To add an additional ripple to
the fold, Washington has a controversial sales tax exemption for all Oregon
residents. Washington lawmakers believed
that without an exemption, Oregonians wouldn’t shop in Washington since they
could shop in their home state and pay no sales tax at all. All it takes is an Oregon driver’s license
and there’s no sales tax charged. Not
surprisingly, businesses on border cities and towns greatly dislike the
exemption. Washington State
Representative Jim Moeller told Pew
Center on the States, “Sixty-thousand of my constituents pay Oregon income
tax and help support their parks and their roads and their health care. When Oregonians find themselves over here and
they need to pick up a shirt or a pair of shoes or whatever, they should help
pay for our parks and our roads and our health care just as much as we pay for
theirs.” Oregon isn’t the only state
which benefits from the exemption.
Alaska, Colorado, Montana, and New Hampshire among others
benefit as well.
To complicate matters, Washington
residents are required by law to pay use tax on goods or certain services when
a sales tax has not been paid. However,
this practice is widely ignored in the state. See Phil’s use tax post here.
That leads us to the question--does any of this really matter? Are residents in both Oregon and Washington
traveling en masse and moving across one border to the next in order to dodge
the tax burden? Overall, experts have
mixed thoughts on the issue.
Portland-based economist, Joe
Cortright believes the disparate tax structures do not play a large role in
each state’s economy – even though he believes Clark County is losing $100
million annually in sales tax revenue.
Some factors which support his position are that many Washingtonians
live in Vancouver yet work in Portland.
So, they are paying Oregon’s income tax and Washington’s sales tax. One positive for this group of Washington
residents is that homes are cheaper in the border area of Washington.
Many believe that the various tax
structures are not a major determinate of residents’ shopping habits. People are going to live where they want to
live, shop where is most convenient, and work where they want.
A question raised by the article
by the Pew Center on the States is not whether the current tax structures of
each state is hindering economic growth for the other, it’s whether or not both
states are being well served by their respective tax structures.
By now, every reader of this blog
should know that Washington’s tax structure, which is so heavily reliant on the
sales tax, is one of the most regressive in the country. And, given Oregon’s
boom-or-bust revenue cycles reliant on their income and corporate gains taxes,
they’ve got some work to do, too. The
message the authors of this blog have been trying to get across is that
Washington State’s tax structure needs to be reformed so that it isn’t so
heavily reliant on one particular tax – a volatile one at that. Oregon faces the same troubles we have – they
rely too heavily on one source of tax revenue.
Just like you’d want to diversify your investment portfolio, we need to
diversify Washington’s tax structure so that in times of high volatility, we
have something to rely on.
One poignant quote included in
the Pew Center on the States article by Randy Miller, an active Portland
business leader, “Enlightened people here all feel the same: We need a sales
tax. Enlightened people in Washington
feel the same: They need an income tax.
The general public? Forget it.”
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