eye on business
Unfortunately , We Saw This Coming
Kris Johnson , AWB President
It wasn ’ t long ago that state lawmakers were awash in a multi-billion-dollar budget surplus thanks to a surprisingly strong rebound from the pandemic lock-down and a flood of federal relief dollars .
At the time , employers pleaded with lawmakers to make smart decisions about what to do with the bounty , i . e . put away some of the money in the rainy-day fund , don ’ t use one-time funds to pay for ongoing obligations , and don ’ t raise taxes at a time when the state is flush with resources .
Some readers might recall that AWB even joined with chamber of commerce partners around the state in a paid advertising campaign urging lawmakers not to raise taxes on employers .
We were concerned not only about hurting businesses that were still struggling to recover from the pandemic , but also about setting up a scenario where lawmakers would spend through all the one-time funds , find themselves needing to plug a budget hole and then be tempted to raise even more taxes . In other words , we were concerned that we might land in exactly the spot where we have landed today . Going into the 2025 legislative session , lawmakers are looking at a $ 5.1 billion-plus shortfall in the next two-year state budget , and as much as $ 10-12 billion over the four-year outlook . In November , outgoing Gov . Jay Inslee called on state agency leaders to look for budget cuts to close the gap , but it ’ s clear that lawmakers will also be looking at tax increases to solve at least part of their problem .
We ’ re expecting lawmakers to propose an array of potential tax increases including a new payroll tax that would , if approved , amount to by far the biggest state tax increase in Washington history .
Regardless of whatever mix of reductions and new revenue lawmakers ultimately arrive at to solve the problem , make no mistake : This is a problem of their own making . Unlike previous budget crises , which could be attributed to an unexpected downturn in the economy , this crisis is the result of overspending , not a drop in revenue .
Lawmakers chose to increase spending by 16 % in the 2023-25 biennium at a time when revenue was expected to increase by 3 %. “ Now that bill is coming due ,” the Washington Research Council noted in a recent policy brief . Faced with the possibility of ever-increasing tax bills , it ’ s fair for taxpayers to ask what they ’ re getting in return . Are we getting the results that lawmakers intended ? It ’ s also fair to ask when the spending will end . Unfortunately , there is no limit to the number of good things lawmakers might want to do with the taxpayers ’ money . Knowing this , someone must ask when it ’ s appropriate to draw the line . Washington is already a high-cost state for employers , even without any additional taxes . And we ’ re at risk of falling further behind other states in regions in key competitiveness measures . It ’ s time to draw the line . fall 2024 13