Washblog

More Taxes Please...

Governor Gregoire,

Something has to give. During the [2008 gubernatorial] campaign you made two pledges. You said you would not raise taxes and you said you would not support a state income tax. Unless you intend to follow down the path of Gary Locke and Dino Rossi, you will need to break one of those pledges. (Here's a hint: Introducing a state income tax will not happen overnight.)


As everyone is painfully aware, the latest budget projection for the next biennium now stands at a deficit of $8 Billion; the largest deficit in state history. This new projection all but wipes out the money that should be coming to our state from the federal stimulus plan and leaves us at a net zero sum gain from where you and the legislature began this term. It doesn't take much calculation to realize that, without some form of revenue enhancement, our state's children, elderly, and other at risk groups will be paying an undue portion of the cost of recovery. The "all cuts all the time" budgetary approach to our economic situation also places our future growth and development at high risk. Where is the stimulus for recovery in a plan that only allows for cuts and zero investment?

 I am not alone in my assessment. In a recent appearance on TVW, former Republican Governor, John Spellman in discussing his response to a similar budget crisis in the early 80's said this:
"I didn't get elected to balance the budget. I got elected to serve the people, and at a certain point you've got to do what's necessary --raising taxes...".

I also read this morning that a prominent group of local economists has written an open letter to you and the leaders of the legislature about the need to increase revenues to help move us out of our budget challenge.  In part, they say:

"Although both cuts in government spending and tax increases have the potential to slow economic growth, cutting government spending would likely have the most immediate impact by directly reducing consumption. Tax increases are less problematic because individual consumers, especially those with higher-incomes, are unlikely to reduce consumption by the full amount of the tax increase."

I think it is particularly note worthy that they point to the reduction in consumption as we are a state so dependent on consumption for revenues.


Finally, there is still one other option to consider. Last week, following up on a piece I read from Sandeep Kaushik at PubliCola that I do not believe has gotten the proper consideration it is due. Kaushik, pointing to a recent revelation by the Seattle Times' Andrew Garber that Washington State is not constitutionally mandated to balance its budget, suggests that you and the legislature should seize on the same arguments being put forward by the federal government that the current economic "crisis" warrants a certain amount of "borrowing" and deficit spending in order to create adequate stimulus to the economy.


No matter which approach you finally decide on in the short turn to move our state onto a path of recovery, in the end I believe you must reconsider your reservations to starting that discussion on a state income tax as a long term solution.  The citizens of this state must be allowed an honest debate on the relative benefits and deficits of funding state government via the consumer market.


Peace,
Chad (The Left) Shue  

< Sadly, We Must Save Our States, Not GM and Chrysler... | We Want to Take You and We Will Nyah Nyah >
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Let us hope that cooler (as opposed to stubborn) heads prevail.

I don't really think Gov. Gregoire wants to have as her legacy that she stubbornly refused to propose new taxes even as state services collapsed and Washington had some of the worst unemployment numbers in the country. Can you imagine? Washington has had one of the stronger economies in the country. To go from that to one of the worst would be on the head of this governor--and her allies in the legislature.

New taxes I take it will be proposed by the legislature in a series of referenda put to the voters. Let us hope these referenda are not too little, too late.

Talk about denial. Nationwide we've lost about 600k jobs each month for the last three months. Krugman has suggested that unemployment could rise into 2011--yes, 2011. Economist Joseph Stiglitz long ago proposed raising taxes as part of a recovery package. Voice crying in the wilderness.

Restructuring Washington's tax structure was long ago proposed. Because we have a regressive tax system that relies on the sales tax, we now have one of the worst deficits, per capita, in the country--approaching the mess in California.

I'm beginning to think that Olympia has its own kind of bubble. Let's hope reality breaks through soon.

by DWE on Fri Feb 20, 2009 at 10:05:31 AM PST

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We're not going to close an $8 billion gap with taxes. It's not going to happen. And, as I have written many times, we need $10 billion, not $8 billion to get Washington "on the road to recovery". People didn't believe me. I hope they do now

Of course we need new taxes, but we need them as a structural revenue and reform plan so we can pay back the $10 billion we need to borrow to get through this crisis. Dems need to start pushing things like this "good bank" proposal. All across the modern world countries have - at one time or another - created state banks and "good banks" could be state banks. We need to get financially smart. Simply raising taxes will not, at this point, close these gaps.

by dlaw on Fri Feb 20, 2009 at 11:00:19 AM PST

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  • Agree... by The Left Shue, 02/20/2009 11:37:53 AM PST (none / 0)
The suggestion that our electeds in Olympia (at least the D's) do not have a sound grip on reality is off base.
Taxes will be part of the answer, but the scale of the issue must be considered. One cent in sales tax would generate somewhere in the neighborhood of one billion dollars and a hike of 5-8 cents is out of the question and a bad idea.

