HorsesAss.Org

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.

Last week’s contest was won by Milwhcky in 14 minutes. It was Hagerstown, MD. WyWyWa provided the link. Here’s this week’s, good luck!

Another profile in courage, this time from the Republican side of the aisle:

Senate Republican Leader Mike Hewitt, R-Walla Walla, said an income tax is a dangerous path for Democrats to take. “This politically hurts them,” he said. “I don’t think this helps them at all.”

Well, duh-uh. Since when are taxes, of any kind, popular?

But it reminds me of a conversation I had with John Carlson about a proposal to reinstate voting rights to felons upon their release from prison. I suggested to John that he and his fellow Republicans should support the measure, because demographically, Washington’s felon population generally matches one of his party’s core constituencies—white, working class men with less than a college education—to which John retorted in disbelief: “Then why would Democrats support it?”

“Because it’s the right thing to do,” I told him. John didn’t seem to buy it.

Perhaps he and Hewitt were projecting, or perhaps they really think that poorly of Democrats that it doesn’t even occur to them that we might, just sometimes, be willing to put governance ahead of politics. But the unexpected conversation we’re starting to get about an income tax isn’t part of a strategy to “help” Democrats… it isn’t even about quickly plugging a hole in the current budget. It’s about helping Washington take a step toward a more fair and stable tax system, period. In fact, even putting the issue on the ballot will likely cost Dems a few swing districts in 2010, regardless of whether the measure passes.

No doubt a majority of voters would prefer the Legislature balance the budget without raising taxes, and that would surely be the easiest political path. But that’s not leadership; that’s following. No, leadership isn’t about giving voters what they want, it’s about persuading voters to want what they need.

It remains to be seen whether we have that kind of leadership here in Washington state.

MOSES is reaching for fairy dust in his proposal to lead the Israelite slaves out of Egypt.  It’s not going to happen.

A mass exodus would require the approval of Pharaoh, most likely only after a series of devastating plagues.

Even if Pharaoh were to allow an exodus, it would still require approval by the Israelites, who are the very people who would be expected to wander in the desert for forty years.  The Israelites have rejected exodus before, and in a time of job cuts, economic worry and unleavened bread, would almost certainly do so again.

Moses has long promoted exodus as a way to “let my people go,” but the people have long suspected that this would lead to even harsher treatment at the hands of their Egyptian overlords.  Here the cynics are right.

Certainly, the enslaved Israelites, beaten and oppressed, are having their problems.  But their Egyptian masters, facing rising mortar prices and a sudden infestation of frogs, have their problems too. Their interest is in quickly building a monument to the divinity of Pharaoh, which is made less likely by an exodus of slaves.

Some advocates say that Moses would lead the Israelites to the Promised Land, but by what route?  Does he expect the people to cross the Red Sea on foot?  And once in the desert, how will Moses feed the Israelite nation?  Food doesn’t fall from heaven, and you can’t get water from a stone.

Moses is said to talk to God.  He might recall that so did Lot.  And we all remember what happened to Sodom and Gomorrah.

Sound familiar?

Now this is the kind of bold political leadership that would make the Seattle Times proud:

House Majority Leader Lynn Kessler, D-Hoquiam, said she’s not sure an income tax is a good idea.

"I’m concerned about people who have to run for re-election in 2010 and having a big tax increase as one of their votes out of here," she said. "I maintain that if you don’t have the majority, you don’t have much. As the Republicans can tell you right now."

I’m as Machiavellian as the next guy, but let me ask you this Rep. Kessler:  what’s the use of having a majority if you’re afraid to use it?

I’m just askin’.

This should make my millionaire-coddling friends at the Seattle Times happy:

Sens. Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) recently introduced a $250 billion amendment to slash estate taxes for the heirs of multimillion-dollar estates. Yesterday, the Senate narrowly passed the bill by a 51-48 vote. Joining Republicans in approving the bill were ten Senate Democrats…

And two of those ten Democrats to cross party lines were our very own Senators Patty Murray and Maria Cantwell.

I mean really… WTF?

Everything that’s wrong with Washington state politics can be summed up by today’s smirk of an editorial in the Seattle Times, “Gasp! Another try at an income tax.”

STATE Senate Majority Leader Lisa Brown, D-Spokane, is reaching for fairy dust in her proposal for a state income tax. It’s not going to happen.

That’s right, the Times ridicules Sen. Brown, not for being misinformed or unserious or on the wrong side of a policy issue, but for merely trying.  You wanna know why we elect so many mediocre politicians, incapable or unwilling to display even an ounce of leadership?  It’s editorials like this.

See, we hate leadership here in WA state.  We hate boldness.  Oh, we like to whine over the lack of it, but the minute a politician dares to assert it, or even (“Gasp!”) tries to start a fucking conversation about a difficult issue, we heap scorn on them for their arrogance or giggle at their foolish stray from executing the paramount duty of government:  taxing poor people to build more roads.

And as for the Times’ blunt statement that an income tax is simply “not going to happen”…? Oh, you mean like last year’s rail-only Prop 1?

