The Expense We Pretend Not To See
The Expense We Pretend Not To See
Most people don’t wake up thinking about taxes. They think about paying their mortgage, picking up groceries, planning a vacation, maybe hoping gas prices come back down someday. But here’s the truth that most Washingtonians have never actually been shown: according to the U.S. Department of Labor’s Consumer Expenditure Survey, for households making over $140k per year, personal taxes are the single largest expense the average American pays at approximately 19%. Larger than housing. Larger than healthcare. Larger than transportation and food combined.
And that’s before we even get into the taxes you don’t see.
Washington likes to brag that it’s “tax friendly” because we don’t tax wages. That’s technically true, but it’s also wildly misleading. Because if you zoom out and look at the actual cost of living, you quickly see that Washington residents are being taxed from every possible angle.
Start with fuel. Once you combine federal fuel tax, state fuel tax, and the “carbon charges” added through the Climate Commitment Act, Washington drivers are paying close to one dollar per gallon in direct and indirect government-imposed costs. That means 20 to 25 percent of your fuel cost isn’t fuel at all. It’s taxes, fees, and “credits” that function exactly like taxes.
Fuel moves everything in our economy. Your groceries. Your building materials. The roofing company’s trucks. The contractor’s van. The magazine you’re holding or the tablet you’re reading this on. If you wonder why basic goods cost more here than in other states, fuel taxes are a big part of that story.
And then there’s the Business and Occupation (B&O) tax, which taxes revenue, not profit. You can lose money running a small business in Washington and still owe tax because the state taxes you simply for having customers. That is the opposite of business friendly.
Add in Washington’s capital gains tax, which is essentially a selective personal income tax. It starts at 7 percent and jumps to 9.9 percent on higher gains. People can debate whether it’s constitutional, but there’s no debating the impact. Retirees, business owners, and long-time Washington residents are making financial decisions differently because of it.
But the single best example of how Washington’s policies drive the cost of living is housing.
A recent analysis from the Building Industry Association of Washington found that regulatory costs now add roughly $203,976 to the cost of building a single-family home in this state. That’s nearly 30 percent of the median new home price.
That is not lumber. Not labor. Not land.
That is regulation.
If you’re wondering why starter homes no longer exist, here’s your answer. If you’re wondering why builders can’t put homes on the market fast enough, here’s your answer. If you’re wondering why rents keep rising, here’s your answer. Homes are expensive because it is expensive to build them, and it is expensive to build them because the state made it expensive.
All of this — taxation, regulation, fees, delays — fuels inflation at the local level. You cannot regulate and tax everything in the economy and then act surprised when prices rise.
Recently, I was at a breakfast with several local elected officials. They asked what I’m hearing from people in my office. So here’s what I told them: I am hearing from regular Washingtonians — retirees, workers, small business owners — who are thinking seriously about leaving the state. Not because they want to, but because they can’t afford not to.
Washington doesn’t just have a tax problem. It has a spending problem and a regulatory problem.
And instead of asking, “What more can we tax?” the real question Olympia should be asking is:
What are other states NOT doing that we ARE?
Where are they not spending money that we are?
Where are they not creating massive regulatory burdens while we are?
Where are they not making it nearly impossible for small business to compete while we are?
Where are they not adding over $200,000 of regulatory burden to every new home while we are?
Washington is one of the most beautiful places in the country. It has incredible people. But people are starting to leave, not because they want to, but because they feel like the state they love doesn’t love them back.
If Olympia doesn’t want a slow-motion exodus, it needs to start asking the right questions.
Because when ordinary residents decide the only way to protect their financial future is to move away, that isn’t a tax issue.
It’s a values issue.
Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Peaks Financial is separately owned and operated and not independently registered as an investment adviser. 1050 NE Hostmark St, Suite 200, Poulsbo Wa 98370 360-564-1811
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kevin Campbell and not necessarily those of Raymond James.
Sources: US Department of Labor,Bureau of Labor Statistics, Consumer Expenditure Survey, 2022.
https://dor.wa.gov/taxes-rates/tax-incentives/deductions/motor-vehicle-fuel-tax-rates
https://housingstudies.biaw.com/reports/the-cost-of-regulations-2025
New role? New Hire? Promotion? Leadership change? Certifications? Receive an Award? Let the community know! Submit your update to Changing Faces, Changing Places and be featured among the professionals driving Kitsap’s business growth.