Debate of an income tax cannot be conducted in a workable timeframe and establishing an income tax as a means to increase overall revenue is a nonstarter.

So the legislature must look at every budget reduction that they can find and then propose raises in taxes and fees and tuition in order to bridge the projected deficit. In the end, a detailed tax and program funding measure will be sent to the voters and with any luck the measure will be passed.

by Particle Man on Fri Feb 20, 2009 at 01:50:26 PM PST

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As you may have seen in the Sea Times, Gov. Gregoire is "mulling" a third term.

She, and our out-of-touch legislators, have failed to do their jobs when it comes to education. They proposed education finance bills that didn't actually contain any plan for putting education on a stable platform.

First there was Washington Learns, which, as part of its enabling legislation, was supposed to tackle the funding issue. Gregoire and her crew kicked the issue down the road 2 years to the Basic Education Finance task force, which did everything but come up with a revenue plan. So now here we are. Education is about to get gutted, and there really is no one to blame but the legislature and the governor. It was their responsibility; they didn't deal with it.

If you think education funding doesn't matter, please visit my classroom. I see it every day. If legislators and the governor and the task force had seen what I'd seen the last three years, they would have been down in Olympia screaming their heads off. Instead, they've been dilly-dallying. Out. Of. Touch.

by DWE on Sat Feb 21, 2009 at 08:23:58 AM PST

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As an economic matter, cutting Washington state's budget is the worst possible idea in the world. It's exactly what we don't need. Governments have to spend when businesses won't.

As a political matter, I am starting to reluctantly agree with the fiscal responsibility message the President is putting forward. The private sector, the previous administration and their radical-right fantasy world have put us in this predicament, but they've also succesfully destroyed the credibility of the left.

However stupid and counter-productive it may be, we have to be seen as putting our own house in order first. It's monstrously stupid. Now is absolutely NOT the time. But we'll be asking for such a large, structural adjustment and we need credibility. We need to make sure that Dems can run on everything they are going to ask the people to change their lives so much to fund.

Right now there's patching problems with lots of money and belt-tightening. The patching slows down the speed of the drop and the speed of the drop is what gets everyone doing the same (wrong) thing at the same time. Belt-tightening is that wrong thing. People think the belt-tightening makes things better, but it makes them much worse.

We want to spend efficiently, but consider this: World War II was the most insane waste of human effort in history and yet it got us out of the Depression. It only did that because it got everyone going the same direction, but against fear not in reaction to it.

Cutting spending is belt-tightening. Taxes are belt-tightening. They're both counter-productive in this circumstances because they stress and atomize society. But if cutting spending will get people believing in government, I guess it's necessary to appear to be doing it - temporarily - while actually doing as little as possible of it as possible. Its all about uniting people to spend and go in the same direction.

by dlaw on Sat Feb 21, 2009 at 03:14:37 PM PST

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we need to raise taxes, not lay people off. Inheritance tax plus income tax on those that make north of $500,000 would be a good place to start.

And how about a Basebasll tax? Taxpayers paid for Safeco Field. A buck a seat for M's game would raise about $20 million. I know that is a drop in the bucket, but $20 million here, and $20 million there, pretty soon it adds up to real money.

by sarge on Sun Feb 22, 2009 at 10:45:29 PM PST

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that can be taxed. Soda pop syrup is not now taxed, for example. Connelly is talking and the comments are over 100. /comments/2009/2/20/12252/4256/0/post#here And, there are loopholes galore that can be closed. http://wataxfairness.org/

by ktkeller on Mon Feb 23, 2009 at 10:21:41 AM PST

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Any system of taxation is to be judged, obviously, on some criteria such as sufficiency of revenue, efficiency of labor in collection/administration, and public acceptance, which is based on objective fairness which is pretty easy to model, economically.

The system of funding our public sector in Washington fails the test on the most critical measures.

Most of the developed world has a Value Added Tax.

The B&O tax is really not far from a VAT.  It can be reformed into a VAT.  Business will support it, since they will be able to deduct costs from the taxable income.  The public seems hardly aware of the B&O tax and is not deeply indoctrinated to hate it, as they are an income tax.  

We need a beefy public sector.  Let's build the doctrines and message towards a reform of the B&O tax.  FIRST you must clean up all the arbitrary and unequal treatments, THEN implement deductions from the taxable gross THEN, raise the rate to get more revenue.  

by toddboyle on Tue Feb 24, 2009 at 01:56:07 PM PST

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