Schmudget Blog


A good state budget is the best medicine

Posted by Jennifer Tran at Oct 18, 2018 09:42 AM |
Filed under: State Budget, Health, Equity

Policymakers can use the state budget to create a healthier Washington

All Washingtonians should have opportunities to lead a healthy life, no matter who they are, where they live, or how much money they make. While access to health care plays an important role in influencing health outcomes, opportunities for better health begin where we live, work, and play – and these are factors that are largely shaped by state and federal tax and budget decisions.

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Our new brief, "A Good State Budget is the Best Medicine," describes how policymakers can help build healthy communities and advance equity in Washington by applying a health lens to all state budget and tax decisions. For example, education is one of the most important determinants of long-term health: People with more education live longer, are less likely to die from cancer or heart disease, and have better access to health care and insurance. So when lawmakers invest in high-quality early childhood education, kids are prepared to succeed in school, and experience immediate and long-term health benefits.

Policies that lift and keep people out of poverty are also health policies. In the upcoming session, state lawmakers have an opportunity to increase the income of low-paid workers by funding and modernizing the Working Families Tax Rebate (our state version of the federal Earned Income Tax Credit, or EITC). Nationally, the EITC lifts more working families out of poverty than any other federal government program and has been shown to improve the health of infants and mothers. In 2017, nearly half a million working Washingtonians across the state could have benefited from the positive impacts of this tax rebate.

These and many other policies that may not seem to be health-related on the surface, including affordable housing, public transportation, and high-quality jobs, are all essential to the well-being of the state. By looking at budget choices through a health-promoting lens, lawmakers can take steps to create a budget that invests in the programs and policies that give everyone a chance to lead a healthy life.

Read the full brief, "A Good State Budget is the Best Medicine."

Support for this brief was provided by the Robert Wood Johnson Foundation.

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Press release: Washington state again ranks worst in the nation for our state tax code

Our state continues to top the “Terrible 10” list of tax codes that ask the most of those with the least

Contact: Melinda Young-Flynn, Washington State Budget & Policy Center communications director, melinday@budgetandpolicy.org, 206.262.0973, x 223

October 17, 2018 - Despite the many ways Washington state takes prides in its spirit of innovation, it still ranks dead last when it comes to its tax code, according to a new study by the Institute on Taxation and Economic Policy (ITEP). Our state has the most upside-down tax code in the country, forcing people with the lowest incomes to pay 17.8 percent in state and local taxes as a percent of their income – while the state’s wealthiest residents pay just 3 percent.

The study, “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” analyzes tax systems in all 50 states and the District of Columbia. Washington state leads the pack among the report’s “terrible 10” of inequitable tax codes, along with states like Texas, Florida, and Oklahoma. (Meanwhile, our western neighbors, Oregon, California, Idaho, and Montana, all rank among the top 15 most equitable states.)

Washington state is considered the worst in large part because of its heavy reliance on regressive forms of taxes – like sales and other excise taxes – that place an oversized share of the responsibility on people with low and middle incomes. Also putting us in last place: the lack of a state level Earned Income Tax Credit that puts money back into the pockets of hardworking but low-paid Washingtonians – in our state, it’s called the Working Families Tax Rebate. The ITEP report also notes that our state’s business and occupation (B&O) tax is regressive. Although it’s nominally paid by businesses, a large portion of B&O taxes act as hidden sales taxes on consumers in the form of higher prices on goods and services. (See ITEP's Washington state fact sheet for more details.)

“The wealthiest people and corporations have benefited most from our state’s booming economy,” says Budget & Policy Center Associate Director of Fiscal Policy Andy Nicholas. “Meanwhile, hardworking people with lower and middle incomes are having a hard time keeping up with our state’s skyrocketing cost of living. It’s not unreasonable to ask the highest-income residents, who have some of the lowest state and local tax rates in the nation, to pay a little more to support our communities.”

State and local tax policies are creating an even larger divide among people with the most and those with the least. Our tax code that takes a very large bite out of the budgets of households with lower incomes makes it harder for many people to afford basic needs. Further, because of historically inequitable policies designed to exclude people of color from opportunity, Washington state’s tax code is especially harmful to many communities of color.

“Washington cannot be complicit in the way our tax code works to punish poor people and communities of color,” says Sameth Mell of the Coalition for Immigrants, Refugees, and Communities of Color. “We must continue to work together for reform to a system that is long overdue, and make sure that we raise resources equitably for our state and future generations."
 
