By Cindy Alia 2/5/26
Washington State prides itself on having no broad personal income tax on wages. Instead, the state funds its government through a heavy reliance on sales taxes, property taxes, B&O (gross receipts) taxes, excise taxes, and a growing array of fees and regulatory costs. While this system is frequently labeled “regressive” because lower- and middle-income households pay a higher percentage of their income in taxes, the full picture is far more nuanced—and often overlooked by those pushing the idea of "fairness" in the form of an income tax.
The Incomplete “Regressive” Story
According to the Institute on Taxation and Economic Policy (ITEP), the bottom 20% of Washington households pay about 13.8% of their income in state and local taxes, while the top 1% pay roughly 4.1%. This percentage-of-income metric is used to argue that the system unfairly burdens the less affluent.
But percentages alone don’t tell the whole truth. In absolute dollars, higher-income households contribute significantly more to state and local tax revenue—especially through sales and excise taxes—because they have far greater buying power and spend much more on taxable goods and services. The top 20% of earners already pay approximately 60% of all personal state and local taxes in raw dollars. In many cases, the wealthiest individuals pay more in sales taxes alone than entire lower-income quintiles combined. The “regressive” label emphasizes relative burden while quietly downplaying who actually funds the bulk of government operations in real terms.
Everyday Costs Keep Rising
Every new broad-based tax, surcharge, fee, or regulatory requirement tends to get passed forward into higher prices for essentials: groceries, fuel, utilities, clothing, housing, and services. These increases disproportionately reduce the real buying power of lower- and middle-income families—even if the wealthy ultimately pay more total dollars. A major example is the Climate Commitment Act (CCA), Washington’s cap-and-invest program enacted in 2021 and fully operational since 2023. Under the CCA:
- Major emitters (fuel distributors, large industrial facilities, natural gas utilities) must purchase carbon allowances at quarterly auctions.
- Allowance prices have ranged from roughly $20 to over $60 per ton, with proceeds funding state climate initiatives.
- Emitters face additional compliance expenses: emissions monitoring, reporting, and investments in cleaner technologies to avoid higher future costs.
These costs are largely passed on to consumers through:
- Higher gasoline and diesel prices (often 10–30 cents per gallon attributed to CCA)
- Increased natural gas and electricity rates
- Elevated prices for goods and services that depend on transportation or energy (groceries, manufacturing, home heating, etc.)
Because these price hikes are embedded in everyday necessities, they function like a regressive consumption tax—hitting lower- and middle-income households hardest as a share of their budgets, even though the program pursues progressive environmental goals.
The Cycle of “Progressive Regressivity”
Recent and proposed changes illustrate a recurring pattern: efforts to make the system “fairer” add progressive elements at the top (e.g., graduated capital gains tax, estate tax increases, the proposed Millionaires Tax) while simultaneously layering on or expanding regressive mechanisms (sales tax base broadening, new fees, surcharges, CCA compliance costs). The result?
- Relative percentage regressivity improves slightly at the margins.
- Absolute costs and price pressures on everyday essentials continue to rise.
- Lower- and middle-income families experience reduced purchasing power.
- Housing becomes less attainable for new or first time buyers because savings are decreased by costs of living.
This cycle explains why many residents feel the tax and regulatory burden growing heavier, not lighter.
The Proposed Millionaires Tax (HB 2724 / SB 6346)
The current proposal would impose a 9.9% tax on personal income over $1 million, affecting less than 1% of households and generating an estimated $3.5–3.7 billion annually. Revenue would support education, health care, and some targeted relief measures (e.g., exemptions on hygiene products, expansion of the Working Families Tax Credit, increases to small business B&O credits). Supporters argue it directly addresses percentage-based regressivity by shifting more burden to high earners. Critics contend:
- The direct relief portion is modest (~6–7% initially).
- It establishes a full income-tax framework that future legislatures could expand.
- It does little to offset or remove the existing regressive base (sales, B&O, CCA compliance costs, fees).
- It adds another layer without tackling the root driver: ever-increasing government spending and non-transparent cost shifts.
The Real Choice
One perspective sees new progressive revenue combined with targeted relief as the path to equity. The other sees the continual accumulation of taxes, fees, and hidden costs—including CCA-driven price increases—as the primary reason everyday families have less purchasing power today than they would have otherwise. The less affluent would enjoy more buying power if fewer broad-based taxes, non-transparent fees, and regulatory cost shifts had been layered on over time.
Ultimately, the debate is not just about who pays what percentage. It is about whether more taxes (even those aimed at the top) are the solution—or whether reducing the overall size, scope, and cost of government would do far more to protect working families.The evidence of rising living costs suggests the answer may lie in less government, not more taxation.
Here is a list of progressive regressive taxes at play in Olympia nowto make purchasing and saving less affordable, call 800 562 2000 so legislators can know your opinion of the taxes and fees.
HB 1607 Concerning recycling and waste reduction. ( Beverage container fee)
HB 1652 Reducing environmental impacts associated with the operation of certain ocean-going vessels.
HB 2215 Concerning climate commitment act compliance obligations for fuels supplied or otherwise sold into Washington. Increasing the gas tax.
February 5, 2026