Published October 26, 2020 in Puget Sound Business Journal
The coronavirus is not just a health disaster, but an economic one as well. There are, of course, the steep declines in income and consumption we are experiencing. But in addition, the economic tumble has translated into reduced state revenue and a gaping budget deficit.
Washington State’s budget problem is of course not unique. All other states across the nation are equally challenged, and most are responding by cutting spending and shutting down programs. Yet the case for finding new revenue sources instead has never been stronger. Especially here in Washington.
According to the most recent state forecast, Washington State’s current biennial budget is $2.4 billion below pre-Covid19 projections, an amount equaling about 5 percent of general state revenue. Meeting this shortfall with cuts only would be devastating.
With Cynthia Stewart, Published in Tacoma’s The News Tribune December 7, 2019
Few topics are less understood or more quickly put the public to sleep than tax policy. Yet especially in our state, it’s essential knowledge.
And not just because public oversight of government depends on it. If you care about redressing our nation’s racially biased past, it is necessary to recognize how tax policy furthers our regrettable history of disparate treatment for different races.
The inequalities in our state’s tax code are well known, and have gained us the ignoble designation of “the most unfair state and local tax system in the country.”
This medal of dishonor from the Institute of Taxation and Economic Policy is based on ITEP’s assessment of how fairly the tax burden is spread among residents in the 50 states. Washington ranks dead last.
The problem is that our state and local governments rely heavily on sales and excise taxes, which fall disproportionately on the poor. Meanwhile, Washington lacks the income or wealth taxes to rebalance the burden towards those with the means to carry it. Continue reading
Published March 5, 2019 in the Seattle Times
“The Fleecing of the Millennials.” This is the provocative headline of a recent opinion piece by a New York Times columnist. David Leonhardt convincingly makes the case that the income gap between younger and older generations has been widening.
There’s nothing alarming about an older generation having more income and wealth than a younger one, of course. But Leonhardt investigates trends in this gap over time. He found that, on average, today’s young adults between the ages of 25 and 34 earn the same now as they did nearly half a century ago. Meanwhile over this same time period, the income of those between 55 and 64 grew by a quarter; and it grew by 75 percent among the retired population.
Published in Tacoma’s News Tribune February 1, 2015
The start of the 2015 legislative session has brought stiff competition for the most suitable image of Washington’s tax code. Reuven Carlyle, chairman of the House Finance Committee, called it a Ford Pinto, the automotive jewel once named by Forbes as “The Worst Car of All Time.”
A bit more kindly, Gov. Jay Inslee evoked earlier transportation history, finding the moniker jalopy more fitting to the tax system’s barely functioning condition.
Sticking with the transportation theme, my vote is with the sedan chair, that 17th-century European conveyance in which the rich and royal rode, carted around by bearers.
There is much to dislike about taxes, of course, but those we pay in Washington are especially onerous. Start with the hundreds of tax breaks, each one no doubt enacted some point in the past to encourage a worthwhile pursuit. Or not. Continue reading
Published in The News Tribune, June 5, 2013
Gridlock; a ticking clock; a glacier.
Pick your favorite metaphor to describe the ongoing, seemingly never-ending “negotiations” occurring in Olympia over the state’s budget. So boring, uneventful, and secretive are these purported discussions that even political scribes are finding little of interest to report on.
The Legislature’s 30-day special session, the sole purpose of which is to approve a budget, is now set to expire in less than a week. Continue reading
Published in The News Tribune, January 5, 2012
As our legislators return to Olympia, they must feel like the Bill Murray character in the movie Groundhog Day. Each year they show up at Olympia and find that — once again — revenue falls far short of expenditures. Let’s hope this year they find a way to awaken from this bad dream.
To start, legislators should begin distinguishing short- from long-term budget problems. Short-term cyclical problems are caused by a weak economy. Continue reading
Published in The News Tribune, October 9, 2011
After what now seems like a thankfully long respite – four months was it? – state budget cuts are once again on the table. And it’s the same old story.
