Archives for April 2009
Johann Hari takes an extraordinarily eye-opening look at Dubai.
Please join us tonight at the Seattle chapter of Drinking Liberally for an evening of politics under the influence . The festivities take place at the Montlake Ale House, 2307 24th Avenue E. beginning at 8:00 pm. Or stop by earlier for dinner.
Not in Seattle? The Drinking Liberally web site has dates and times for 328 chapters of Drinking Liberally spread across the earth.
Over the 74 years since it was first implemented, Washington’s state retail sales tax has been raised eight times, from 2% in 1935 to 6.5% in 1983. On average, the sales tax rate was raised once every 6 years during its first 48 years of existence, culminating in a 2-cent jump between 1981 and 1983.
Yet it has remained unchanged over the past 26 years.
The steady rise in rates over the first two-thirds of the sales tax’s history stemmed partially from the fact that growth in demand for public services generally tracked growth in personal income, while retail sales steadily shrunk as a portion of the overall economy (from 32% of total consumer spending in 1959 to only 26% by 2000), primarily due to our ongoing shift from a manufacturing to a service and information based economy. State government simply couldn’t meet the demands of our growing economy without periodically raising the sales tax rate, and at times, expanding its base.
But since 1983 the rate has been frozen at 6.5%, and with inevitable results. Over the past decade and a half Washington state’s personal income has grown by 225%, while state sales tax revenues have increased by only 198%. And for a state that relies on the sales tax for over half its general fund revenues, that is a recipe for a structural budget deficit.
Contrary to the Eymanesque meme of out-of-control government spending, state taxes and expenditures are steadily declining both per capita, and more importantly, as a percentage of the total economy. Sure, our severe recession has exacerbated and accelerated the problem, but it was always there lurking beneath the ups and downs of the economic cycle. Already even with Mississippi in terms of state and local tax burden, and contemplating drastic cuts in our social safety net, Washingtonians can no longer put off the tough questions: are we willing to raise our taxes to help maintain the level of services and quality of life we’ve come to expect, and if so, how?
The easiest and quickest solution would be to raise the sales tax, which would immediately generate additional revenue with little administrative overhead. But a 1 cent increase only raises an additional 2 billion dollars over the next biennium, enough to fill but a portion of the remaining budget gap, and recent polls show an increase even a fraction of that size is extremely unpopular amongst voters. And with WA already laying claim to the most regressive tax structure in the nation, and combined state and local rates now topping out at 10 percent, it’s not hard to understand why.
The other solution—the one I’ve been relentlessly plugging for weeks—is a high-earners income tax, that depending on the plan, would only tax the top .1% to 4% of households. The very households, it turns out, who have benefited most from our state’s economic growth over the past couple decades.
Over the past decade the average income of the wealthiest fifth of Washington families has increased $14,136, from $119,954 to $134,090, while real incomes of the poorest fifth and middle fifth have remained flat, or even declined. And the disparity only grows when looking back a further decade.
Again, lower and middle incomes have remained relatively flat, while the top fifth of households have seen their income grow 41%, from $94,930 to $134,090.
Add to this growing income inequality our profoundly regressive tax structure, where the bottom fifth of households pay 17.6% of income in state and local taxes while our top 1 percent pay only 3.1%, and the argument for an income tax appears clearly grounded in both fairness and mathematics. It is the wealthy who have benefited the most from our state’s extraordinary economic expansion over the past few decades, and the public investment that helped make it possible, and it is the wealthy who clearly have ability to pay. Meanwhile our lowest income households are already struggling to pay what amounts to the highest state and local taxes in the nation, all the while seeing their real incomes stagnate or decline.
Coming up soon: why taxing the rich has less of an anti-stimulus effect than cutting government spending.
Outlawing speech and commenting that someone’s speech (cough*Glenn Beck*cough) is reckless, irresponsible and deplorable are two different things.
Clearly Fox Noise has never had a problem with its employees being reckless and irresponsible, so nobody with any sense gives credence to their programming. Until far more Republicans admit to themselves, if not the wider society, that Fox Noise offers nothing of value, we will have to keep pointing all this out.
