Adding up your tax bill: How much do you really pay into state and local coffers?

By Drew DeSilver and Cheryl Phillips
Seattle Times staff reporters
 

	TOM REESE / THE SEATTLE TIMES
	Amy and Phil Crocker, with toddler Ian, say they don't feel unduly burdened by taxes. "When you look at all the taxes individually, none of them seem ridiculous," Phil Crocker says.

Phil and Amy Crocker of Seattle have all the makings of a middle-class lifestyle: a house, a child, a small business. And a $482-a-month tax bill.

Every time they fill their car's fuel tank, buy toy boats for their son's bath or turn on the gas heat, the Crockers pay a tax. When Phil's school-management-software firm signs a new client, it pays tax. And when the couple pay their monthly mortgage, a portion goes to property tax.

But while many Washington residents consider themselves overtaxed, the Crockers don't feel unduly burdened.

"When you look at all the taxes individually, none of them seem ridiculous," Phil Crocker said. "If I can't criticize the pieces, I can't criticize the whole."

The Seattle Times analyzed the Crockers' finances, and those of two other households, for a month to learn how Washington's tax system hits people at the pocketbook level. Each household saved receipts and utility bills, and where appropriate shared their property-tax bills and business-tax returns. Using that information, we calculated how much they paid in sales, property, gas and other taxes and fees.
 

	Profiles Crocker family Johnny Grady Jr. Proctor family

Johnny Grady Jr., a single UW graduate student, paid $106.78 during the month; Gary Proctor, a retired dentist, and his wife paid $1,334.92.

To complement that personal perspective, we panned out to assess the tax system as a whole. We learned where taxes have risen — and fallen — the most; ranked Washington against the rest of the country; measured how much the state's total tax burden has changed over time; and analyzed the underlying trends behind state and local taxes and fees.

Here's some of what we found:

• State tax collections have more than quadrupled over the past 20 years, rising an average 7.35 percent a year. They've just about doubled when adjusted for inflation.

• When you take the state's growing population into account, the increase in collections has averaged only 5.5 percent a year. And factored against rising incomes, taxes have barely budged.

• The higher your income, the less of it you pay in state and local taxes. The lowest-income people pay more than 16 percent, according to one study; the highest, less than 5 percent.

• The overlapping of dozens of property-tax districts in King County has created a blizzard of rate combinations — 265 at last count.

• State and local governments rely on sales taxes more than ever, but the tax applies to less and less of what people buy — resulting in a loss to public agencies of hundreds of millions of dollars each year.

• Government fees provide nearly one-third of all revenues for Washington's cities, counties, ports and transit agencies.
 

	Q & A Who pays the most and least — and why Sales taxes Property taxes Business tax Other taxes and fees Looking ahead

A systematic look at taxes is particularly timely.

State lawmakers, who convene in January, must close an estimated $2 billion gap between anticipated revenues and the cost of maintaining current services. Some legislative leaders have said the problem can't be fixed without raising taxes.

Cities, counties, school districts and other local governments are grappling with their own budget problems — and closing parks, pools and libraries in response. Many local officials, including King County Executive Ron Sims, blame their troubles on what they call an antiquated tax structure.

Two weeks ago, voters turned down $7.8 billion in transportation-related tax increases that would have funded major road and mass-transit projects around the state. Legislators now have to decide what, if any, replacement plan to offer; Puget Sound-area officials also must piece together a regional transportation plan and figure out a politically palatable way to pay for it.

Voters also continued their tradition of limiting taxes when they approved Initiative 776, which repealed the last vestiges of the motor-vehicle excise tax — a tax that as recently as 1999 was the state's fourth-largest revenue source. They may get another chance next year: Tax activist Tim Eyman has filed an initiative to raise the supermajority required for raising taxes from two-thirds to 75 percent.

Against this background, a committee of legislators, lawyers and economists has been studying the state's tax structure to figure out how it might work better. The committee's final report, due in a few weeks, is expected to recommend a state income tax — an option that in the past has smacked up against constitutional and electoral brick walls — along with other changes such as regularly reviewing special-interest tax breaks.

But any proposals to overhaul taxes will have to navigate a split Legislature. Republicans appear set to control the Senate by one vote, while Democrats have a slightly firmer hold on the House.

Anyone trying to craft a better tax structure will have to bridge philosophical as well as political divides. The fairest tax economically may also be the most complicated for actual taxpayers. Is it more important that taxes capture economic booms or remain stable during busts? If taxes should be visible to those who pay them, why are sales taxes — which most of us never think about — so widely accepted?

Resolving those questions, in a way that satisfies most Washingtonians, is sure to be one of the biggest challenges of the next several years.