Washington revenue growth tops the nation in new Pew analysis. So why are lawmakers considering tax increases?

A Pew analysis shows Washington tops the nation in state revenue growth in FY 2020 and FY 2021. The Pew graph below shows biggest gains and losses among the states.

Idaho and Utah come in second and third. The biggest losses, Pew notes, come in states dependent on energy and tourism: Wyoming, Alaska, and Hawaii.

Of Washington, the report states,

Several states with strong economies leading up to the pandemic avoided a drop in total revenue.   

Washington projects solid revenue growth to continue this fiscal year and, when combined with increases last year, expects to collect nearly 12% more than if collections had stayed at pre-pandemic fiscal 2019 levels, the largest two-year gain nationally. The state’s recent forecast cited strong retail sales and a booming real estate market. Idaho also projected its revenue this and last year will surpass its pre-pandemic forecast, with recent monthly tax collections still topping updated estimates.

Pew reports that, unlike Washington, Utah is using its revenue growth to provide tax relief.

Despite the recession, Utah similarly took in enough revenue to pass a series of tax cuts for Social Security recipients, veterans, and families with children.

Overall,

A Pew analysis of the most recently revised general fund revenue forecast issued in every state finds vast differences in the projected toll of the recession over the two fiscal years since the pandemic’s start:

  • 19 states projected revenue to fall in the current budget year, which typically ends June 30, with 13 of those estimating declines on top of losses last year.
  • When both this and last fiscal year are considered, 23 states expect total estimated revenue to be lower than it would have been had it remained at pre-pandemic fiscal year 2019 levels, not accounting for inflation.
  • A dozen states expected to maintain positive revenue growth in nominal dollars for fiscal 2020 and fiscal 2021, but generally at a slower rate than originally forecasted.

The Washington economy and revenue structure performed extraordinarily well. It’s a curious time for lawmakers to be considering tax increases and tax policy changes – like a capital gains tax and wealth tax – that could jeopardize the state’s economic vitality.