We Can’t Cut Our Way Back to Prosperity

Washington’s regressive tax system has failed us. Again.

Washington’s regressive tax system has failed us. Again. 

This weekend, Governor Inslee vetoed nearly two dozen bills recently passed by the Legislature, including one that would have extended health care to low-income women and birth parents up to one year after giving birth. 

Other items on the chopping block – a prescription drug affordability board, a pilot program to vacate criminal convictions, and a plan to add 370 student counselors statewide, and funds for a bill that would have helped defeat climate change.

But eliminating supports for our most marginalized people will only prolong the recession and hurt people who were already hurting. We need more support for our most vulnerable populations – not less. The answer to our state’s revenue shortage is not to cut critical programs for low-income people. We can’t cut our way back to prosperity.

Low and middle-income Washingtonians and people of color will bear the brunt of the COVID-19 pandemic and what is now being referred to as the “greater recession.” Low-income people already suffer the worst in our broken health care system where health insurance company CEOs take home millions of dollars in compensation each year. 

All told, the cuts to our supplemental budget will save $445 million over the next three years, and we can expect more in the upcoming special session.

Some, like the Seattle Times editorial board, say we have no choice but to make cuts. 

But it’s easy for the editorial board, which represents the wealthy owners of the newspaper, to argue for sacrificing the programs needed by marginalized people instead of a real solution – taxing the rich.

We live in a state with more than 205,000 millionaires (7 percent of Washington households) and three of the world’s wealthiest people. They pay very little of their income in taxes. We’re also home to a near-monopoly, Amazon, that takes home $281 billion in revenue each year, and does everything it can to avoid taxes.

Washington has the most regressive tax system in the country. No state taxes the poor at a higher rate than we do in Washington (17.8 percent), while millionaires pay a mere 3 percent. Washington relies on regressive taxes like sales, property, cigarette, alcohol and utility taxes. Even more conservative states like Idaho and North Dakota have more progressive tax structures in place. 

If we want to come out stronger on the other side of this pandemic – where “we” means all of us, not just the well-off – and repair our ailing economy, we must urgently implement progressive revenue options. 

Last session, the Washington State Legislature considered progressive revenue options like taxing excess reserves of health insurance companies (HB 2679), replacing an expiring federal health insurance tax (HB 2821), and taxing excess compensation over a million dollars (SB 6017), but they chose not to act. Now a global pandemic has hit and we are cutting programs for people who were already struggling. 

In a prosperous state like Washington, we will continue to fight for small gains like the postpartum bill, in good times and bad, despite our failing to fix our backwards tax system.

Leaders at local, state and federal levels have been acting boldly to keep people afloat and healthy during this pandemic. Now is the time for Washington’s Legislature to act boldly as well to safeguard Washington workers now and in the future.

  • Leave a Reply
    • Randy Baker

      I would suggest an asset tax analogous to that advanced by Senators Sanders and Warren.

      To limit tax avoidance, I suggest computation of tax be based on assets of 2019 discounted by any loss [or increase] the asset holder could prove for 2020 by clear and convincing evidence. I further suggest that a substantial no-fault civil penalty be imposed on any subsequently discovered under reporting to create a disincentive for such mistakes.

      Among the issues to review before proceeding with such a tax is whether fleeing the state by asset holders could deprive the state of jurisdiction to claim the tax, how much flight of high asset holders the tax would provoke, and whether such flight would be a detriment to the people of WA.

      Of course, people with large amounts of wealth as a group have and will suffer far less through this crisis than those lacking that wealth, and particularly those who are risking their health daily by going to work. Were the extremely wealthy public spirited, as they typically portray themselves in their highly publicized charitable contributions, they should gladly grant that their assets be taxed to contribute their fair share to the public good. That Twitter founder Jack Dorsey has pledged $1 billion of his estimate $3 + billion of wealth illustrates the ease with which those with large assets could pay the necessary tax and remain extraordinarily wealthy.

      Apr 13 2020 at 10:08 AM

    • Dennis Ortblad

      Creating a public bank for financing infrastructure is one means to strengthen our state’s capability to respond to the Covid-19 economic crisis. The Federal Reserve has opened a unique opportunity for states to borrow from the Fed at zero interest rates if the states create their own public banks. Instead of paring away at the state’s budget, our state can obtain the same borrowing rights as commercial banks to draw on the Fed’s newly created emergency facility. Besides financing infrastructure (e.g., affordable housing), Washington could also use its bank’s mechanism to back up community banks to increase lending to the many small businesses needing credit. It is likely that the Governor can issue an emergency order to create a public bank as a measure to help rescue a sinking economy. Or he can call a special session of the legislature to push through measures bold enough to help avoid painful austerity as our economy flounders.

      Apr 26 2020 at 5:16 PM

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