How to reform Washington’s tax structure
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Introduction
On January 24, 2019, the House Finance Committee held a work session on the state’s tax structure and recommendations for reform. I was invited by lawmakers and made a presentation on tax principles and volatility, reforming the “temporary” Business and Occupation tax, providing a sales tax cut, why a capital gains tax is an income tax, and the need for a state tax transparency website. Here is a summary of the information I presented on these issues.
Tax principles and volatility
The proper function of taxation is to raise money for core functions of government in a neutral way. A “fair field and no favors” is a good motto for a strong tax system. Elected officials should not use the tax system to favor special interests, to punish business activities they don’t like, or otherwise to reward or harm people for the reasonable choices they make in their own lives.
The following fundamental tax principles provide guidance for a fair and effective tax system; one that raises needed revenue for core functions of government, while minimizing the financial burden elected officials place on citizens. A healthy tax system should have:
- Simplicity
- Accountability
- Economic Neutrality
- Equity
- Complementary components
- Competitiveness
- Reliability
- Transparency
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