Schmudget Blog

Three Reasons Why a New Tax Break for Manufacturers Is Bad for Washington State

Posted by Andy Nicholas at Jul 03, 2017 06:50 PM |
Filed under: State Budget, Tax Break

In the final hours of intense, behind-the-scenes negotiations over the recently enacted 2017-19 state budget, lawmakers in Washington state snuck in a major new tax break for manufacturers. This new tax break, which is one of 13 new or extended tax breaks included in Senate Bill 5977, would reduce the business and occupation (B&O) tax rate applied to Washington state-based manufacturers from the current rate of 0.484 percent to 0.2904 percent over the next four years. 

This Senate tax break bill is one of several bills that still need to be signed by Governor Inslee in order to become law. It is bad policy and it should not be enacted. Here are three reasons why:

  1. Once fully implemented, the new break will eliminate $39 million per year in funding that would otherwise support schools, health care, and other investments that form the foundation of a strong state economy. Structuring this tax break to gradually phase in allowed lawmakers to balance the state budget over the next four years. But after 2022, the mounting costs of this tax break will make it ever more difficult to balance the budget and adequately fund schools and other priorities.
  2. It includes no accountability to the public. It’s unacceptable that lawmakers neglected to apply any of the standard transparency and accountability provisions applied to other recently enacted tax breaks to this tax break – such as identifying a specific public purpose or goal, designating metrics to assess its success or failure in achieving those goals, or setting an expiration date.
  3. It will largely benefit shareholders and out-of-state consumers. The new tax break might allow manufacturers to very modestly reduce the prices of the goods they sell, but that would mostly benefit consumers in other states and countries where those goods are primarily sold. Manufacturers could also use the tax savings to pad their profits for the benefit of their own shareholders. Either way, that means millions of dollars in resources that would otherwise be used to support communities throughout Washington state will be diverted to other states and countries.

Last-Minute, Makeshift Budget Misses Opportunity to Fix Upside-Down Tax Code

Posted by Kelli Smith at Jun 30, 2017 01:05 PM |
Filed under: State Budget, State Revenue
Statement by Executive Director Misha Werschkul:
Legislative leaders have agreed to a spending plan to fund state services for the next two years – and as such, they may avoid a state shutdown – but they have left a lot of important work undone. Notably, lawmakers have passed up an historic opportunity to address our state’s broken tax code, and instead have relied too much on unsustainable fund transfers and budget gimmicks that will threaten the economic strength of the state in the future. The budget deal includes some investments in critical programs, but it falls short of meaningfully strengthening many of the state’s most important long-term investments.

Instead of creating a budget that enacts much-needed revenue reform, lawmakers have cobbled together a budget that makes progress toward fulfilling a mandate from the state Supreme Court to strengthen our K-12 schools. But the final budget agreement does this by relying too heavily on irresponsible accounting tricks, like drawing down the state rainy day fund and shifting funds between accounts, that will leave the state on shaky ground in future years. 

Lawmakers propose to raise new resources for schools with a small increase in the state property tax. But it is disappointing that no actions were taken to offset higher property tax bills for lower- and middle-income homeowners and renters who, under our current tax code, pay up to seven times more in state and local taxes as a share of their incomes than the richest Washingtonians. In addition to the property tax changes, lawmakers agreed to eliminate wasteful tax breaks – including the bottled water sales tax exemption and a sales tax break for oil refineries – and close off legal loopholes that allow out-of-state businesses to avoid paying sales taxes and business taxes. But they also added or extended 13 other tax breaks that will take money out of communities in favor of special interests and leave fewer resources for future investments. Now is the time to clean up the tax code to clear out wasteful tax breaks, not add more.

Central to legislators’ budget negotiations was compliance with the state Supreme Court’s order to fund public schools by the end of this legislative session. The school funding plan included in the final budget deal overhauls the state’s teacher pay system and will invest an additional $7.3 billion in public schools over the next four years. It remains to be seen whether the compromise will be sufficient to satisfy the court’s order to amply fund public education. 

It appears that severe cuts to many important priorities that improve the lives of Washingtonians with low incomes may have been largely avoided. If so, that’s a good start. However, the deal doesn’t do enough to strengthen many of the programs that allow people with middle and low incomes to thrive – and in particular many people of color who, because of systemic racism, are denied equal access to opportunity. Unless state lawmakers take significant steps toward reforming our tax code to enact equitable and sustainable revenue sources, meaningful improvements to community investments will continue to be difficult. 

