1. THE PUGET SOUND ECONOMIC FORECASTER Washington State and Local Tax System Dysfunction & Reform Dick Conway Dick Conway & Associates The Puget Sound Economic Forecaster www.economicforecaster.com

2. THE PUGET SOUND ECONOMIC FORECASTER Some Washington Tax Myths The people of Washington would never vote for an income tax. Taxes are high. State and local fiscal problems are due to over-spending. Without an income tax, the Washington economy has a competitive edge.

3. THE PUGET SOUND ECONOMIC FORECASTER Characteristics of Tax Systems Washington Grade FAIRNESSF (51) ADEQUACYF (50) StabilityF (47) TransparencyF (50) ECONOMIC VITALITYNo grade

4. THE PUGET SOUND ECONOMIC FORECASTER RetailOther SalesExcisePropertyTotal IncomeTaxTaxTaxTax $20,000 and under6.73.25.8 15.7 $20,000-30,0004.41.93.59.8 $30,000-40,0004.01.63.99.4 $40,000-50,0003.71.43.28.3 $50,000-60,0003.71.33.28.2 $60,000-70,0003.51.23.17.7 $70,000-80,0003.31.03.17.4 $80,000-100,0003.20.92.76.8 $100,000-130,0002.90.72.56.0 $130,000 and over2.20.41.8 4.4 Washington State and Local Tax Burden on Households, 1999 Percent of Household Income

5. THE PUGET SOUND ECONOMIC FORECASTER U.S. State and Local Tax Revenue

6. THE PUGET SOUND ECONOMIC FORECASTER WashingtonRankUnited States FY 199511.41210.8 FY 20009.93810.5 FY 20059.83810.6 FY 200610.23410.9 FY 200710.43011.0 FY 200810.03410.8 FY 20099.53710.5 FY 20109.63710.5 FY 20119.83610.5 FY 20129.43710.3 Washington and U.S. State and Local Effective Tax Rate, FY 1995-FY 2012 Percent of Personal Income

7. THE PUGET SOUND ECONOMIC FORECASTER Tax PersonalRevenueRevenueRevenue Income(actual)(10.6% rate)Difference FY 2005233.423.024.7-1.7 FY 2006245.825.126.1-1.0 FY 2007265.327.528.1-0.6 FY 2008285.728.630.3-1.7 FY 2009286.327.230.3-3.1 FY 2010281.927.129.9-2.8 FY 2011295.128.831.3-2.5 FY 2012313.629.433.2-3.8 Total---216.7233.9-17.2 Washington State and Local Tax Revenue, FY 2005-FY 2012 Billions of Dollars

8. THE PUGET SOUND ECONOMIC FORECASTER Washington Taxable Retail Sales

9. THE PUGET SOUND ECONOMIC FORECASTER TaxPersonalEffective Tax RevenueIncomeRate (%) FY 199514.8129.811.4 FY 200018.7189.69.9 FY 200523.0233.49.8 FY 201027.1281.99.6 FY 201532.6350.39.3 FY 202039.0447.18.7 FY 202546.6570.68.2 Note: Forecast assumes no change to tax rates or tax base. Washington State and Local Tax Revenue, FY 1995-FY 2025 Billions of Dollars

10. THE PUGET SOUND ECONOMIC FORECASTER Business Tax Climate and Employment Change 1970-12Percent of U.S.Employment RankStateChange (thous.)Change ---United States60,632.0100.0 1Wyoming168.70.3 2South Dakota221.30.4 3Nevada954.51.6 4Alaska230.60.4 5Florida5,219.28.6 6Washington1,807.63.0 47Rhode Island79.50.1 48Vermont143.80.2 49California7,550.412.5 50New Jersey1,150.61.9 51New York1,382.02.3.

11. THE PUGET SOUND ECONOMIC FORECASTER Washington and Oregon Economic Growth, 1970-2010 Annual 19702010Change (%) Washington Employment (thous.)1,282.12,998.32.1 Personal income (bils. $)14.3286.77.8 Per capita income ($)4,18942,5216.0 Population (thous.)3,417.46,743.61.7 Oregon Employment (thous.)767.71,677.92.0 Personal income (bils. $)8.2137.77.3 Per capita income ($)3,92735,8695.7 Population (thous.)2,100.43,838.21.5

12. THE PUGET SOUND ECONOMIC FORECASTER Single-Rate Personal Income Tax, FY2012 Billions of Dollars Income Tax SystemCurrent Tax System TaxEffectiveTaxEffective RevenueTax Rate (%)RevenueTax Rate (%) Tax revenue33.210.629.49.4 Income33.210.600 Individual33.210.600 Corporate0000 Sales and gross receipts0020.26.4 General sales009.73.1 Business and occupation003.41.1 Other excise007.12.3 Property009.22.9