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Times' series on spending
(June 2002)
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Sunday, November 17, 2002 - 12:00 a.m. Pacific

Questions and answers
Who pays the most and least — and why

By Drew DeSilver and Cheryl Phillips
Seattle Times staff reporters

 
Q & A
Who pays the most and least — and why
Sales taxes
Property taxes
Business tax
Other taxes and fees
Looking ahead
In a recent Seattle Times poll, nearly two-thirds of people called the state's tax system unfair, and 41 percent said taxes took "a lot more" of their income than 10 or 15 years ago.

How true that is depends largely on how you look at the numbers. On a per-capita basis, state and local taxes in Washington rose 35 percent through the better part of the 1990s. But measured against income, Washington taxes actually fell 10 percent over that same period.

Where does fact end and ingrained belief start? Who really pays the taxes? How is a system that hasn't changed much since the Great Depression holding up in the Information Age?

Here are answers to some basic tax questions.

How much do we pay in taxes, anyway?

The per-capita state and local tax bill in Washington was $3,148 in 1999, the most recent year on record with the U.S. Census Bureau. That includes sales taxes, property taxes, business taxes, gasoline taxes, "sin" taxes on items such as cigarettes and alcohol, and a plethora of smaller charges.
 
Graphic
Are we paying more than we used to?

Just over a third more: In 1992, the per-person figure tracked by the Census Bureau was $2,326.

How meaningful are those per-person rankings?

They leave something to be desired, especially in a state that's home to folks like Bill Gates and Craig McCaw on one end and unemployed millworkers on the other. Nor do they take into account differences in people's life circumstances: Newborn babies, schoolkids and retirees count the same as working, taxpaying adults. Finally, they ignore the fact that incomes also have risen over the years, not just taxes.

For those reasons, many economists prefer to examine taxes per $1,000 of personal income, a measure that's more comparable across households, states and income classes. Looked at that way, Washington taxes in 1999 were $111.25 per $1,000.

How do we rank? I keep hearing that Washington's a fairly high-tax state.

In terms of state and local taxes per $1,000, Washington in 1999 ranked 20th among the 50 states and the District of Columbia. The state ranked 12th in 1992, when taxes were $122.17 per $1,000.

In per-capita terms, the Census pegs Washington as 14th-highest. That status didn't change much through the '90s; in 1992, Washington ranked 13th.
 
?Did you know?
The nation's highest state and/or local taxes are in the District of Columbia, $151.21 per $1,000 of personal income. The lowest are in Tennessee, $87.99 per $1,000. Washington ranks 20th with $111.25. (Source: Census Bureau)
Wait a minute. Didn't I hear we were the second-highest in the country?

You may have; it was one of the arguments made by backers of Initiative 776, the tax-cut measure that passed this month. That ranking, which comes from a Washington, D.C.-based research group called the Tax Foundation, includes federal income tax, which makes a big difference.

In the foundation's 2002 rankings of overall tax burden, Washington placed second (third if you include the D.C.), with $11,899 in taxes per person or 35.6 percent of income. (The foundation uses data from the Bureau of Economic Analysis rather than the Census Bureau, so its numbers are more recent.)

But when just state and local taxes are considered, Washington drops to 21st in the foundation's ranking — $3,498 per person, or 10.5 percent of income.

Why do federal taxes, which are the same in every state, affect Washington's ranking so much?

There are three main reasons:

• Washington is a relatively high-income state: 15th in per-capita income, according to the Tax Foundation. That means it bears a bigger share of the personal income tax.

• Washington also is home to big companies like Microsoft, Washington Mutual and Costco, so it bears a bigger share of the federal corporate income tax relative to its population. That also plays into the foundation's rankings.

• Finally, Washington relies very heavily on sales taxes — which, unlike state income-tax payments, can't be deducted from federal taxes. If all the sales taxes Washingtonians paid in 1999 were deducted from federal income tax, taxpayers would have saved $523 million in federal tax, the state Revenue Department estimates.

Where does all that money go?

To the state, first off. Last year, Washingtonians paid nearly $12 billion in state taxes, or $1,997 for every man, woman and child. That included everything from sales taxes ($5.5 billion) to a tax on boxing and wrestling matches ($43,000).

Local governments get another big chunk of our taxes. In 2000 (statewide totals for 2001 aren't in yet), counties, cities, ports and transit districts — the major units of local government — collected $4.56 billion, or $772 per person. Most of that came from local property and sales taxes.

And don't forget schools. Washington's 296 local school districts levied nearly $1.9 billion in property taxes this year. That equaled $314 per person, though the actual tab varies widely from district to district.

Have taxes been rising all that time?

Not consistently.

The state sales-tax rate has been 6.5 percent for nearly two decades. But as local governments have grown more reliant on sales taxes, the average local rate (which is added to the state rate) has risen from 1.235 percent to 1.889 percent over that same period.

Property-tax rates are actually lower than in 1992. The statewide average rate crept up between 1992 and 1997, but it has fallen back since, due in part to tax-limiting ballot measures. The average rate this year is $12.52 per $1,000 of assessed value, down from $13.25 in 1992. But while rates have been dropping, property values have been rising, and many property owners still feel squeezed.

The rate schedule for the business-and- occupation tax gets rewritten just about every time lawmakers get together. Several business activities were consolidated into lower rate categories in 1998, though overall collections continued rising until this year.

The gasoline tax has been 23 cents a gallon since 1991. Cigarette taxes have been raised repeatedly and, at $1.425 a pack, are now the second-highest in the nation; taxes on beer, wine and spirits also have been raised.

Does it matter where in Washington you live?

It sure does — levies, property values and sales-tax rates are all over the map. Literally.

Take average property-tax rates, which usually are expressed as an amount per $1,000 of assessed value. They range from $8.11 in San Juan County to $15.83 in Garfield County.

King County's average rate, $11.17, is among the state's lowest, but even that doesn't mean much: Due to the overlapping of hundreds of taxing districts, the county has 265 distinct total tax rates, ranging from $7.43 in Hunts Point to $14.24 in an unincorporated area near Tiger Mountain.

Sales-tax rates vary considerably. The state rate is 6.5 percent everywhere, but localities add anywhere from 0.5 percent to 2.8 percent; the latter rate applies to bar and restaurant sales in King County and includes a 0.5 percent surtax to help pay off Safeco Field. All other retail sales in King County are taxed at 2.3 percent in addition to the state's 6.5 percent.

Next: Sales tax »




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