If lawmakers can get the budget signed by the governor in time, they may narrowly avoid a state government shutdown; but either way, the result is a makeshift budget that doesn’t address the unsustainability, inequity, and inadequacy of our tax code. Especially with the threat of huge federal cuts on the horizon, state lawmakers must ensure the budget protects the wellbeing of Washingtonians. 

In 2018, lawmakers will have another chance to lift up Washington’s communities and build a brighter future for our kids. To do that, they’ll need to get serious about cleaning up our tax code to raise state resources in an equitable and sustainable way.  

Stay tuned for more-detailed analysis from the Budget & Policy Center after our full review of the budget. 

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State Revenue Forecast Doesn’t Change the Facts: Washington State Needs Equitable New Revenue

Posted by Kelli Smith at Jun 20, 2017 01:45 PM |
Filed under: State Budget, State Revenue
Statement from the Washington State Budget & Policy Center:
The updated state revenue forecast, which projects a small increase in the amount of tax resources available to fund schools and other priorities in the coming years, should signal to lawmakers that it’s time to get to work on cleaning up the state’s flawed tax code. Failing to do so would make it impossible for lawmakers to amply fund schools without forcing harmful cuts to health care, higher education, and other investments that promote a strong state economy and thriving communities.

Lawmakers in Olympia have until June 30 – just 10 more days – to finalize the state budget before state agencies are forced to begin shutdown procedures. A state government shutdown would put thousands of Washingtonians at risk of losing access to child care, public health resources, and job supports, and it could cause interruptions to business, environmental protection, and utility services. That’s not even to mention the loss of income for state workers during the shutdown.

With the latest revenue forecast, lawmakers now have all the information they need to come to an agreement on a budget that invests in strong communities. The Washington State Economic and Revenue Forecast Council’s final revenue forecast for the fiscal year (which ends on June 30) projects state tax revenues will increase over the next two years by just $80 million (less than 0.2 percent of the current budget) relative to the previous forecast – a mere blip on the state budget radar. 

In the past few years, lawmakers in Washington state have passively relied on revenue growth from the shaky economic recovery in order to make sluggish progress toward fully funding schools, per the state Supreme Court’s McCleary mandate. This approach has been both inadequate – the legislature is currently being held in contempt for failing to fully fund schools – and irresponsible, since most or all of the revenue growth will vanish when the next recession strikes. Today’s inconsequential revenue projection doesn’t change that.

As we wrote after the last revenue forecast in March, when adjusted for economic growth, state revenues have actually declined since 2001 and have remained nearly flat since the end of the last recession. This means Washington state is still funding many programs and agencies at levels far below what is necessary to serve our communities. Negligible growth in revenues is not enough to maintain current obligations, let alone enough to provide for stronger investments that help our state thrive. 

Lawmakers must take this opportunity to enact smart, long-term reforms by raising new revenue from equitable, sustainable, and adequate sources. They can start by closing wasteful tax breaks for corporations and by eliminating the tax break on high-end capital gains. Doing so would improve the wellbeing of our state and its people for generations to come, and begin to turn our upside-down tax code right-side up.


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State and Federal Proposals to Cut Funding for Women’s Health Would Decrease Family Economic Security

By Misha Werschkul, executive director
Building economic security for Washington's women is an essential component of creating a thriving economy in our state. Nearly 500,000 women and more than 20 percent of Black, Hispanic, and Native American women live in poverty in Washington. Many factors contribute to high poverty rates among women, and especially among women of color – including the gender wage gap, a disproportionately high percentage of women working low-wage jobs, and the lack of universal paid leave programs and child care supports. Access to health care– including high-quality pre- and post-natal care – and the ability to choose when and under what circumstances to start a family are also critical ingredients of family economic security.

Investments in the wellbeing of women are critical to any serious strategy to address inequality or reduce poverty. And investing in the full spectrum of women’s health services in particular is an important step toward strengthening the economic security of women and families.

