Compare and Contrast

This excerpt is from a story by Megan Doyle that appeared in last Saturday’s Moscow-Pullman Daily News:

Fire and emergency services in Whitman County probably can go for a while without upgrades to their fragmented communication system. It is, however, inevitable that a large bill to pay for new equipment is coming.

Providers, including city police, the Sheriff’s Office and all fire agencies, are planning for the changes and costs by collecting money from a one-tenth of 1 percent sales tax, which voters will decide March 14.

The sales tax would be $1 per $1,000, a projected income for the county of $300,000 annually. All of it is designated for financing, designing, equipping, operating, maintaining, remodeling, repairing and improving the emergency communication system.

The tax is the easiest and fairest way to go about raising money for the improvements, said Jim Dahmen, fire chief of Rural Fire District No. 12.

“It’s not a painful tax,” he said.

Compare that with Michelle Dupler’s story yesterday in the Daily News about the Pullman League of Women Voters forum on sales tax Monday night:

Some studies have said Washington’s tax system is the most regressive in the country, said David Nice, a political science professor at Washington State University. A regressive tax system means the poor pay a larger share of the burden than the wealthy.

“If you’re a relatively poor person, Washington is not a good place to live in terms of the tax system,” Nice said.

Sales tax is one example of a regressive tax. Washington relies on sales tax for 53 percent of its general fund revenues, according to the state Department of Revenue.

No other state is as reliant on sales tax, Behring said. People at the lower end of the economic spectrum are shouldering the load for government services, particularly in light of tax cuts awarded to the wealthy by the federal government in recent years.

The Tax Foundation recently studied which states have business-friendly tax codes. Washington came in #13 overall. This is a little deceptive though, as Washington was ranked at the bottom (#50) in the Sales and Gross Receipts Tax Index, but near the top (#2) in the Individual Income Tax Index, obviously because we have no state income tax.

Idaho, on the other hand, ranks #24 overall, with both a state income tax (#37) and a lower sales tax (#17).

What do you think? Is it time to implement an income tax in Washington and lower the sales tax? Or are we fine just the way we are?

I’ll start the discussion off. The sales tax IS regressive. It leaves state funding at the mercy of economic downturns. It makes businesses in border towns like ours less competitive. And as we have seen in Pullman, it forces under-retailed rural areas scramble to make ends meet. On the flip side, in a border area, state sales tax can be worked to your advantage (i.e. buy all your food in Washington, everything else in Idaho, and save yourself 2.7%).

On the other hand, income tax structures can be unfair and overly complex. It might discourage businesses from opening up or expanding in Washington as it increases the cost of the labor pool (income taxes mean higher wages). Entrepreneurs could also take their capital elsewhere as small startups often report on individual income tax returns. And frankly, if the government is getting into my wallet twice, it’s bound to cost me more.