Washington Business Winter 2019 | Washington Business | Page 15

eye on business
Growth Spurt
Kris Johnson, AWB President
If you came to our Policy Summit in September, you
probably noticed the giant chart we set up in the lobby
depicting state revenue growth over the last decade.
It was hard to miss — the tallest of the revenue lines
was over 6-feet tall. That was the projection for 2021-
2023, when state coffers are expected to take in more
than $53 billion.
At the other end of the chart, the line showing 2011-2013
revenue of $31.1 billion, was just over three-and-a-half feet tall.
As we prepare for a new legislative session, we expect
some lawmakers to call for new and higher taxes, likely in
the form of a capital gains tax but perhaps by other means
as well. It’s important to keep in mind, however, just how
dramatically state revenue has increased since the end of the
recession.
Based predominantly on the strength of the economy,
growing at a rate consistently better than the U.S. average
post-Recession, the state’s income has gone from the size
of a preschooler to a fully-grown adult when viewed on
our Policy Summit chart.
That’s remarkable growth by any measure, and yet we’re
hearing from some lawmakers and the governor that it’s
not enough. Projected shortfalls for the 2019-2021 budget
range from $1.5 billion to $4 billion and lawmakers are
blaming a regressive and outdated tax system for the
problem.
But with the kind of revenue growth we’ve seen over
the last three biennia, it’s worth asking the question: Do
we really have a revenue problem? And is Washington’s tax
structure really as bad as critics allege?
Richard Davis explores the second question in more
detail in an article on page 46 and comes to the conclusion
that, despite its flaws, Washington’s tax system actually
works pretty well for most people and employers most of
the time.
That kind of message doesn’t lend itself well to talking
points and catchy sound bites, but it should give pause
to anyone looking to make dramatic changes. Of course,
we can always find ways to improve the system and we
absolutely should be looking for ways to make it work
better for employers and families.
At the same time, we shouldn’t dismiss the parts of
the system that are working well and wind up bringing
about unintended consequences. Critics like to disparage
Washington’s revenue system as an outdated relic, but it’s
hard to argue with the results it has produced.
As for claims that Washington’s tax system is the most
regressive in the country, that’s worth a closer look, as
well. In July, the Washington Research Council published
a report that effectively debunked the myth.
By digging into the details of a 2015 report by the Institute
on Taxation and Economic Policy (ITEP), which is generally
cited as the source for the claim that Washington’s system is
the most regressive, the Research Council found two major
errors that change the way Washington’s tax system should
be regarded.
All state and local tax structures are regressive, the
Research Council noted, but the overall federal-state-local
tax burden ends up being progressive when the federal
income tax — which is steeply progressive — is considered.
That’s true in every state, including Washington.
So as lawmakers debate potential new taxes in 2019,
we hope they will consider the incredible growth spurt
Washington’s revenue has experienced over the last decade
and ask themselves the question: Do we really have a
revenue problem? Or do we have a spending problem?
winter 2019
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