A graduated income tax would require an amendment to the state constitution, meaning a two-thirds vote of both legislative houses and a majority approval of the voters.

No it would not!  Jesus… have you even read the goddamn Gates Commission report? (Or, for that matter, your own paper?)  The consensus conclusion is that the 1933 decision would likely be overturned.  Where did you go to law school?  What makes you think you’re a more qualified constitutional scholar than Williams Gates Sr. or Prof. Hugh Spitzer?

Stop lying to your readers.

Even if a 1-percent, flat-rate tax would be constitutional, it would still require approval by voters, who are the very people expected to pay it. Voters have rejected income taxes several times before by landslide margins, and in a time of job cuts and economic worry, would almost certainly do so again.

Actually, a millionaires tax would fall on only 0.1% of the voters asked to approve it, and if precinct results from the last income tax measure are any guide, a majority of these fortunate few would likely vote yes too.  And a broader tax on incomes over $200,000 would only fall on 4% of households.  But let’s not let details get in the way of your scare tactics.

Advocates have long promoted an income tax as a way to tax fairly, and the people have long suspected that the real motive was to tax more. Here the cynics are admitted to be right. The obvious motive of this proposal is to raise more money for the state.

I mean, God forbid we try to tax people more fairly, right?  And who in their right mind would want to raise more revenue at a time we’re slashing hundreds of millions of dollars from K-12 education, eliminating 10,000 slots from our colleges and universities, and kicking 50,000 people off the health care rolls?

Certainly, the state is having a money problem. But people who have lost their jobs or taken deep losses in their retirement investments also have money problems. Their interest is in a quick and vigorous business recovery, which is made less likely by new taxes.

But we’re not talking about taxing people who have lost their jobs, or about taxing people’s retirement investments.  We’re talking, under your scenario, about a one percent tax on household incomes over $1 million a year.  That means, if even in this economic downturn, you earn $2 million, you’d pay an additional $10,000 in state taxes a year.  $10,000 out of $2 million.  And we should feel their pain?

Some advocates say they would tax only the high earners. But it doesn’t raise enough money: a 1-percent tax on joint incomes above $1 million would raise less than one-half of 1 percent of state revenues. The state makes its big money in taxing the broad mass of people, which is also the broad mass of voters.

No, a 1-percent tax on millionaires doesn’t solve our budget crisis, but it’s sufficient to maintain outpatient senior care and save a few thousand higher education slots, while still leaving more than enough money left over to pay for that B&O tax reduction on newspapers for which you lobbied so aggressively.

Sen. Brown is said to be interested in being elected governor some day. She might recall the last such candidate who championed an income tax. It was Ron Sims, who was beaten in the Democratic primary by Christine Gregoire.

Hear that, Sen. Brown?  The editors at the largest newspaper in our state, our alleged watchdogs of democracy, are cautioning you to choose personal political ambition over taking a bold stance on principle.  No, you wouldn’t want to do anything potentially unpopular would you, even if you believe it the right thing to do, because it might cost you the governorship.  Just look at Ron Sims.

Like I said, this editorial is an example of everything that’s wrong with Washington politics.  Its attitude is a recipe for timidity, gridlock and stagnation, which, not surprisingly, is exactly the situation we find ourselves in today.

So you know what? I say be a leader, do what you think is right, and just tell the Times to piss off.  It’s not like you’re  going to get their endorsement in four years anyway—that’s going to Republican Rob McKenna—assuming there still is a Seattle Times in four years.

Be bold.  A 1-percent tax on millionaires doesn’t raise enough money to satisfy the Times?  Then expand it to those households earning over $200,000 a year; at the rates suggested by the EOI, that raises a substantial $2.5 billion per biennium, but still only falls on the top 4% of households.

And then, be creative:  put this high-earners income tax on the ballot tied to a half-cent reduction in the state sales tax.  96% of voters would see their taxes go down, even while saving crucial government services.  As for the millionaires?  Fuck ’em!  They’re the Wall Street fatcats who sold out our nation and got us into this mess in the first place, so let them pay to pick up the pieces.  (And don’t worry about whether that sentiment is grounded in reality or not, that’s the sentiment that’s out there, so you might as well use it to your advantage.  That’s what your opponents would do.)

And the icing on the cake is that our friend Mr. Eyman has made your sales job all the easier, his reprehensible I-960 totally deflating the Times’ inherent slippery-slope argument.  Voters don’t trust the Legislature not raise back the sales tax or expand the income tax to reach into the pockets of middle class families?  I-960 won’t let you!  At least not without a two-thirds majority in both houses, or the approval of voters at the polls.  Hey… thanks Tim!

In fact, the Times’ fact-free prognostication to the contrary (they apparently haven’t seen the polling data that shows a high-earners income tax surprisingly popular), now is the perfect time to put such a measure on the ballot.  Now is the perfect time to offer a stable social safety net and a cut in the sales tax to struggling families who currently hold little charity toward the wealthy who will be asked to pick up the tab… you know, the same wealthy who benefited most from the bubble that set up this devastating bust.  For as the election of Barack Obama and his continued popularity proves, voters are in a mood to take a chance on politicians who are willing to actually do something, even in the face of smug mockery from status quo defenders like the Seattle Times.

