Either we ask the rich to pay a bit more in taxes to support opportunity and middle class prosperity, or billionaires like Nick Hanauer are going to have to start buying a hell of a lot more pants, say Moody’s and Fitch, the credit rating agencies that recently revised Washington’s debt rating outlook from “stable” to “negative”.
Okay, that’s not exactly how they put it, but that’s the takeaway. While affirming the state’s nearly top-notch credit ratings of Aa1 and AA+, the analysts cited a steeper-than-expected housing downturn, one-time budget fixes, and cyclical trends in our aerospace industry as negatively affecting the state’s outlook. This come as no surprise – we’ve been hearing this since the start of the Recession.
But Moody’s and Fitch also specifically cite the state’s structural deficit as one of the principle drivers of the downward revision. What’s a structural deficit? From Fitch:
The state, with no income tax, relies on consumption-based revenues. This makes Washington particularly vulnerable to reductions in consumer spending and limits the prospects for quick revenue recovery.
In other words, Wall Street’s recovery and corresponding salary increases and bonuses for high-income individuals don’t translate into significant consumer activity in Washington – so sales tax collections have remained flat. An income tax would help that, by diversifying Washington’s revenue collection, and ensuring revenue collections matches overall economic activity.
As wealthy venture capitalist Nick Hanauer wrote in a recent article, the economy will not recover until consumer spending rebounds – which cannot happen if all the wealth is concentrated at the top:
The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.
So goes the myth of trickle-down economics. Either we ask the rich to pay a bit more in taxes to support opportunity and middle class prosperity, or Nick Hanauer is going to have to start buying a hell of a lot more pants.