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Carlyle Releases Annual Survey of State Tax & Spending Flow

May 5, 2013

Washington is on the march toward being a low tax, low service state

Today I am releasing the annual survey and analysis of how state taxes flow into and out of state government each year.

The analysis of the original data, ably conducted at my request by the Office of Financial Management (OFM), provides open transparency into where tax dollars are collected and spent in Washington’s 39 counties for the 2011 calendar year. A previous analysis released with former Rep. Glenn Anderson (R-5th District) was based on 2008 data, and generated considerable attention.

I sincerely and genuinely offer no value judgement in releasing this data: My goal is not for counties to casually boast or feel shame about their tax status, but to open the door to a courageously honest public conversation about how state government collects and spends billions of public tax dollars. This data is relevant and material to a more accurate understanding of how taxes flow because it directly counters some widely held, outdated stereotypes and clichés. And I respectfully suggest the lack of acknowledgment of this data impacts tax policy in Olympia in counterproductive and disproportionately negative ways.

Of Washington’s 39 counties, only 9 contribute more to state coffers than they receive back in benefits. Even then, only 3 (San Juan, Garfield, and King) receive $0.65 or less for every dollar they pay to the state. The other 6 are closer to the edge, receiving $0.90 for each dollar paid. On the other end of the spectrum, 13 counties receive $1.50 or more for each dollar taxed, and 3 (Stevens, Ferry, and Yakima) receive more than $2 for every $1 paid in state taxes.

Overall, according to the U.S. Census Bureau, Washington ranks 36th in the nation in the overall obligation of state and local taxes, at 9.3% of personal income, the lowest levels in decades. Related national data from the conservative-leaning but respected Tax Foundation shows that Washington State is the 13th largest ‘net contributor’ of taxes to the federal government, receiving just $0.88 for each federal tax dollar paid by residents. This comes in spite of a large military presence in the state, Hanford as well as the University of Washington which receives among the largest federal research grant levels in the country.

The state level data is important because some legislators may have distorted or factually inaccurate views of their local tax obligation or burden relative to other taxpayers statewide that impacts their public policy positions regarding taxes.

It is relevant because the current model is politically unsustainable.

The raw, aggregate level of money flowing into and out of counties may help dispel such misconceptions. King County, for example under one model, has an annual state tax contribution to state government of $5.9 billion but just $3.9 billion is reinvested back into the county. The rest, about $2 billion, is distributed for services to communities across the state that have smaller tax bases.

We are one state with one future, but we are on the march toward being a low tax, low service, low quality of life state and unless we understand the importance of investing in everyone’s education and our state’s public infrastructure we will continue to slip in the quality of our schools, parks, community services, transportation and public safety.

There is an argument that we are being forced by anti-tax legislators into an era of ‘local option’ for taxes, and yet this short sighted approach actually hurts a bolder 21st Century strategy of building a strong statewide economy. The people of my own 36th Legislative District and the City of Seattle are net contributors of taxes in every single category of public spending, and yet our busses are full and our schools lack infrastructure. Does that make us better than others or merely fools? Absolutely no to both, but it is insulting and patronizing that legislators from other areas make it next to impossible for us to at least have the freedom to vote–through our local elected officials or even directly–on additional local option taxes that are important to our community.

Being a ‘net contributor’ county should merely gain us sufficient respect, courtesy or deference to local democracy as to be able to allow our own local governments to make independent decisions relative to the services our citizens need that state government cannot or does not provide. And, perhaps, it could engender a bit more gracious rhetoric from those who play into inaccurate and counterproductive negative stereotypes about rural communities subsidizing city life.

There are those who criticize my efforts to bring transparency into the flow of taxes and, to an extent I understand the discomfort. Yet the lack of dialogue in this area contributes to a framework by which legislators who call for reduced taxes overall are simultaneously demanding additional spending for their own areas.

It is counter productive and inequitable for a legislator from an Eastern Washington county that has among the most disproportionate benefit from King County taxes–by way of Olympia–to figuratively wield more effective authority over the quality of bus service in my legislative district than the King County executive elected by the 1.8 million people of the county to run Metro.

Of course at a broader systemic level, taxes and spending should have a link with authentic needs, ability to pay and an evidence-based drive to build up our overall quality of life. The politicization of taxes and spending has, in my view, been driven by those who expect disproportionate benefits while simultaneously demanding overall reduced spending.

I am not politicizing the flow of taxes and spending merely by making the data public and calling for a dialogue.

Those who demand incremental spending in Olympia that disproportionately benefits their own communities while simultaneously leading the charge against broader state government spending are failing the test of common sense.

No one likes taxes, and no one wants to feel that they are paying disproportionately more than others, but the blind retreat into anti-tax sentiment is forcing a policy direction toward a low tax, low service, low quality of life state. We should have this dialogue in the open so that we understand the profound structural implications of disinvesting in education and other important services statewide. We owe it the people of Washington not just to appeal to the lowest common denominator of politics, but to a higher purpose of our children’s children who will not see the quality of life that we treasure in Washington unless we rethink our direction.

It is philosophically inconsistent or, less generously, hypocritical for some key legislators from counties that are among the highest ‘net recipient’ counties in the state to specifically block efforts for major urban counties to add additional ‘local option’ funding for transit services to meet local needs while those same legislators’ constituents enjoy wildly disproportionate benefit from primarily King, Snohomish and Pierce County taxpayers.

We are better than this as a state and we need to engage in a more thoughtful approach to our state’s future to lift us all up.

I know that it is uncomfortable in our state’s gentle political discourse to raise difficult issues that highlight the irony of anti-tax legislators, but our current path is simply unsustainable in the long run.

If, for example, legislation was introduced and adopted to require tax dollars collected in a county to be reinvested in those same communities our state would implode politically and economically. The same idea at the national level would be seen as an assault on the American way of life. But isn’t that, in a figurative sense, rather what is happening today in reverse?

It’s easy for some to righteously demand no new taxes budgets when their constituents enjoy disproportionate benefits from the status quo of how taxes and spending actually flow.

It’s anti-tax, anti-government, anti-public services fantasy living in a pro-tax, pro-government, pro-spending reality.

We are so much more than what we’ve become.

We can do better.

Your partner in service,

Reuven.

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5 Comments leave one →
  1. Daniel Goodwin permalink
    May 7, 2013 6:12 pm

    Thank You. I Would Love To See This Conversation HeLd At The National Level Also. I Am A Constituent And I Applaud Your Efforts.

  2. Ron Bueing permalink
    June 25, 2013 4:05 pm

    On local options, I am all for that flexibility within a framework that does not result in a multitude of new taxes. At least from a business perspective, the proliferation of additional tax compliance is a problem.

    Ultimately, we need a restructuring of our state tax system. Business shoulders too great a percentage of the overall burden. On the individual side, there is also too much regressivity. Meanwhile citizens want services, but wish for others to pay the bills. There must no longer be an attitude of spend first – pay later or not pay at all. Provide services when the citizenry provides funding.

    Despite zero based budgeting we still do not spend according ot overall priorities. Determine first what must be paid. If we have laws that put people in jail, we need jails and jailers. If we have promised pensions, we need to meet those promises. We need fire and police protection. After that meet our education imperatives. Determine our prioroities and fund them until the money is gone in priority order and then only pay what all agree is necessary and on which the citizenry will pay taxes.

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Trackbacks

  1. How the money flows | Washington State House Democrats
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