Another issue with our state tax code is that continual tax cuts for the wealthy and corporations funnel money out of our communities – from things like schools, parks and public spaces, and emergency response services. If we fail to address this problem in our tax code, it’s going to become increasingly harder each year for the legislature to ensure the state budget can cover the public services that we all rely on in our state. 

“State lawmakers have control over how their tax systems are structured,” says Meg Wiehe, deputy director of ITEP and the lead author of the study. “They can and should enact more equitable tax policies that raise adequate revenue in a fair, sustainable way.”

In Washington state, those policy solutions include enacting and funding a modernized Working Families Tax Rebate and removing wasteful tax breaks that mostly benefit the very wealthiest households, like the one on capital gains.

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For more, read the Budget & Policy Center's analysis on the ITEP rankings, "Unacceptable. Washington still has the nation's most inequitable state tax code."

Unacceptable. Washington still has the nation’s most inequitable state tax code

Transformative changes are needed to create a tax code that works for everyone

 

Washington state continues to have the most upside-down tax code of any U.S. state, according to a new report from the Institute on Taxation and Economic Policy (ITEP). It wrongly requires people with the lowest incomes to pay six times more in taxes as a percent of their income than the state’s wealthiest residents to fund investments that benefit all Washingtonians. 

Lawmakers need to create a more just tax code that better fits our vibrant state economy. They can take steps to do this by funding and expanding the Working Families Tax Rebate and closing a tax loophole on capital gains that benefits the very wealthiest households.

The report, "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States," finds that the poorest fifth of Washingtonians, those earning less than $24,000 per year, pay an average of 17.8 percent of their incomes in state and local taxes. By contrast, households earning more than $546,000 per year (the top 1 percent) pay only 3 percent of their incomes in taxes (see graph below). This gap in tax responsibility between the wealthiest and poorest families is wider in Washington state than any other state in the nation. 

Click on image to enlarge.

Upside-down_tax_code_2018

 

The culprit behind this extreme imbalance is our state’s over-reliance on regressive forms of taxes, like sales and other excise taxes, that take an especially large bite out of lower- and middle-income family budgets while asking little of those at the very top of the income scale. Our state’s business and occupation tax is another major contributor to the problem, acting as a hidden sales tax on consumers. (See the Washington state fact sheet from ITEP for more details about our upside-down tax code.)

This is simply unacceptable. A state as cutting-edge and socially advanced as ours should not rely nearly so heavily on those who are least able to afford the taxes that fund state investments that benefit us all. Washington’s regressive tax code is especially hard on communities of color, many of whom, due to the legacy of systemic racism, are more likely to be in the lowest-income, highest-taxed portions of the population than in the highest-income, lowest-taxed portions.

Since 2009, 42 percent of all income generated in Washington state has gone to the wealthiest 1 percent. But our upside-down tax code only exacerbates rising income inequality, making it harder for families to make ends meet in the short run and virtually impossible to save for a house, a child’s college tuition, and retirement in the long run. 

And asking so little of those at the very top of the income scale deprives us of resources needed for schools, health care, infrastructure, and other investments that create good jobs and form the foundation of a strong state economy.

It's time we joined the company of our neighboring states on the West Coast, Oregon and California, which have much more equitable state and local tax codes. In fact, California has the most equitable tax code in the nation, while Oregon ranks tenth best. 

When lawmakers convene in Olympia in January, they should take two critical steps toward creating a state and local tax code that fits Washingtonians’ values and the needs of their communities. First, extending our excise tax code to include currently untaxed capital gains would generate billions of dollars in new resources for community investments. Since the tax would almost exclusively be paid by the wealthiest two percent of Washingtonians, doing so would bring greater balance to the tax code at the top end of the income scale. 

Second, funding and expanding the Working Families Tax Rebate, our state's unfunded version of the federal Earned Income Tax Credit, would significantly reduce taxes for the 40 percent of households with the lowest incomes. This would create more opportunity for those who have been denied their just share of our state’s growing prosperity.

While Washington leads the nation in many important ways, our neighboring states have far surpassed us when it comes to creating balanced and equitable systems for funding investments that build thriving communities. This new ITEP report reaffirming our tax code's worst-in-the-nation status shows we’re long overdue for a tax code overhaul. Now is the time to get started. 

For more, see our press release about ITEP's new "Who Pays?" report. For media inquiries, contact Melinda Young-Flynn, communications director, 206.262.0973, x223. 