Be bold, Sen. Brown.  Be creative.  Shove this editorial back in the Times’ face, and be a leader, whether you’re ultimately rewarded for it or not.

There are two main arguments against seeking new revenue to help close the current budget gap.  The first—that an economic downturn is exactly the wrong time to raise taxes—comes down to an argument over economic philosophy, and it is certainly reasonable to debate the anti-stimulus impact of tax hikes versus the anti-stimulus impact of reduced government spending… the cost in human suffering aside.

But the second argument—that our current budget crisis is largely due to out-of-control spending, and thus should be solved by slashing the same—well, that ultimately comes down to facts… facts that upon close evaluation, simply don’t support the thesis.  In fact, as I’m about to show you, far from ballooning, Washington state government tax revenues have actually shrunk over the past 15 years, when adjusted for population growth and inflation.

The heart of the out-of-control spending argument comes from the simple fact that the state’s “near general fund” spending jumped from $25.6 billion during the 2003-2005 biennium to about $32.6 billion for the 2007-2009 biennium that ends in June… an undisputed 27.2 percent increase over four years.  (Or so says the conservative Washington Policy Center.)

That’s a big jump, and it doesn’t take a spreadsheet jockey to intuit that it far outpaces population growth or inflation or even overall growth in the state economy over same period.  During last year’s gubernatorial campaign, Dino Rossi repeatedly argued that such spending growth was unsustainable, and he was right.  That’s why nobody was arguing to sustain such growth rates.

In fact, the jump was an anomaly made possible by a spurt of real estate bubble fueled revenues, and largely exaggerated by the fact that the starting point, the 2003-2005 budget, embodied a substantial dip in both revenue and spending growth as the state struggled to recover from the previous recession.  Spending did jump 27.2% during the first Gregoire administration, but only relative to the low point that immediately preceded it.  This four-year snapshot may have been useful to Republicans for rhetorical purposes, but it doesn’t take into account population growth or inflation, and it hardly says anything about long term budget and revenue trends.

So, if the anti-taxers are going to argue that the current budget crisis is the result of out-of-control spending rather than a revenue shortfall, let’s take a look at long term tax revenue trends, and see what the data tells us.  And since the TABOR crowd absolutely insists that population plus inflation is the proper metric for limiting growth in government, let’s start by tracking state tax revenues over time, and adjusting as such.

The chart above tracks WA state government tax revenues per capita over the 15 year period between 1994 and 2008, indexed to year 2000 dollars.  The red line tracks per capita taxes, adjusted for the commonly used Consumer Price Index All Urban Consumers (CPI-U), while the blue line tracks per capita taxes adjusted for the Implicit Price Deflator for State & Local Government Consumption (IPD).  Tax revenue and population totals were drawn from US Census Bureau data.  And for those doubting my math, you can download my spreadsheet here.

As you can clearly see, even using the less applicable CPI-U index, per capita state taxes in Washington have remained relatively flat over the past fifteen years, ranging from a low of $1,978.42 in 2001 to a high of $2,265.47 in 2007, and currently hovering damn near its fifteen-year average.

But as I’ve previously explained, the CPI is the wrong measure for tracking the growth in cost of government, as the highly-educated, labor-intensive services governments tend to provide (doctors, nurses, teachers, etc.) do not benefit from the same sort of productivity gains that technological advances have bestowed on economic sectors such as manufacturing.  That’s why the IPD is widely accepted as the most accurate measure of inflation, even by the conservative Heritage Foundation, which insists that “the IPD measures inflation more accurately than the CPI.”

The US Bureau of Economic Analysis also breaks down the IPD into various economic sectors, and it is per capita state taxes adjusted by the IPD for State and Local Government Consumption that is tracked by the blue line… data which clearly shows even the 2005-2007 jump in revenues as nothing more than a spike in a trough, and our 2008 revenues having come in at a fifteen year low.

The trend is clear even adopting the anti-tax frame: adjusted for population growth and the most accurate measure of inflation for the types of products and services governments consume, state tax revenues have consistently trended down over the past fifteen years. And that’s before the dramatic drop in revenues resulting from the current economic crisis.

Quite simply, Washington state suffers from a long term structural budget deficit, that while masked by the good times and exacerbated by the bad, continues to drive down per capita revenues in real dollars over time.  Even the conservative Tax Foundation, Tim Eyman’s think tank of choice, shows WA’s state and local taxes plummeting from 10.4% to 8.9% of personal income over the past 15 years, ranking us dead even with Mississippi.

So where is the evidence of a state government out of control?  Apart from a four-year snapshot taken entirely out of economic, demographic and historical context, there is none.  Zero.  Zip. Nada.

Our economy will eventually recover, but unless we address our long term revenue deficit, our state government will emerge smaller than it was before the crisis, and its ability to provide services and invest in infrastructure will continue to shrink over the decades hence.