The good news is Washington state has made significant progress in expanding health care access for women and in reducing unintended pregnancies. Under the Affordable Care Act, the number of uninsured women in Washington state has dropped to historic lows. And as the KIDS COUNT Data Center shows, Washington’s teen birth rate has fallen from 25 teen births per thousand in 2011 to 18 teen births per thousand in 2015. King County has the second lowest teen pregnancy rate in the country. Expanding health care and reducing unintended pregnancies is good for women and families, and it’s also cost effective for states.

However, this progress is being threatened. Recent federal and state proposals would pay for tax cuts for the wealthy at the expense of investments that support women and communities. In the next few weeks, we anticipate the release of the 2018 federal budget and a compromise 2017-2019 state budget, not to mention the U.S. Senate’s health care bill. Elected leaders must ensure legislation invests in programs that help promote economic security for women and families. 

Federal Threats

Washington’s women face a multitude of threats from federal proposals, ranging from the repeal the Affordable Care Act to President Trump’s 2018 budget proposal to the possibility of new regulations affecting birth control from his administration. Especially when combined with deep cuts to federal programs that disproportionately serve women and children – like housing and energy assistance, job training, and hunger relief – these cuts to women’s heath are a recipe for increased economic insecurity. Federal proposals include:

  • Cutting Medicaid – Federal proposals to eliminate the Affordable Care Act’s Medicaid expansion and make deep cuts to Medicaid would jeopardize health care for nearly one million women in Washington state (see graph below). In fact, women make up a majority of Medicaid beneficiaries and therefore face a disproportionate burden of proposed cuts to the program. Medicaid is a key support for women on multiple fronts: Working women who don’t have employer-sponsored coverage are able to get health insurance coverage through the Medicaid expansion; women of reproductive age rely on Medicaid for family-planning and maternity care services (importantly, Medicaid provides health care for nearly half of all pregnant women nationwide); and older women and women with disabilities are the primary users of Medicaid long-term services and supports. In addition, Medicaid serves women of all races and ethnicities in Washington. 

[Click on graphic to enlarge.]

Women girls medicaid enrollment


  • Defunding Planned Parenthood – Congressional Republicans have put forward multiple proposals to ban Planned Parenthood from receiving federal and state funds through the Medicaid program and to allow states to exclude them from the Title X family-planning program. These funds are currently used to provide family-planning and a wide range of critical health care services like cancer screenings to more than 98,000 low-income women and men at 32 health care centers in Washington state. Several of Washington’s Planned Parenthood clinics are the only clinic in their county that offers the full range of contraceptive health services, including longer-acting methods like intrauterine devices that are the most effective at preventing pregnancy. Defunding Planned Parenthood would jeopardize health care for thousands of low-income women in Washington state and increase economic insecurity as a result of unplanned pregnancies. 
  • Reducing coverage for newborn and maternity care and birth control – The Affordable Care Act repeal legislation from House Republicans removes the requirement for publicly funded health insurance to cover the full range of health care services, including newborn and maternity care. In addition, the Trump administration is considering rule-making that would remove the requirement for insurers to provide copay-free birth control. Both of these changes would mean that women who have health insurance coverage would have to pay more money out of pocket to get their health care needs met.

State Threats

Washington state legislators are continuing to negotiate the 2017-2019 biennial state budget in order to avoid a state government shutdown on July 1, 2017. This year, budget writers have an opportunity to clean up the tax code to make historic investments in ensuring every child in Washington has access to quality public education. However, the Senate Republicans’ approach is largely to protect tax breaks for wealthy special interests and fund investments in schools at the expense of other important priorities like child care and job training for low-income parents. 

The State Senate's proposals would also reduce state family-planning funding. On top of cuts being proposed at the federal level, state Senate Republicans propose a 10 percent reduction to state funds that provide family-planning services, which would result in reduced access to women’s health services.

Especially with federal threats looming, Washington state leaders should be doing everything possible to protect women and build on the progress that has been made in our state. 

Economic security and women’s health are fundamentally intertwined. If we want to have an economy that works for everyone, we simply can’t ignore women’s health. As federal and state policymakers develop new budget proposals, they must focus on advancing economic security by investing in the full spectrum of women’s health services. 


