The Washington state Office of Financial Management, the governor and legislature all agree—things are bad for Washington State’s budget.
So how did this happen? How did the deficit soar from $3.2 billion less than a month ago to more than $5 billion just this week?
The answer is revenue. Or more precisely, the lack of it.
Washington’s tax structure relies heavily on sales and use taxes, and those revenues fluctuate most with changes in economic conditions. Because of the current recession, more people are cutting spending and non-essential items that bring in tax revenue.
The inequality of Washington’s tax structure, considered the most regressive in the nation, results in revenue fluctuations that have now crippled our state budget and increased the projected revenue shortfall by more than 60% in less than a month.
But everyone stands to lose in this picture. Without changes to our tax structure, cuts in state spending will only result in job losses, cuts to education, transportation and other economic investments, and ultimately less tax revenue—a recipe that will only deepen the downward spiral.
A more balanced tax structure would put more money in the pockets of low- and middle-income families and promote consumer spending. Increasing the B & O tax credit for all small businesses, and rolling back tax breaks that unfairly favor a select few, will promote small business growth – one of Washington’s main economic engines. And leveling the sales tax playing field will make economic life more fair for every business and consumer.