Friday, December 18, 2009

Render Unto Caesar...

As discussed over on HorsesA$$, is Washington State's tax structure unfair to the poor?

Have a look at the chart from a report issued by the Institute on Taxation and Economic Policy and see what percentage of your income goes to to the state.

(click to embiggen)

If you make $20,000 a year, you pay 17.3% which comes to $3460 in taxes to the state. If you make $500,000 then you pay 2.9% which is about $13,000. The median income (PDF) for Spokane County is roughly $43,000 which gets tagged at 10.8% for about $4644 in taxes to the state.

I'm not here to justify our tax system, but I do have an observation to make about this. If you examine only the percentage rate, then those in the lower income levels seem to have a greater tax burden than those with higher incomes. But if you look at how much is being paid, you'll see that those with higher incomes are actually paying more. The trick is determining a fair rate for everyone regardless of income and that is beyond me.

One other observation. Since Washington does not have an income tax, I can either compute a sales tax deduction every year on my federal income tax or save my receipts for the year and claim the total state and local taxes. One year I saved all my receipts and I was better off taking the computed deduction based on my income. However, the amount computed by the IRS, as well as the amount from my receipts, is far lower than the amount listed on the above chart.

As it is, Washington and other states benefit from another lucrative method of taxing the poor.

Whose world could you change? Indeed.

2 comments:

Sherry said...

I do NOT understand why Oregon residents do not pay sales tax on things they buy in WA. Anybody know how that came about?

Hank said...

Sherry,

http://apps.leg.wa.gov/RCW/default.aspx?cite=82.08.0273