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New Report: Supplemental Nutrition Assistance Program Critical to the Wellbeing of Many Washingtonians with Disabilities

Posted by Julie Watts at Jun 14, 2017 06:25 PM |
According to a new report by the Center on Budget and Policy Priorities, the Supplemental Nutrition Assistance Program (SNAP) – which provides basic food support to people with lower incomes – helps 126,000 Washingtonians with disabilities secure a better quality of life and protect their basic health. The report underscores the key role SNAP plays in lifting people with disabilities out of poverty, helping them put food on the table, and contributing to a wide range of positive long-term health and economic outcomes.


What is a Disability

Far too many Washingtonians with disabilities are just one accident or mishap from financial catastrophe. SNAP plays a vital role in providing them with added financial security. Further, by ensuring they have the resources for adequate nutrition, SNAP offers them a key foundation of good health. Policymakers must protect this important program against funding cuts being proposed by Congress and President Trump.

Two out of five non-elderly individuals with disabilities in Washington state participate in SNAP. For them, it is an especially important resource because having a disability can make life more expensive and can make it harder to earn enough money to buy food and other necessities.

People with disabilities are more likely to live in poverty than those who don’t. In fact, as seen in the chart below, 33 percent of children with disabilities live below the federal poverty line in Washington state, compared to 21 percent of non-disabled children. And among 18 to 64 year olds, people with disabilities are twice as likely to live in poverty than non-disabled people. Given that this is the time of life when most people are in the workforce, earning income, and saving money, this data underscores how much harder it can be for people with disabilities to make ends meet without basic supports like SNAP.

[Click on graphic to enlarge.]

People with Disabilities are More Likely to Live in Poverty in WA

Despite the fact that SNAP provides important nutrition benefits to millions of low-income people with disabilities nationwide, President Trump has proposed shifting 25 percent of the federal cost of the program to states, which would cost Washington state an additional $363 million a year. Congressional House Republicans are also in the process of negotiating a 2018 budget resolution that will likely propose sweeping changes to SNAP, including cuts to overall spending and shifting costs to states. Among the other things the president and Congressional Republicans have proposed are:

  • The elimination of a small SNAP benefit (called the “minimum SNAP benefit”) that seniors and people with disabilities can qualify for in connection with other public supports. This modest amount of additional assistance is critical for people living in poverty.
  • Limits on the length of time people living in communities with high unemployment can receive SNAP. This is yet another challenge for people with disabilities who already have a difficult time finding work.
  • New fees imposed on grocers who accept SNAP benefits, which will result in many grocers opting out of the program. This will obviously make it harder for SNAP participants to find stores where they can use their food assistance benefits.

Not only will none of these proposals help people move out of poverty; they will actually increase hardship for working families and millions of Americans with disabilities.

SNAP plays a vital role in ensuring that many Washingtonians with disabilities can put food on the table and have an opportunity to move out of poverty. As Congressional budget writers in Washington D.C. sit down to figure out how they will allocate public resources, Washington state’s elected officials should ensure that all residents – especially those with disabilities – have access to basic supports like SNAP.

To find out more about how SNAP is a critical resource for many people with disabilities, read the Center on Budget and Policy Priorities’ report, “SNAP Provides Needed Food Assistance to Millions of People with Disabilities.”



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KIDS COUNT Report: Washington Continues to See Historic Progress in Kids’ Health Care Access

Posted by Jennifer Tran at Jun 13, 2017 09:25 AM |

The number of Washington state children with health insurance has risen to historic highs, with 39 of every 40 kids in the state now covered by health insurance. Further, disparities in access to health care have been reduced across nearly all racial and ethnic groups. This according to the 2017 KIDS COUNT Data Book released by the Annie E. Casey Foundation and the KIDS COUNT Data Center. Given this monumental progress toward strengthening the long-term health and well-being of Washington’s kids, our representatives in Washington, D.C. must reject harmful federal policy proposals that would send kids’ health backward.


Washington state's Cover All Kids law, passed in 2007, combined with the 2014 implementation of the Affordable Care Act (ACA) have helped reduce the number of uninsured Washington children by more than half, to 3 percent today from 6 percent in 2011. This improvement underscores how smart federal investments to expand Washington state’s Apple Health for Kids has significantly enabled more kids to see a doctor or get necessary medicines when they’re sick.

As the chart below shows, these policies have also advanced health equity by connecting more Black, Latino, and Asian and Pacific Islander (API) children with the coverage they need to thrive. Today, only 2 percent of Black and API and 3 percent of Latino children are without health insurance. With the exception of American Indian children, coverage gaps among children of different races and ethnicities have narrowed since 2011. Ten percent of American Indian kids remain uninsured in Washington state.

