In his April 16 letter, “It’s the fairest way to share burden,” Kerry Watkins correctly articulates that replacing the state sales tax with an income tax would reduce the tax burden for lower income people and seniors. This alone should be adequate incentive to implement this tax reform.
There would also be another significant benefit. Revenues would be much more constant during good times and bad times. During good times people feel secure and prosperous, so they spend more proportionally to their income than in bad times. When recession comes, those afraid of losing their jobs cut back spending significantly, and even many of those with secure jobs will spend less. Therefore, revenues fluctuate wildly. During good times revenues produce a big surplus, so there is a temptation to introduce new spending programs or cut taxes, depending on whether you are Democrat or Republican. Conversely, during bad times wrenching cuts and/or tax increases become necessary to balance the budget, as we are experiencing now.
With an income tax, however, revenues are more constant. People earn the same wages, so they will pay the same taxes regardless of their spending habits. The unemployment rate increases during a recession, but only by a few percentage points, so revenues decline only slightly. In this scenario balancing the budget during bad times becomes much easier.
If the people of this state would put their emotions aside and examine taxation policy objectively they might allow our legislators to come up with a more fair and manageable tax system, but I’m not holding my breath until this happens.
Jerry Fraser
Lynnwood
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