When we opposed the party in power, we didn’t pick up guns and rocks, we started blogs, and since we had meaningful ideas to offer, we succeeded. Republicans should try it sometime, it’s really kind of fun! (The fun part is offering meaningful ideas. Anyone can start a blog and uncritically ape right-wing talking points. Which is why to this day their blogs suck so badly.)
Senators Patty Murray and Maria Cantwell, two of only nine Democrats to vote in favor of raising the federal estate tax exemption from $7 million to $10 million, and lowering the top rate from 45% to 35%, apparently both told Publicola’s Chris Kissel that they did so to reduce the financial strain on “small businesses.”
“Small businesses are hurting and we need to make sure they’re protected,” said Murray spokeswoman Alex Glass.
Um… define “small,” but… whatever.
Kissel goes on to suggest the real motivation behind our senators’ vote:
The measure will have the greatest impact on wealthy folks like Seattle Times publisher Frank Blethen, who unsuccessfully lobbied both Murray and Cantwell to vote for a repeal of the estate tax in 2006. That same year, voters here rejected a measure that would have repealed Washington State’s estate tax.
Gee, I dunno. With McClatchy essentially writing off its 49.5% stake in the Times, I’m not so sure that lowering the estate tax’s top rate helps Blethen and his heirs all that much. I mean, 35% of zero is still zero, isn’t it?
Talk about a clever estate planning strategy.
The Columbian in Vancouver, Wa., is facing a “debt foreclosure action” related to a loan it obtained to help finance its move to a new building. Unfortunately for the newspaper, and unfortunately for reporters and others who have been laid off, it has since moved back to its former building and is facing legal action by Bank of America.
But The Columbian has no plans to cease operations. From its business section:
(Publisher Scott) Campbell emphasized that it would be business as usual for readers, advertisers and employees of The Columbian.
“The fact is we have a huge readership — in print and online — that represents the largest aggregation of Clark County citizens available,” he said. “Our products are very valuable to businesses that are trying to reach consumers in an increasingly overloaded and confusing media environment. The economics of the (newspaper) business are changing, but there is a clear path to a sustainable long-term business model.”
Campbell said the publishing company’s strong preference is to resolve the debt issue, but he described the agreement process as complicated for both the bank and the newspaper.
Meanwhile, the new building at 415 W. Sixth St. continues to be marketed for both lease and/or purchase. Two of its six floors are leased.
So here we have a newspaper in financial trouble over a bad real estate decision, and it’s being sued by Bank of America, which acquired Countrywide and Merrill Lynch. If things run true to form we can expect that taxpayers will be called upon one way or another. We know newspaper owners in this state have asked for a tax break, and there has been noise about the City of Vancouver purchasing the new Columbian building for city offices.
On the optimistic side, it is true that The Columbian benefits from a unique media landscape, being the only traditional media outlet of any consequence in Clark County. Historically Portland media has more or less ignored non-heinous news north of the river, and Clark County long ago lost its lone AM radio station to robot-controlled oldies programming. Unlike a lot of metro areas that consider themselves one place, the Columbia River is still a magical barrier when it comes to the flow of information.
I have no earthly idea how long Campbell can ride out the Great Recession, and nobody knows for certain when the economy will truly turn the corner. If Campbell has enough wealth to do so, it looks like he will wait it out.
But as national job figures continue to appear dismal, it’s hard to imagine a big uptick in advertising dollars for newspapers anytime soon.
From Senate Majority Leader Lisa Brown’s blog:
Our sales-tax-based tax system is least fair tax system in the country.
It hammers lower and middle class families, who pay far more than their fair share for the essential public services from which everyone in our society benefits, like K-12 and higher education.
And now they stand to pay more for less. The global economic meltdown has forced lawmakers to make dramatic cuts in the state budget, which will disproportionately affect these same individuals.
Having a conversation about restructuring this tax system so that working class families are treated more fairly is not a conversation I am afraid of having.
So, despite the Seattle Times’ shrill ridicule, Sen. Brown isn’t afraid of publicly having that conversation. But what about House Speaker Frank Chopp?
I know Chopp understands the issue. I know he knows all about Washington’s structural revenue deficit, and I know he’s personally appalled at having the most regressive tax system in the nation. And I know he knows that our current tax structure simply isn’t sustainable over the long run.
