Like an old-time medicine show barker, Tim Eyman celebrates each time he invents a new symptom of sick government syndrome. Heck, he even brings his own thermometer, permanently set at 104 degrees, to diagnosis Olympia’s tax fever. Washington taxpayers, you’ve got a problem, he says, and he has the cure.
You can’t sell snake oil to healthy folks, so it’s necessary to spread a little insecurity through the crowd. When it comes to that, Tim makes Internet Viagra hustlers look like Girl Scouts selling cookies.
Take his recent e-mail broadside: “We live in the 4th highest taxed state in the nation.”
Feel the fever rising?
Then, this: “That means 46 other states are providing education, transportation, and other government services at a lower tax burden than Washington does.”
Al Gore is piling up box office receipts with a movie he calls “An Inconvenient Truth.” Eyman hopes to pile up contributions flogging convenient falsehoods.
Here’s what’s going on.
In April, the Tax Foundation announced Tax Freedom Day, “the day when Americans will have finally earned enough money to pay off their total tax bill for the year.” It’s a great PR gimmick: catchy and timely, measuring tax burdens with the precision of batting averages and ranking the states from high to low.
There are two major problems: The Tax Foundation is often wrong. And even if they get it right, Eyman misuses the numbers.
Because the Tax Foundation publishes its report early in the year, it has to guess at the full year’s tax collections. Their economists calculate each state’s tax burden adjusted for population and for the size of the state economy. (Typically rich states like Washington have high per capita taxes compared to the tax burden shown as a share of the state’s economy.) All of the calculations rely on estimates. Then, using an economic model – think, black box – they tweak the numbers some more to try to adjust for taxes paid by each state’s taxpayers to other states.
All those estimates can seriously mislead. The liberal Center on Budget and Policy Priorities compared the Tax Foundation’s figures for 2002 tax burdens as a share of the economy with the official record compiled by the U.S. Census Bureau. They find “27 states rank five or more places higher in one ranking than in the other, while seven states’ rankings differ by 10 or more places.” Washington dropped from 20th in the Tax Foundation’s list to 32nd on the Census Bureau’s. Those are pretty big swings, nearly matched by swings in the Tax Foundation’s own annual revisions of its previous years’ estimates.
On May 31, the Census Bureau released its calculations of tax burdens for 2004. (Census data typically show up a couple of years late because they rely on actual tax collection data.) They peg Washington at 18th in per capita tax burden (the Tax Foundation had us 12th) and 29th in taxes as a share of economy (the Tax Foundation had us 21st). Only part of the difference comes from the way the Tax Foundation shuffles the interstate tax burdens with its black box.
So where does this “4th highest taxed state” stuff come from? You get it by including federal taxes, which the Tax Foundation does in estimating Tax Freedom Day. As home to some of the richest folks in the world, Washington generates a lot of federal income tax for the IRS, but that has little to do with decisions made by lawmakers here. The Tax Foundation cautions that federal taxes should be removed to compare state and local tax burdens. Eyman knows that, but it’s, well, inconvenient.
How we’re taxed matters at least as much as how heavily we’re taxed. In our state, business pays about half of all state and local taxes; in Oregon, the business share is about one-third. Oregon’s progressive income tax takes relatively more from wealthy taxpayers. Here, the system leans a little harder on low and middle income folks. These are legitimate reasons to focus on state tax policy.
Like hypochondriacs who enjoy ill health, some disgruntled taxpayers always want to believe the worst. They’re the proper prey of charlatans. The rest of us should disregard the barker’s hype.
Richard S. Davis, president of the Washington Research Council, writes every other Wednesday. His columns do not necessarily reflect the views of the council. Write Davis at email@example.com or Washington Research Council, 108 S. Washington St., Suite 406, Seattle, WA 98104-3408.