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Income gains are not being shared equally

Posted by Julie Watts at Oct 12, 2018 01:50 PM |

New Census data show many Washingtonians of color are still facing barriers to economic opportunity 

By Liz Olson, State Priorities Partnership policy fellow

From 2016 to 2017, Washington state’s median household income rose while the statewide poverty rate slightly declined, according to new data released by the U.S. Census Bureau. While this is good news, it is tempered by the fact that gains in prosperity have not been shared equally across racial and ethnic groups. Substantial barriers to financial well-being persist for many people of color as a result of a continued legacy of discrimination in hiring and promotions, overrepresentation in low-wage work, and redlining policies that pushed people into neighborhoods that often don’t have the resources they need to thrive. 

In 2017, our state’s median annual household income increased by $2,430 (in inflation-adjusted dollars) from the previous year. But even though hardworking people of every racial and ethnic identity are driving growing economic prosperity in our state, not all households are reaping the benefits. 

White households represent the only racial group in Washington to have seen a meaningful bump in household income (1),  with median income rising to $72,254 in 2017. Meanwhile, income growth stalled for Black and Latinx households. And even more disconcertingly, incomes for Native American and Alaska Native households slid backwards. 

Washington’s median income was just $52,212 for Latinx households, $49,300 for Black households, and $42,127 for Native American and Alaska Native households in 2017. This means that many households of color are struggling to make ends meet, with incomes well below the high cost of living in our state – $64,203 for a single parent with two kids (2). These patterns reflect the outcomes of centuries of discriminatory federal, state, and local policies.

Census data also show that 3,532 fewer Washingtonians lived in poverty last year than in 2016, as the overall poverty rate fell slightly from 11.3 to 11 percent. Even with this modest decline, the actual number of people in poverty in Washington remains higher than it was a decade ago at the onset of the Great Recession. In fact, the number of Washington families living in deep poverty (with an income of less than $10,210 for a family of three) grew by nearly 30 percent from 2007 to 2016 (3).

 

Families of color – particularly those headed by single women – and kids are hit especially hard. As the chart below illustrates, too many young people of color don’t have access to the financial resources they need for a safe, secure, and bright start in life. More than a quarter of Latinx, Native American, and Pacific Islander children, and nearly 30 percent of Black children, lived in a household below the poverty level in 2017. 

Click on image to enlarge

Children in poverty

 

Washington’s kids and families deserve better, and our policymakers can do better by making investments in our communities that enable all of us to thrive. We know that anti-poverty programs like the Supplemental Nutrition Assistance Program, Temporary Assistance for Needy Families (WorkFirst), affordable housing, affordable childcare, and Apple Health work. They provide families who have fallen on hard times the opportunity to meet basic needs, get and keep jobs, and increase their income over time. State lawmakers should take advantage of a growing state economy to invest in poverty reduction efforts so that everyone in our state can have the opportunity to thrive – especially those communities of color who have historically been excluded from economic opportunity.

1. While other racial/ethnic groups also saw an increase in annual median household income from 2016 to 2017, the bump in median income for white households was not only larger than most other groups but also the only statistically significant increase, according to Center on Budget and Policy Priorities analysis of 2017 American Community Survey (ACS) data.

2.  MIT Living Wage Calculator for single-parent household with two children, Washington state; http://livingwage.mit.edu/states/53

3.  Center on Budget and Policy Priorities two-year analysis of Current Population Survey (CPS) data.

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I-1631 invests in what matters

Posted by Andy Nicholas at Oct 05, 2018 12:35 PM |

Clean air, thriving communities, and good jobs far outweigh pollution fee’s costs

As we’ve previously written, Initiative 1631 would inject hundreds of millions of dollars per year directly into communities in Washington by imposing a carbon pollution fee on businesses that emit large amounts of carbon dioxide or sell carbon-laden fuels. Revenues from the fee would help our state transition to a dynamic, low-carbon economy with cleaner air and water. And a substantial portion of the new revenue would be rightly invested directly into communities that have been most harmed by decades of air pollution.

Yet to persuade voters to reject this commonsense initiative on the November ballot, opponents (mostly massive, multinational oil companies) frequently reference an unrealistically high estimate  of the pollution fee’s average cost to households. While the measure would appropriately increase the costs of carbon-intensive fuels, the actual average impact on households is up to $100 per year lower than opponents are claiming.

