In Washington, every person should have access to a robust education system, safe housing, and the ability to put food on the table. To provide these essential services, the state must generate enough revenue and allocate resources in an equitable way so that all communities in Washington can prosper. The revenue forecast, released quarterly, plays an impactful role in the state budgeting process, as it signals to the governor and lawmakers how much they can expect from existing revenue sources to fund essential services in the coming years.
According to the November forecast from the Economic and Revenue Forecast Council (ERFC), over the next four years, state policymakers will have $770 million more in revenue from existing sources than previously estimated – $191 million more (3.3%) in revenue in the 2023-2025 biennium, and $579 million for the July 2025 to June 2027 biennium. This is a modest increase from previous forecasts. While the projected increase in state revenue is encouraging, lawmakers must do more to fund schools, health care, infrastructure, and other services vital to communities across Washington.
The forecast uses economic indicators to paint a picture of the economy, but fails to depict full story
The governor and lawmakers can anticipate roughly $66.9 billion in revenue for the 2023-2025 state budget, and $71.5 billion for the 2025-2027 state budget. The modest increase in the revised forecast is due to an expected expansion of the state economy in the coming years. Two indicators the ERFC looks at to predict economic strength are unemployment rates and growth in total personal income across the state. Despite a slight trend upward since September, the state unemployment rate remains historically low at 3.8%. Total state personal income is projected to grow by 5.4% across 2024-2027, reaching an estimated $746.5 billion in 2027. While total state personal income is growing, contributing to a modest bump in the revenue forecast, we know that people’s ability to put food on the table remains threatened by continued high prices and insufficient investment in public supports and critical infrastructure.
Capital gains tax contributed to the strength of the forecast
The total revenue collected from Washington’s new capital gains excise tax is projected to total $889.3 million this year, more than double the anticipated revenue in the tax’s first year. While the final number may adjust slightly as the department processes remaining tax returns, the fact of the matter is that the excise tax has been more successful than previously anticipated. Findings from the November revenue forecast suggest that progressive revenue sources, like the estate tax and capital gains tax, will provide $2.14 billion in revenue across the 2023-2025 biennium to the Education Legacy Trust Account to support funding schools, child care, and early learning initiatives.
Lawmakers must consider progressive revenue proposals that allow everyone to benefit from state’s prosperity
Next year, lawmakers will put together a supplemental budget, amending the biennial budget first passed in the spring of 2023. The modest increase in projected revenue included in the November revenue forecast provides lawmakers with an opportunity to fund programs and services that will help offset rising costs for Washington households.
While increases in overall state personal income and low unemployment levels are an indicator of a healthy state economy, the numbers do not reflect the lives of many state residents who continue to struggle to meet their basic needs.
Although the state brings in seemingly high amounts of revenue, it’s not enough. School districts continue to face budget cuts, working families still struggle to put food on the table, and many people are unable to find affordable housing. Washington needs more progressive revenue sources so that lawmakers have the resources to fund the critical infrastructure and public supports we all rely on.Washington needs more progressive revenue sources so that lawmakers have the resources to fund the critical infrastructure and public supports we all rely on. Click To Tweet
Some progressive revenue proposals include:
- Restructuring the Real Estate Excise Tax (REET): The REET is a tax on the transfer of properties at the time of sale. A more progressive version of the tax could impose an additional tax on the sale of higher value properties, like those valued over $3 million.
- Enacting a Wealth Tax: Washington is home to hundreds of households with extreme wealth. Senate Bill 5486/ House Bill 1473 introduces a property tax of 1% on financial assets, like stocks and bonds. The tax does not apply to households with fewer than $250 million in financial assets. If enacted, the current wealth tax proposal would generate an additional $3 billion in revenue annually.
Pursuing new progressive revenue sources will allow state lawmakers to invest in people and families and strengthen the infrastructure and public supports we all rely on. Lawmakers can start by passing a statewide Guaranteed Basic Income pilot program, making sure our unemployment insurance system no longer excludes undocumented workers, and putting cash back into people’s pockets by expanding the Working Families Tax Credit.
See our fact sheet on these policy proposals from the 2023 legislative session here and stay tuned for our 2024 legislative priorities soon.