$8 Billion budget deficit in WA: Almost as bad as CA

By Evan Rohar

This is where things have been pointing for the past three months. It should come as no surprise to readers of this blog, as we have been saying for months now that the deficit is only going to grow. From the Seattle Times:

Washington state forecasters had previously projected a nearly $6 billion shortfall. Thursday's preliminary forecast shows an additional $721 million gap in the current two-year budget and $1.6 billion more in the next biennium that starts in July. That pushed the overall shortfall to $8 billion. ("$8 billion shortfall forecast for Washington state budget," 2/20/09)

What about the federal stimulus, of which Washington State is expected to receive $6.7 billion? Most of the money is earmarked for very specific projects, two of which (Hanford cleanup and Bonneville power grid modernization) comprise $5.25 billion (78 percent) ("State to get $6.7 billion from stimulus deal," Seattle PI, 2/13/09). Back to the Times:

The state expects to get billions of dollars in aid from the federal stimulus package passed by Congress, but the governor's budget office said the additional money will at best offset the latest round of bad news in the revenue forecast. Additional cuts may be needed beyond what's already been proposed by Gov. Chris Gregoire.

So, old Herbert Gregoire's draconian cuts are going to get deeper. Maybe not. There might be help coming from proposals to increase revenues.

Democratic leaders in the state House said earlier this week they'll likely propose sending a tax package to the ballot this year to help deal with the budget shortfall. And Senate Majority Leader Lisa Brown, D-Spokane, said she expects to bring ballot proposals to her caucus to consider.

No details are available yet, but House Majority Leader Lynn Kessler, D-Hoquiam, said one idea would be to ask voters to increase taxes to pay for subsidized medical coverage to lower-income families.

This would be good news if Washington lawmakers knew how to tax something other than sales. They have no will to utilize the hoards of the 133,812 of millionaire households in Washington State ("More Millionaires," Seattle PI, 1/11/08).

Allow us to paint a picture: about half of Washington's revenue is generated through the sales tax. Regular people (non-millionaires) pay far more as a percentage of their income in sales taxes than those with more money. Levying additional sales tax on those with less money will decrease their spending power, leading them to buy even fewer things. So, the net effect of increasing sales tax would be relatively small. Contrast this with a modest income tax on the top 5 percent of households in the state (which, incidentally, would only tax millionaires); the revenue increase would be enormous. But no one is talking about that because it is politically inconvenient. Meanwhile our schools are facing debilitating cuts and the state health plan is becoming a skeleton of its former self. Libraries are closing and state workers are being laid off.

It takes a constitutional amendment in Washington state to allow for an income tax. Here's an amendment proposal: "Income tax shall be allowed on households with incomes in the top 5 percent of all households in the state." There. Done. Simple.