In reality, I-1631 would raise high-carbon fuel and energy costs by an average of $13 per month per Washington household in 2020. That’s a small price to pay for cleaner air, healthier communities, and more efficient energy and transportation infrastructure – all of which would create new good-paying jobs in the clean energy, or “green jobs” sector. This estimate is derived from the same model used by the state Office of Financial Management to estimate the amount of revenue that would be generated each year under I-1631.(1) 

It’s also important to note that carbon pollution fee costs would vary significantly across households. People with SUVs; long, single-driver commutes; and large, poorly insulated homes would likely pay more than $13 dollars per month. People with more efficient cars, shorter commutes (or who carpool, bike, or use public transportation), and well-insulated homes would pay less.

Further, the measure would devote significant resources ($144 million in the 2021-22 budget cycle alone) to reduce energy costs for low-income households. These resources would be used to assist Washingtonians with low incomes with weatherizing their homes, purchasing energy efficient appliances and vehicles, and installing solar panels. It would also provide them with cash rebates to offset additional higher costs.  All these actions would reduce carbon pollution, stimulate local economies, and generate good-paying jobs in the clean energy sector.

The bottom line is that the benefits of I-1631 – cleaner air, improved public health, clean energy and transportation infrastructure investments in communities, and new good-paying green jobs, just to name a few – far outweigh its costs. That’s why the Budget & Policy Center enthusiastically joins Tribal Nations, businesses, climate scientists, public health experts, and many organizations representing communities of color to endorse I-1631. It is an equitable and inclusive way to build a cleaner and more prosperous future for all Washingtonians, especially those who have been denied their just share of the state’s growing prosperity. 

Voters shouldn’t let the overly broad and unrealistically high cost estimate circulated by large oil companies and climate-science deniers dissuade them from approving I-1631 on the November ballot.

(1) Carbon pollution fee revenues were obtained from Carbon Tax Assessment Model (CTAM) that is maintained by the Washington State Energy Office. Per I-1631, the fee was assumed to take effect in calendar year 2020; the rate was set at $15.00 per ton; jet fuel, marine fuel, transition coal, and emissions from Colstrip 1&2 were exempted. Under these assumptions the model determined $858 million in carbon pollution fee revenues would be generated in 2020. $472 million of that amount would be paid by individuals; $387 million would be paid by businesses. The number of households in Washington state in 2020 was estimated to be 2,969,980. This was obtained by growing the 2017 estimate (2,840,377) from the U.S. Census Bureau’s American Community Survey by 1.5 percent per year, which is the average annual rate of growth from 2012 to 2017, through 2020. Dividing the amount of carbon pollution fee’s estimated to be paid by individuals ($472,000,000) in 2020 by the estimated number of households in Washington state for that year (2,969,980) yields an average household cost of $159 in 2020. 

 

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Four community leaders join the Budget & Policy Center board

Posted by Melinda Young-Flynn at Sep 07, 2018 02:15 PM |
Filed under: BPC News

We are pleased to welcome the following people to the Washington State Budget & Policy Center board of directors! They join a group of dedicated community leaders, academics, policy experts, and strategists who help shape the direction of our organization.  

Irene Basloe Saraf, community advocate

Irene Basloe SarafIrene is the founding board president of the Washington Housing Alliance Action Fund, and she also served on the board of the Tenants Union of Washington. Prior to moving to Seattle in 2003, Irene was the legislative director of the National Low Income Housing Coalition in Washington, D.C. Irene has a bachelor’s in humanities from Yale, a master’s in public policy from the University of Chicago, and a juris doctor from New York University. She is especially passionate about how the Budget & Policy Center’s work aligns with her commitment to advocating for the needs of people with low incomes. “I understand how access to stable, safe, and affordable housing supports people in the other aspects of their lives – education, employment, health, family – and that government investment is often necessary to ensure housing quality and affordability for low-income people,” she says. “Our social safety net depends on an equitable budget that includes sufficient taxation and ample investment in programs serving low- and moderate-income people.”

Karan Gill, chief of staff of King County Councilmember Dave Upthegrove 

Karan Gill headshotIn addition to his responsibilities with the King County Council, Karan (“ker-in”) is the lead on budget issues and oversees a variety of other policy issues for the district representing much of South King County. Previously, Karan led the public policy efforts for a local nonprofit, was the legislative aide to Washington State House Speaker Frank Chopp, and was campaign manager for Senator Kevin Van De Wege. He earned his bachelor’s degree from the University of Washington and a Master of Public Administration from Seattle University. “The mission and the work of the Budget & Policy Center is personal to me,” he says. “I was raised in a low-income household in South King County and witnessed first-hand many of the inequities that families face in our community. With that perspective, I have been fortunate to work on the state and local side of public policy to help advance policies through an equity and social justice lens.” Karan, who previously served on our community advisory board, is dedicated to undoing racial disparities in public institutions and fighting for more resources for those communities who are furthest from opportunity.

