COVID-19's economic hit shows Washington right to avoid income tax

By DAVID BOZE  | 
Mar 18, 2020
BLOG

Again and again,WPC's Jason Mercier has reminded policymakers that Washington voters have said no to an income tax 10 straight times and a recent poll shows 72 percent are opposed to a local version of an income tax. Mercier has pointed to Washington's lack of any income taxes as a competitive advantage in attracting businesses -- something Washington state's own Department of Commerce advertises. But Jason has also pointed to the volatility of the income tax during times of crisis.

In the midst of the COVID-19 economic slowdown, it's a good time to let these reasons sink in.  Evidence backing WPC's long-standing recommendation against income taxes in Washington state this examination by the Tax Foundation of tax revenues from the Great Recession.  In it they conclude, "As a general rule, income taxes are more volatile than consumption taxes... By 2010, general sales taxes were down 8 percent from their 2008 peak, while individual income taxes fell 16 percent and corporate income tax collections plummeted a full 25 percent."

You can read the full report here.  The challenges our state now faces from COVID-19 only strengthen the case against income taxes for Washington state. Jared Walczak of the Tax Foundation also has a new piece of essential reading, "Income Taxes Are More Volatile Than Sales Taxes During an Economic Contraction," that makes the same point (and shares some hopeful news about the projected length of the current contraction). Daniel Bunn also has a timely and insightful column, Tax Policy and Economic Downturns, that our state policymakers should be reminded of whenever an income tax is floated as a "solution" for Washington.