I know this, because I’ve privately had this conversation with Chopp, on more than one occasion. The question now is whether Speaker Chopp is willing to join Sen. Brown in taking this conversation public?
Thanks to a steep drop in sales tax revenue, Seattle’s new fiscal forecast is bad and getting worse, with a $29.5 million decline in revenue now projected for 2009, on top of the $13.3 million actual revenue decrease in 2008. And that’s good compared to 2010, where a “squishy” forecast now projects another $41 million drop in revenue.
As a result, the Council and the Mayor need to cut $43 million in expenses between now and the end of the 2009 fiscal year, plus God knows how much in 2010. It won’t be easy. But I suppose, it could be worse.
$43 million amounts to roughly 4.7% of the city’s annual $912 million budget, and I’m guessing a big chunk of that gap will be filled by drawing down the city’s $30 million rainy day fund. But while I don’t envy the folks who will be asked to make these cuts, it’s a walk in a slightly underfunded park compared to the crisis facing the state:
While the city’s budget troubles are serious, Dively said they are not as bad as the situation state lawmakers face in trying to backfill a $9 billion deficit to a $35 billion two-year spending plan with cuts and possible tax increases. That’s because sales tax alone amounts to more than 50 percent of the state’s general fund revenue.
“While you’ll see that we have a significant budget challenge, it’s nothing what like the state has. The state’s is far worse than what we’re talking about here,” Dively said.
By comparison, sales tax revenues account for only about 20% of the city’s general fund, but shhh… let’s not talk about the state’s structural revenue imbalance, as it interfere’s with the popular meme that the budget crisis is largely the result of out-of-control spending.
NPR’s On the Media has a great segment this week on the history of yellow journalism, and whether it really deserves its tawdry reputation. The answer: not so much. But the money quote for me comes near the end, at the 4:48 mark, when historian W. Joseph Campbell is asked whether modern American broadsheets might benefit from getting a little yellower:
“The energy and effervescence of yellow journalism certainly could be adopted in many respects in daily American newspapers; a lot of newspapers today tend to be staid, boring, predictable… and those are the features that you would not typically associate with yellow journalism as it was practiced 110 years ago.”
Listen to the whole segment. It’s worth it.[audio:http://audio.wnyc.org/otm/otm040309e.mp3]
As I’ve written before, there are a lot of factors contributing to the recent collapse of the daily newspaper industry, many of them outside the control of the editors and reporters themselves, but I think it is past time for a little introspection as to whether delivering a staid, boring and predictable product is a recipe for successfully competing in the 21st century media market.
As usual, the Seattle Times editorial board is willing to make all the tough choices:
THE state Legislature must accomplish mission impossible this session. In the worst budget cycle in decades, lawmakers still must pass reform legislation that propels schools into the 21st century.
The price tag will be in the billions, but not now. This is a decades-long investment.
Uh-huh. The Times wants the Legislature to redefine basic education to fund full-day kindergarten for everybody, and preschool for those who can’t afford it. They also want the state to fund technology and security, while restoring about a billion dollars worth of education spending cuts in the proposed 2009-2011 budget. And they want to do all that, without raising any new revenues.
So, let me get this straight. First, Washington state’s paper of record cautions the Senate Majority Leader to choose personal ambition over the common good, and now it’s urging the Legislature to approve a popular and expensive series of education reforms, that it can’t possibly afford, essentially just saying “we’ll figure out how to pay for it in the future.”
And they have the temerity to complain about politicians?
Don’t get me wrong, I mostly agree with the Times’ education spending priorities. I just think that the responsible (and mathematically honest) thing to do is to actually talk about how we’re going to pay for the things we promise.
Talk about a marriage of convenience. Sen. Don Benton, R-Vancouver, has teamed up with Portland opponents of the CRC project that would replace the aging Interstate Bridge spans between Vancouver and Portland. Benton showed up at a rally held by bridge foes yesterday in Portland.
State Sen. Don Benton, a southwest Washington Republican, urged the crowd to hold elected officials accountable for their views on the project.
“We need to hear loud and clear: If you don’t stop this boondoggle we will replace you,” Benton said.