The state’s chief economist Arun Raha once again erred on the side of optimism. In truth, it’s more accurate to say that he was not pessimistic enough – no one dares be optimistic these days. At any rate, the state budget is once again short — this time it is predicted to have $1.4 billion fewer revenues than when Raha last peered into his crystal ball. So back to the drawing board. Back to negotiating more budget cuts. Continue reading
Published in The News Tribune, April 29, 2011
When it comes to the economy, it’s hard to know what we should be worried about these days. Not long ago, most everyone agreed that demand –to be precise, a lack of it — was the key concern. To shore it up, the federal government embarked on a massive spending spree. The Federal Reserve also enacted a policy of “quantitative easing”, with the hope that this too would help convince us to spend more.
Seemingly overnight, however, the watchword has somehow turned from “demand” to “debt”. The TNT (4-19) trumpeted this new concern across its headlines recently, referring simultaneously to the growing federal debt as well as the large state debt. Republicans and Democrats in Washington, DC are now sparring over whose debt-reducing package is better. Continue reading
Published in The News Tribune, April 15, 2011
Paying public employee pensions is costly, and will become more so. So we
better learn the right lesson.
In this state, two public pension programs are running out of money. Unless
it changes current contracts, the state will have to significantly dip into
the general fund to meet its obligations.
The recent House budget addresses this problem by reducing future payouts to
retired workers. Yet even if approved, the changes still leave the two
programs billions of dollars short over the coming years. Continue reading
Published in The News Tribune December 7, 2010
Published in The News Tribune December 2, 2010
Despite front page doom and gloom on the state budget front, my column last week argued that things aren’t quite so bad. Sure in the weeks ahead, we’ll suffer more budget cuts as the projected revenue for the rest of the fiscal year is once again falling short of what was previously forecast. .
But looking ahead, the Office of Financial Management (OFM) is forecasting record revenue for the next biennium – a full 16 percent above revenue expected this biennium. By comparison with these last two years, the next biennium sounds like a piece of cake. Perhaps with the exception of Tacoma’s City Manager, who among us wouldn’t leap for joy if told that our income was going up 16 percent? Continue reading
Published in The News Tribune October 27, 2010
It’s the Innovation Era! Creativity and ideas are what drive economic growth these days, not strong backs and the luck of geography.
So we should be especially interested in knowing what promotes “innovation” — and conversely what inhibits it. If you listen to many opponents of the state’s income tax initiative (I-1098), an income tax on the wealthiest Washingtonians will do the latter.
“I-1098 would significantly harm the state’s ability to attract new businesses” is a common complaint. Another critic writes that I-1098 harms firms “at the heart of the ‘innovation economy’”.
There may be good reasons for opposing I-1098, but that it will stifle innovation is not one of them. Continue reading
Published in The News Tribune August 15, 2010
Should we be upset that Congress has just promised Washington an extra $526 million? Not I nor, I think, will others whose kids go to our public schools, who use Medicaid for health insurance or have a parent in a nursing home, or who otherwise support the wide range of services the state provides: This money will help assure their continuation.
According to Richard Davis, however, we would be better off without this additional federal dollars (“We missed a chance to really fix the state budget”, TNT 8/11). Basically, Davis believes this windfall has allowed elected officials to temporarily avoid the hard choices ahead. Continue reading
Published in The News Tribune, March 9, 2010
Peter Callaghan noted in his column (“Instead of guessing, we could ask our economist about tax increases”, 2/21/10) that elected officials in Olympia are throwing out dueling claims over the effect new state taxes will have on the economy. He asks “Would it cripple a halting economic recovery? Would deeper budget cuts do the same?”
The truth is, neither cuts in public spending nor tax increases are ideal in a recession as both reduce demand for goods and services (and hence employment) in the economy. However unlike the federal government – which can rely on deficit spending during recessions – the state government must choose cuts, new taxes, or a combination of both. Given this choice, deeper cuts in spending on investments to education, health care and infrastructure improvements would be the worst option. Continue reading