Building an Economy that Works for Everyone

Washington’s Revenue Forecast Doesn’t Reflect the Needs of the People

Federal dollars might fund the first round of COVID recovery, but without progressive revenues we can’t build the infrastructure needed for a more equitable economy

Early on in the pandemic, Washington’s budget forecasters were predicting sharp drops in state revenue to well below the level necessary to sustain state services. The good news in the March 17, 2021 forecast is that expected receipts from state taxes are pretty much back to the level being projected for this budget cycle in February 2020.

But we all know that we are a long way from where we were thirteen months ago.

Many of us have lost beloved family and friends without the comfort of in-person goodbyes and hugs. Millions of people have been sickened, and some “long haulers” continue to suffer health complications. We’ve missed graduations, weddings, births, shared holidays, reunions. Our kids will have a lot of catching up to do after a year of on-line schooling. Stress and isolation have increased the need for mental health and substance use disorder services for people of all ages. More people than ever are living unsheltered.

COVID’s impacts have driven economic and racial inequality to new extremes. The wealthy – disproportionately white – have gotten even richer. Those who were comfortable before have, for the most part, stayed comfortable. But essential workers and low-wage workers who have suffered the most damaging effects of COVID have long been disproportionately from Black, Indigenous, and people of Color communities. And with prices for housing, child care, and health care shooting up much faster than typical wages, many of the people who were struggling to meet basic expenses before COVID are now deeper in the hole, behind on rent or mortgages, with any reserves exhausted.

The federal American Rescue Plan recently passed by Congress is aptly named. It will send much needed funds directly to individual households and also to school districts, state and local governments to help with many of the immediate costs of dealing with the pandemic.

All these factors make it urgent for Washington’s state legislature to add a dose of fairness to our tax system by enacting multiple new taxes focused on the wealthy and finally funding the Working Families Tax Credit.

For decades, Washington’s tax structure has contributed to growing income inequality and continuing racial inequities. Low- and middle-income households in Washington pay far higher tax rates than the wealthy. Washington’s tax system is more skewed toward the wealthiest households than any other state. Our over-reliance on sales taxes is a big part of this regressivity and also underlies the structural deficit. Tax revenue may increase from year to year in dollar terms, but after accounting for inflation, population growth, and economic growth, our state budget has been continually shrinking. As a result, we were underfunding public health, child care, higher education, K-12 education, and family supports even while the economy boomed. That left our people and communities even more vulnerable to COVID.

The state legislature is now considering several solid proposals that would require the wealthiest to contribute a sliver more of their riches to the common good. These include SB 5096, the tax on extraordinary capital gains, which has already passed the Senate and is now before the House. HB 1406 would institute a wealth tax on the investment holdings of the top 0.1% of individuals, and HB 1111 would close a tax break enjoyed by profitable corporations that stash money in investment portfolios rather than in research, worker wages, or lower consumer prices.

One of the arguments made against these proposals is that it will take a year or two before they provide the state with funds to spend on services. The fact that it looks like we can largely avoid immediate state budget cuts and pay for the first round of COVID recovery work with federal money gives us time to set up the needed infrastructure. Once that federal money is gone, our state will still need stronger public schools, more accessible higher education, more affordable child care, robust public health services, and supportive housing and social services. These new progressive funding sources would be on-line just in time to sustain the level of investments our people need to thrive going forward.

Without bold action now by state lawmakers, the scars from COVID will be long lasting. We can rebuild with even more racial and economic inequality than before, or we can choose to finally take steps toward a more fair state tax system to fuel a more just recovery.


  • Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

More To Read

Progressive Tax Reform

May 24, 2024

Report: First Findings from the Legislature’s Wealth Tax Study

What the Department of Revenue has learned exploring wealth tax proposals from other states and countries

Progressive Tax Reform

March 20, 2024

I-2111: The Income Tax Ban Is A Spectacle, but One We Can’t Ignore

A way to waste time, energy, and money, I-2111 is costing more than just taxes

Progressive Tax Reform

February 2, 2024

What is REET and Why Do We Need to Reform It?

Washington State lawmakers have the chance to make a progressive tax more progressive and provide a permanent funding source for affordable housing