New state revenue forecast shows that tax reform can’t wait

State revenues continue to lag behind Washington’s economic growth

The following is from Andy Nicholas and Kelli Smith of the Washington State Budget and Policy Center:

OLYMPIA (March 17, 2017) — All too often, certain lawmakers in Washington state who are ideologically opposed to creating a more just and sustainable tax system have leaned on positive revenue growth predictions to justify avoiding their obligation to fund schools and other investments that benefit all Washingtonians. Thursday’s projected uptick in future state tax resources is negligible compared to what we actually need to build thriving communities in every corner of our state in the years ahead. These projections should not be an excuse for these lawmakers to continue kicking their responsibility to fully fund schools down the road.

State tax revenues are now projected to come in $313 million higher than previously anticipated in the coming 2017-2019 budget cycle, according to the latest forecast from the state Economic and Revenue Forecast Council. But going beyond the headline, a deeper analysis shows that, without action to fix Washington’s flawed, inequitable tax code — by taking important steps that include ending the tax break on capital gains and reforming our property tax system — available resources will remain at untenable recessionary levels.

As this graph shows, total state tax revenues actually declined by 15 percent between 2001 and 2016, after adjustment for economic growth. They dropped significantly during the last recession and have remained nearly flat since then. And revenues are projected to decline by an additional 7 percent from current levels by 2021.

Thursday’s small increase in projected tax collections for the coming years represents less than 1 percent of the amount of funding needed simply to maintain our existing commitments to early childhood education, clean air and water, public safety, and other priorities. The increase is insignificant relative to the billions of additional dollars in funding required by the state Supreme Court to ensure Washington’s kids get the high-quality schools they deserve.

It’s worth noting that these state revenue projections will also not offer any meaningful buffer against the extreme cuts to federal funding proposed by the Trump administration that would devastate many programs here in our state.

The truth is that today’s forecast means lawmakers won’t have anywhere near the resources needed to help our state’s communities thrive for generations to come. Those resources can only be generated if lawmakers show the boldness of vision required to finally fix Washington state’s tax code.

Get more analysis from the Washington State Budget and policy Center by following its Schmudget blog.