Meeting
Basic Needs

Opportunites
to Prosper

Voice in
Democracy

Causes of Poverty

Search

Responsible Government

More Information

A responsible government is accountable, collects taxes fairly, and ensures the well being of its people. But today in Washington, our tax system is not accountable, is not fair and does not provide enough revenue to address the needs of residents.  Our state law also fails to protect Washington consumer from predatory lending practices.

Payday Lending:

Washington law offers little or no protection for consumers of payday lenders. As a result, many Washington residents living paycheck to paycheck are getting caught in never-ending cycle of debt that prevents them from their basic needs and keeps from getting ahead. Nationally, Congress & President Bush passed a bill that protects military families with a 36% interest rate cap, as well as a ban on check holding and electronic access to consumer bank accounts. Washington lawmakers need to follow the lead of Congress by extending these same protections to all residents in our state.

In 2005, over 3.5 million payday loans were made in Washington State. That’s about one and half for every state resident over age 16. Payday or cash advance lenders charge exorbitant fees on short-term loans that result in incredibly high, annualized percentage interest rates. A typical such loan in Washington has an annual percentage rate (APR) of 391%.

These fast cash loans trap people living paycheck to paycheck in serious debt. Once borrowers take out a loan, they have a short time to pay it back and are charged additional fees if they cannot pay up quickly. The typical loan is for only 14 days, but some loans are for as little as 3 days. When a borrower cannot pay, they often end up taking out multiple back-to-back loan transactions in order to pay fees to the payday lender, resulting in greater and greater debt.

Charging high fees on short-term loans to people living paycheck to paycheck is big business for payday lenders. In fact, the payday business has grown by 90% in Washington since 2000. In 2005, payday lenders indebted Washington residents by $1.4 billion and made over $170 million off loan fees. The industry reaps the bulk of its profits from people who are caught in debt. In fact, only 2.5% of the payday loans made in Washington State are to borrowers who take out one loan in a year. Almost 82% of borrowers cannot repay the first emergency loan they take out, and get caught in the cycle of borrowing more to pay off the initial loan plus fees.

Payday lenders target these debt-trapping loans in African American and military communities. According to a study commissioned by the Seattle Post-Intelligencer, African American neighborhoods have twice as many payday lenders in their communities as the rest of the state.

While many people in Washington need short-term loans in order to get by, what payday lenders offer comes at an unfair price for consumers. Washington State must not allow people with lower incomes to be the targets of lending practices that trap people in debt. State lawmakers should pass legislation to stop payday lenders from gauging their customers by requiring them to offer lower rates, longer loan periods and fair repayment plans.

Tax Fairness:

In fact, Washington has the most “regressive” tax structure in the nation, meaning that people with lower incomes pay more than their fair share, while the wealthy pay less than theirs. According to the Institute for Taxation and Economic Policy (ITEP), people earning under $17,000 are paying more than 17 percent of their income, while those earning over $922,000 pay as little as 3 percent. A big part of the problem is Washington’s over reliance on the sales tax which makes up more than half (54 percent) of all state revenues.

Additionally, many wealthy corporations are getting out of paying their taxes to the state through legal tax breaks. In 2002 and 2003 the legislature passed 43 tax breaks that cost $214 million. In 2004 they passed several more tax breaks that cost $109 million that year, which will grow to $323 million in the 2005-07 budget cycle.

Over the same period people with lower incomes have seen over $1 billion in cuts to health care and human services programs that help them meet their basic needs. These cuts include the state’s Basic Health Plan, emergency care for the Medically Indigent, eliminating some dental services for the disabled and seniors on Medicaid, cuts to General Assistance Unemployable, and the list goes on. These cuts undermine our ability to meet the growing needs of people struggling in our economy, more and more families without health care, childcare and basic needs assistance.

Poverty Action supports tax reform in Washington state than includes a graduated income tax. We believe our tax system must be more fair, sufficient and stable to meet the needs of our residents into the future. We work to educate our members and mobilize people to support policies that make our tax system more accountable, end tax breaks that do not serve the common good and that alleviate taxes on people with lower incomes.