Jan Harrison, director of diversity stewardship and Achievement Rewards for College Scientists (ARCS) Foundation liaison, University of Washington 

Jan Harrison headshotJan has been with the University of Washington for more than 10 years. In her current role, she works to build healthy and productive communities and organizations through the application of critical race theory and impact-driven philanthropy. She also serves as a liaison for Achievement Rewards for College Scientists Foundation, an organization that supports graduate education in science, engineering, and medical research. She has a bachelor’s degree in marketing from Western Washington University and a master’s in cultural studies from UW. She is excited about helping the Budget & Policy Center serve the needs of populations who have historically faced barriers to opportunity through innovative, data-driven policies. “Economic, education, health care, and social inequities aren’t random, but are the outcomes of race-based oppressions embedded in policy and budget decisions,” she says. “As a race scholar, community activist, and Black American woman, I have unique perspectives on social areas concerning fiscal allocations and policy development that have been under-emphasized and under-utilized.”

Lauren Hipp, early learning senior campaign director for MomsRising

Lauren Hipp headshotIn her role at MomsRising, Lauren works to advance the organization’s commitment to ensuring all families have access to affordable, high-quality early care and education opportunities that are welcoming and inclusive, and that create environments where all children can thrive. She has almost 10 years of experience in the early learning field doing policy, advocacy and organizing, and program implementation in both Washington state and nationally. She has previously worked with Thrive by Five Washington, the League of Education Voters, and the University of Washington. She has a Master of Public Administration from the Evans School of Public Affairs at the University of Washington. She looks forward to supporting our organization's work on increasing opportunity and prosperity for all families in Washington, including our focus on racial justice. “I believe in the mission and guiding values of the organization and deeply appreciate the analysis and focus on budget and tax policy to ensure Washington is budgeting with a centering on families and communities,” she says.

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Brief: Modernizing the Working Families Tax Credit would rebalance the tax code, grow local economies, and help workers thrive

In an inclusive economy, all Washingtonians would have access to economic security and the opportunity to prosper. Even though Washington’s economy is growing, progress isn’t reaching everybody. Income inequality is increasing, and too many people are still struggling to make ends meet – even those who work full time. This is especially true for many workers and families of color, who have long faced greater barriers to opportunity than their white neighbors – the result of historically racist policies and practices.

Our state’s upside-down tax code – in which people with low and moderate incomes pay up to six times more in state and local taxes as a share of their income than the wealthiest 1 percent – exacerbates these inequities. As a result, working families can’t keep up with the rising cost of living and housing, and many are pushed further into poverty.

Our new brief, “Promoting Economic Security through Commonsense Tax Reform,” provides a road map for how to make our tax code work for working people. It lays out our proposal to modernize and expand the Working Families Tax Credit*, our state’s version of the federal Earned Income Tax Credit (EITC). This modernization and expansion would transform our tax code from one that holds back hardworking but low-paid Washingtonians to one that promotes economic security. Ultimately, it would increase opportunities for working families to get ahead, mitigate the effects of historically racist policies, and strengthen the economy. Lawmakers can make lasting positive impacts on the well-being of Washingtonians by enacting this real, commonsense reform to our tax code. 

Promoting Economic Security through Commonsense Tax Reform” is the third publication in our Progress in Washington 2018 series. This series examines the ways our state can reach the goal of an inclusive Washington state economy with shared prosperity for everyone.

*Editor's note, 12/7/2018: The name of the policy has changed to Working Families Tax Credit since the original publication of this post and brief. Reference to the Working Families Tax Rebate has been updated accordingly.

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Thank you for attending Budget Matters

Our Budget Matters 2018 policy conference took place on November 13 at Seattle Center. john a. powell from the Haas Institute for a Fair and Inclusive Society and Gov. Jay Inslee were the keynotes. Watch their presentations and other presentations from the conference on TVW.  

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Washington state should be a place where all our residents have strong communities, great schools, and the chance for a bright future. Our 2017-2019 Legislative Agenda outlines the priorities we are working to advance.

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