The Department of Revenue has a new online tool that allows taxpayers to design their preferred state tax structure. The “Tax Alternatives Model” allows users to make major changes to our tax structure and automatically calculate the impact on households and businesses. Graphs also show changes in the distribution of tax burden across household income, i.e. the impact on regressivity/progressivity.
The model, which has been given a national award by the Federation of Tax Administrators, should be very useful if and when the Legislature undertakes serious tax reform. That scenario is growing increasingly possible as the search for revenue to meet the McCleary K-12 education funding mandate goes into high gear.
As currently designed, the model permits users to add one or more taxes and select the rates: sales of business and consumer services, income from capital gains, a personal income tax or a tax on the trade-in value of an item such as a motor vehicle or a farm machine. (In Washington state, trade-in values are currently exempt from the retail sales tax.) The model also allows users to add a sales taxes to food products. (Note: Reasons for specific options are not indicated, but model administrators invite questions.)
The DoR portal to the model also provides links to other information of interest to students of tax reform. These include an extensive list of revenue alternatives, the quadrennial tax exemption study, the state’s 2010 inequality study (The Distribution of Income, Wealth, and Taxes Across Washington Households) and an extensive archive of the work of the Washington State Tax Structure Committee, the last effort (2000-2002) to suggest reforms to the tax code.
