Every person in Washington should have a secure space to call home, every child should have a strong care network, and every family should have food on the table. Yet updated projections of state tax resources make it abundantly clear that Washington’s current, inequitable tax code does not channel nearly enough funding to communities to support these foundational values.
Lawmakers must focus on equitably freeing up new public revenues by ensuring the wealthiest households and large corporations pay what they owe to build healthy, vibrant communities in the years ahead.
Under Washington’s current tax structure, $830 million fewer resources will be available to communities over the next four years than previously anticipated, according to new projections from the state Economic and Revenue Forecast Council. Even before today’s unwelcome downward revision, lawmakers faced significant challenges in crafting a budget that would merely preserve the inequitable status quo. In the remaining few weeks of the 2023 legislative session, lawmakers must focus on equitably freeing up new public revenues by ensuring the wealthiest households and large corporations pay what they owe to build healthy, vibrant communities in the years ahead.
How state resources are projected to decline without new equitable revenue
Compared to the previous forecast from November 2022, state tax revenues are now projected to increase by $194 million through June 2023, decrease by $483 million from July 2023 through June 2025, and decrease by $541 million from July 2025 through June 2027.
Stronger-than-expected collections since November 2022 will drive the higher revenue growth this year. Lower expectations of economic growth in subsequent years explain the downward revision in revenue collections after July 2023. Total state personal income is now expected to grow at an annual rate of 4.4% through June 2024 – down from the 5% growth rate predicted in November 2022. Further out, forecasters also project lower total personal income compared to the previous forecast.
The slowing economy means $245 million less in state sales tax collections during the 2023-2025 budget cycle, as consumers will have fewer resources to spend on taxable goods and services. Slower growth in the economy also means business activity will curtail, resulting in $49 million fewer Business and Occupation (B&O) tax receipts than previously anticipated. Sharp reductions in home sales and construction activity are expected to diminish Real Estate Excise Tax (REET) collections by $263 million in the coming budget cycle.
Washington’s equitable new capital gains excise tax is still expected to be a large source of funding for schools, child care, and early learning supports, however. Revenues from that tax are projected to total $248 million this year and $1.1 billion in the upcoming 2023-2025 state budget cycle, reduced only slightly from the previous forecast.Lawmakers can uphold their commitment to communities with equitable new revenue. Click To Tweet
Lawmakers can uphold their commitment to communities with equitable new revenue
The latest downward projection in revenues puts into sharper focus the need for lawmakers to take action on revenue this legislative session. Nearly 30% of children across Washington state live in households with low incomes or that face overly burdensome housing costs. And, due to generations of racist economic policies and discrimination, children of color are more likely than white children to be part of a family that struggles to make ends meet. Inaction on revenue now will only deepen the inequities across Washington that lawmakers have helped create through past and ongoing budget and policy choices.
The good news is that lawmakers have many options for equitably raising billions of dollars in new resources to shore up communities in the years ahead. As detailed in this fact sheet, which provides equitable new revenue options totaling more than $7 billion over the next four years, they can enact a new tax on financial wealth above $250 million per year, raise excise taxes on real estate sales over $5 million, and close estate tax loopholes and raise rates on multi-million-dollar estate transfers.
With new sources of revenue that ensure the ultra-wealthy pay what they owe, lawmakers would have more funding to ensure communities have access to needed resources and opportunities. For example, lawmakers could fund a significant expansion of the Working Families Tax Credit, eliminate harmful criminal legal fines and fees, and enact a new Baby Bond saving program that helps today’s children build wealth to access in adulthood.
The most recent forecast makes it abundantly clear that lawmakers must focus on channeling more resources to communities in the years ahead. Doing so will improve our quality of life and build a resilient and healthy state economy.