Building an Economy that Works for Everyone

New ways to fill Washington’s budget gap

Thanks in large part to a regressive and out-of-date tax system, the state budget is facing an estimated $2.7 billion shortfall over the next biennium.

While Gov. Chris Gregoire and gubernatorial candidate Dino Rossi are sparring over where to cut essential state services, the budget gap is a prime opportunity to stimulate our economy through much-overdue tax reforms that make our state’s tax system more equitable and sustainable.

For example, the following changes would net over $2 billion in new revenue:

  • A 50% cut in the state portion of the property tax, paired with a graduated tax on high incomes (first $200K exempt for joint filers, 3% rate on income between $200K and $999K, 5% rate on income over $1 million). Net: $1.08 billion. More
  • Expanding the small business B&O tax credit (from $35 to $100) while suspending selected business tax breaks would net nearly $270 million in 2009-11. Net: $269.5 million. More
  • Extending the state sales tax to selected goods and services would provide up to $784 million in additional state revenue, and $293 million to local governments in the 2009-11 biennium. Net: $784.4 million. (Affected businesses would see their B&O tax rate drop by more than two-thirds, from the 1.5% services rate to .471% retail rate.) More

Without new revenue for critical investments in education, transportation and human services in the years ahead, we’ll fall further behind in the global race to educate our kids, build healthy and sustainable communities and stay economically competitive.

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