I’m gonna tell you something nearly every Democrat in Olympia knows, but most are too chicken-shit to admit: Washington’s taxes are too low, and without substantial tax restructuring, few if any of the draconian budget cuts being proposed will be temporary.
Remember the boom years of the 1990’s, when our local economy clicked into overdrive and new residents flocked here for great jobs and the good life? Between 1990 and 1999, Washington’s population increased by over 21 percent, even as state and local taxes as a percentage of personal income swelled to a thirty-year high, peaking at 10.4 percent by mid-decade.
Since then, lawmakers and initiative writers have fed the public a steady stream of tax cuts and business exemptions, ultimately slashing state and local taxes below 8.9 percent of personal income by 2008, a thirty year low. And with revenues dropping faster than incomes as the Great Recession came on, and recovering slower than incomes in its aftermath, new data will surely show our state and local tax “burden” dropping yet a couple tenths of a percent further over the past two years.
For much of the past decade, both tax revenues and our economy were propped up by the real estate bubble, but with that fantasy having popped, Boeing moving production out of state, the Microsoft dynamo reaching maturity, and population growth dramatically slowing, the bill for the past fifteen years of public pandering and disinvestment is finally coming due. Our current level of taxation, and the manner in which its burden is distributed, is simply insufficient to sustain a level of essential services and public investment necessary to maintain our quality of life and assure economic growth.
No state relies more on the sales tax than Washington, which at over 62 percent of total revenues tops out at nearly twice the national average. But the sale of goods as a percentage of the total economy has been steadily shrinking for the past half century, requiring a series of sales tax rate increases just to keep revenues in pace with growth in demand for public services and investment… a demand that closely tracks growth in the economy as a whole.
What this describes is a structural revenue deficit that barring a broadening of the tax base or a steady increase in rates, assures that state and local government as a percentage of our economy will continue to shrink, and with it, its ability to provide the services and investments we want and need. Health care inflation, economic booms and busts and other cyclical factors can merely delay or accelerate the inevitable.
The math is undeniable.
I’ve said it before, and I’ll say it again: there is a legitimate debate to be had over the proper size and scope of government… but we’re not having it. Instead, even as we continue to elect Democratic majorities, we’re getting the Republican agenda by default. And unless Democrats start providing a little leadership and confronting voters with the hard truth that in government like everything else, you get what you pay for, our state is going to increasingly look less like the Washington of the 1990’s, and more like the Arizona of today… only without all the sunshine and warm weather.