[Click on image to enlarge.]

Uninsurance rates by race/ethnicity updated 12June2017

Unfortunately, this progress toward covering more kids is threatened by federal policy proposals that would make huge cuts to health care for people with low incomes. The proposal to “repeal and replace” the ACA with the American Health Care Act passed the U.S. House of Representatives and is now being negotiated by the U.S. Senate. It would effectively end the Medicaid expansion that led so many more children from families with low incomes to get health insurance through Apple Health for Kids in Washington. Furthermore, the president’s proposed budget would also slash Medicaid funding to the state nearly in half by 2027.

We all have a responsibility to ensure all of Washington’s kids have the opportunity to have a healthy start in life. At a time when far too many Washington families are just one personal crisis away from a financial catastrophe, it is vital that families can afford basic preventative health care for their children and can take them to a doctor when they need to. State and federal lawmakers must protect the health and economic security of kids and families against harmful budget proposals. They must safeguard the great progress our state has made in covering more children and closing racial and ethnic gaps in health coverage.

To read more about how Washington’s kids rank nationally in economic well-being, education, health, and family and community, read the full 2017 KIDS COUNT Data Book, the one-page KIDS COUNT Washington state 2017 profile, and our KIDS COUNT in Washington press release.

Guest Post: Kansas Experiment Yields Valuable Lessons in Why State Investments Are Essential

Posted by Melinda Young-Flynn at Jun 08, 2017 11:05 AM |
This week, the Kansas legislature rolled back significant parts of the state’s massive 2012 tax cuts. A two-thirds bipartisan majority voted to reject the “tax-cut your way to prosperity” approach. This was a major repudiation of bad fiscal policies that Congressional Republicans and President Trump are touting as solutions to create economic growth. Heidi Holliday, executive director of the Kansas Center for Economic Growth, wrote this guest post:

You’re welcome, America. 

Heidi Holliday

Our state, Kansas, just wrapped up a 5-year long experiment in governance from which the other 49 states can now glean some important lessons. The Kansas Legislature has voted to roll back much of the 2012 package of tax cuts that sent the state into a downward spiral of financial instability and weakened the Kansas’ public schools, universities, Medicaid program, and virtually everything else that the state funds.

With the state facing yet another budget shortfall of $900 million, government leaders decided that enough was enough. Governor Brownback, who heralded the 2012 experiment, was proposing yet more temporary band-aid approaches and more cuts to deal with the shortfalls. The Legislature chose a different path and instead sent the Governor a bill that would raise more than $1.2 billion in new revenue over two years by, among other things, repealing a costly tax break for pass-through income, rebalancing individual income tax rates by reinstating a third tax bracket, and reversing course on the governor’s plan to eliminate our state income tax. Brownback vetoed the legislation but, with bipartisan support, the House and Senate quickly overrode the veto.

Our state has begun the path to fiscal stability and is closer to becoming a model of good policy choices as much as it is a cautionary tale. The damage done to Kansas from this reckless experiment will not be undone overnight, but other states need not wait to act upon the lessons learned. 

Put simply, revenue matters. You can’t get something for nothing. We all want and deserve thriving communities with great schools, parks, and modern roads and bridges; and we chip in to pay for that. That’s what taxes are for. 

Because of the scope of the 2012 changes, it didn’t take long before Kansans in every corner of the state began connecting the dots between the actions of state lawmakers and the quickly eroding quality of the things that make for a good economic foundation in every community. With every subsequent shortfall, the picture became more clear. Meanwhile, the promised economic boom—and the revenue rebound that would supposedly follow—never happened (as economists predicted). In the last few election cycles, voters have viewed candidates and their promises through a different lens, and the 2017 Legislature had the experience and public backing to chart a new course. 

Most state tax codes, including ours, need further reform, but it’s high time that state tax policy adhere to one basic, proven (and now proven once again) principle—states need revenue to invest in the things that create thriving communities and a prosperous economy. Kansas just learned this lesson again, the hard way, so that your state doesn’t have to. You’re welcome.

Heidi Holliday and her team were instrumental in the legislative victory in Kansas. For more background on the failed Kansas tax-cut experiment and the lessons that can be learned from it:

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