes reducing taxes for large corporations like Boeing and Weyerhauser and shopping mall owners and real estate developers. The more property you have the more you’ll benefit. I-1033 is basically another Eyman wealth transfer scheme from the poor to the wealthy who own property.

Eyman is correct when he says “during these tough economic times, struggling families and fixed income senior citizens desperately need and deserve meaningful property tax relief” The key word is “meaningful.” I-1033 is not meaningful property tax relief for working families or fixed income senior citizens.

Meaningful property tax relief would be targeted to help those that need help most. I-1033 doesn’t do that. The most relief goes to the largest property owners and those with McMansions and second homes.

Real property tax relief would be a targeted homestead exemption, exempting the first $50,000 or $75,000 of the property tax evaluation on your principal residence from taxation. Many other states do that.

Also circuit breaker legislation would provide relief, by also helping renters. Eighteen states have circuit breaker legislation to help lower income homeowners. Some 35% of Washington households are not owner occupied according to the Census Bureau.

Initiative 1033 is not the answer. It is not meaningful property tax relief for those who need it most. Vote No on I-1033 in November.