Benton left out his often acerbic criticism of light rail and Portland-area urban growth policies. After his speech, Benton said he would prefer a highway ring around the Portland-Vancouver area, perhaps widening I-5 in North Portland and a third Columbia River bridge to relieve congestion on the I-5 bridge.
The Bicycle Transportation Alliance, Coalition for a Livable Future, 1000 Friends of Oregon and Smarterbridge.org were among the organizers and presenters at the event.
These Portland groups have relentlessly attacked the CRC project by yammering endlessly about a “12-lane bridge,” virtually ignoring the fact a new bridge would also (finally) get light rail across the river and yield a vastly improved bicycle facility. Now they’re teaming up with a far-right Republican who wants to build a third bridge and a loop highway around Portland. Which tells you all you need to know about the intellectual honesty of these Portland groups.
I always thought maybe I was being too harsh on these Portland “environmentalists,” but now I’m pretty convinced they are just banging their particular tribal drum. Portland good, Vancouver, bad. There are legitimate reasons to keep discussing the new bridge, as it stands to be one of the most important investments this region will make in our lifetimes, but anyone who has taken a cursory glance at the project knows half of those 12 lanes would be used for “mixing” traffic in a short stretch of I-5 before and after the bridge.
If these Portland groups want to team up with a guy like Benton, nobody in Washington state progressive circles should really take them very seriously. If they were serious they would present their arguments in an intellectually honest manner instead of focusing on a distorted messaging campaign and sideshow tricks.
One of the stupider arguments in the comment threads and elsewhere against implementing a state income tax—especially a high-earners income tax on millionaires—is that if we tax the wealthy, they’ll all move out of state.
Huh. Really? To where? Across the border to Idaho, where the top bracket is currently 7.8 percent? Or perhaps we’ll see economic refugees pouring into Oregon, seeking shelter under its 9 percent top rate? Or maybe nearby Montana at 6.9% or California at a whopping 10.3%.
In fact, apart from Washington, there are only six other states with no income tax—Alaska, Wyoming, South Dakota, Nevada, Texas and Florida—all either unbearably hot or unbearably cold for much of the year. So it’s hard to image that a top rate of between 1 and 5 percent would be enough impetus to prompt the wealthy—who have the luxury of affording to live whereever they please—to pick up and leave our temperate clime, natural splendor and vibrant cultural scene for, say, Sioux Falls or Las Vegas.
Even maintaining a second home for tax purposes doesn’t make much economic sense when you look at the actual numbers across a range of incomes. For example, under the Kohl-Welles plan, a family earning $2 million a year would pay an additional $10,000 in state taxes, and the higher you go up the income scale the less the marginal utility of the money paid. Meanwhile, extending the tax downward to the lower income wealthy, while having more of a real-world impact, hardly costs them enough money to make a move financially worthwhile when a family earning $300,000 might pay only an additional $1,000 annually.
But in fact, I think even this analysis misses the point. In general, the wealthy aren’t as inherently selfish as some on the right suggest, and neither are they purely economic animals who make every decision according to the bottom line… both notions that put the most vocal critics of an income tax squarely in the philosophical camp of Karl Marx.
Humans are incredibly complicated creatures, and money is far from our only motivation. Some moved to our state for jobs, some for the music scene, some for nearby access to recreation and wilderness. (I moved here for love, and stayed because this is my daughter’s home.) To argue that a person earning $10 million a year, who chose to set down roots in our region for any number of reasons, would simply pick up and move his family to Texas to save a mere $90,000 in taxes a year, is absolutely ridiculous.
Furthermore, it is based on the false assumption that the wealthy as a group have no sense of social obligation and no understanding of or gratitude for the public investment that helped make their wealth possible, and that helps to protect and maintain both their property and their quality of life. Look at the Seattle precinct maps from the last time an income tax was on the ballot and you’ll see that the measure did best amongst those who were being asked to raise their taxes the most. In reality, it is the Frank Blethens of this world who are the exception to the rule, not ultra-wealthy fair-tax advocates like Warren Buffet and William Gates Sr.
Thus when Republicans and their surrogates insist that an income tax—any income tax—would drive wealth and jobs from our state, they show an incredible amount of disrespect for the integrity and intelligence of the wealthy, who for the most part, would be willing to pay a little more of their fair share, if they can be convinced the money would be put to good use.