Jobless claims up a bit nationally, down a bit in Washington. Overall, the trend remains good.

We’ll lead today with the latest weekly report from the state Employment Security Department on unemployment insurance claims filings. The numbers are falling.

During the week of July 11 – July 17, there were 5,061 initial regular unemployment claims (down 7.8 percent from the prior week) and 315,848 total claims for all unemployment benefit categories (down 7.2 percent from the prior week) filed by Washingtonians, according to the Employment Security Department (ESD).  

  • Initial regular claims applications are now 83 percent below weekly new claims applications during the same period last year during the pandemic.
  • The 4-week moving average for initial claims is at 5,995 (as compared to the 4-week moving average of initial claims pre-pandemic of 6,071 initial claims). That level represents the lowest levels of initial claims for regular benefits since the onset of the COVID-19 pandemic last year, and the sixth consecutive week initial claims have reached a new pandemic low.
  • Initial claims for Pandemic Unemployment Assistance (PUA), which increased by 241 applications over the week, occurred in three occupations: Production, Office and Administration as well as Building and Grounds Cleaning & Maintenance
  • Initial claims for Pandemic Emergency Unemployment Compensation (PEUC), which increased by 78 applications over the week, occurred in three service categories: Administrative and Support, Waste Management and Remediation as well as Professional, Scientific and Technical services.
  • Continued/ongoing claims for all benefits decreased over the week
  • Decreases in layoffs in Educational Services and Retail Trade contributed to the decrease in regular initial claims last week.

Seattle Times business reporter Paul Roberts writes,

New jobless claims fell last week in Washington to their lowest level since the start of the pandemic as the recovering state economy continues to reopen and add jobs.


The state saw fewer new claims last week than it has during any other week since the start of the pandemic in March 2020. In fact, the number of new claims filed last week is actually lower than the state was receiving during the weeks before the first pandemic-related layoffs last year.

Washington has also seen a solid increase in hiring. Employers added 24,100 jobs in June, up substantially from 9,100 in May, the ESD reported last week. The state unemployment rate for June was 5.2%, unchanged from May’s revised figure.

Expectations, he writes, are for the positive trends to continue.

Economists and business leaders expect jobless claims to continue to decline in Washington as the state economy reopens and as safety net programs shift toward a post-pandemic status.

Last month, Gov. Jay Inslee lifted most of the remaining COVID-related restrictions on businesses in Washington. And earlier this month, the state reimposed a requirement that Washingtonians collecting jobless benefits must search for work to keep those benefits coming.

Nationally, claims are up some, the U.S. Department of Labor reports.

In the week ending July 17, the advance figure for seasonally adjusted initial claims was 419,000, an increase of 51,000 from the previous week’s revised level. The previous week’s level was revised up by 8,000 from 360,000 to 368,000. The 4-week moving average was 385,250, an increase of 750 from the previous week’s revised average. The previous week’s average was revised up by 2,000 from 382,500 to 384,500.

The advance seasonally adjusted insured unemployment rate was 2.4 percent for the week ending July 10, unchanged from the previous week’s unrevised rate.

The numbers don’t seem to justify concern at present. The Associated Press writes,

Economists characterized last week’s increase as most likely a blip caused by some one-time factors and partly a result of the inevitable bumpiness in the week-to-week data. Applications for jobless aid jumped last week, for example, in Michigan, where GM has announced that it’s shutting down truck production because of supply shortages.

“I do not worry that this reading signals a sudden weakening in labor demand,” said Stephen Stanley, an economist at Amherst Pierpont Securities. “In fact, I am quite confident that it does not.”

Americans are shopping, traveling and eating out more as the pandemic has waned, boosting the economy and forcing businesses to scramble for more workers. Companies have posted the highest number of available jobs in the two decades that the data has been tracked. Hiring has picked up, though businesses say they often can’t find enough employees at the wages they’re willing to pay.

Overall, another good week in the labor market.


University of Washington tax law professor says state’s new capital gains tax is unconstitutional.

Credit to Washington Policy Center analyst Jason Mercier for pointing to this three-minute legal tip on the stater’s legally-challenged capital gains tax.  University of Washington law professor Scott Schumacher lays out the provisions of the controversial new tax and discusses its likely legal prospects.


Asked if the capital gains tax will pave the way for a Washington state income tax, Schumacher responds,

“I don’t think so. To the extent that this is an income tax, and I think it is, it’s going to be found unconstitutional.”

More on this and the capital gains tax generally in the three-minute video. It’s well worth your time.

Mercier also writes,

These comments from a tax law professor calling a capital gains tax an income tax aren’t a surprise. From the IRS, to every other state in the country, to tax professionals across the world, the analysis is the same: A capital gains tax is an income tax.


Washington ranks as 7th best state on 2021 Prosperity Index

Washington ranks No. 7 among the states on the 2021 Prosperity Index produced by the Legatum Institute.  (We hadn’t heard of it, either, but it has an impressive group of donors and advisors.) Here’s a little background on the index.

Drawing upon the Legatum Institute’s 14 years of producing a global Prosperity Index and informed by the expertise of 40 U.S. advisors from across academic, research institutions, and think tanks, we identified 215 indicators gathered from over 80 separate data sources that best measure the 48 policy focused elements within the 11 pillars and 3 domains to produce the United States Prosperity Index.

The comprehensive set of indicators, at a state and county level, provides a rich and policy-focused dataset, allowing the potential of all states (and all counties in the selected states) to be identified and understood. This enables much more targeted policy responses that can drive tangible improvements in prosperity.

Much more detail at the link.

US News reports,

While the coronavirus pandemic wreaked havoc on most states’ economies, a new report by the Legatum Institute suggests that states with strong economies and other social indicators prior to the pandemic mostly continued to excel afterward.

Massachusetts – which has topped Legatum’s index of most prosperous states almost every year for the past decade – appeared at the top of the London-based think tank’s list again this year. Connecticut and Minnesota retained their respective second and third place posts from 2020 in this year’s index.

New Hampshire, Utah and Vermont took fourth through sixth positions in the 2021 report, compared to fifth, fourth, and seventh places, respectively, in the 2020 index. And this year’s remaining top performing states – Washington, North Dakota, Wisconsin and Colorado – all placed within the top 12 in last year’s report. The District of Columbia ranked fifth overall in the 2021 index.

More at the US News link, including a brief discussion of the global prosperity index.

Now, back to Washington’s performance. The group’s decision to use 11 “pillars” makes the following table a bit of a messy challenge to read. It requires some patience. Click here for the full rankings. 

For each state, there’s a 15-page profile. For Washington, click here. We’ve clipped the overall breakdown for the 3 domains and 11 pillars.

Washington’s three best rankings are in governance (4th), economic quality (5th), and education (9th). 

As usual, we caution about reading too much into this; the indicators are often more important than the final rankings. Nonetheless, there’s quite a lot of good information in the report. We recommend surfing through it.


Latest monthly state revenue collections report shows receipts aligning with forecast

For many months, we’ve reported on collections reports exceeding the state budget forecast. Not today. The latest report from the Economic and Revenue Forecast Council shows tax receipts almost perfectly aligning with expectations. 

Major General Fund-State (GF-S) revenue collections for the June 11, 2021 – July 10, 2021 collection period came in $5.3 million (0.2%) higher than forecasted in June. Revenue Act collections were $13.4 million (0.8%) lower than forecasted while the sum of all other tracked collections was $18.7 million (3.7%) higher than forecasted.

Collections remain elevated, though as the ERFC reports,

Seasonally adjusted collections decreased from last month’s spike (see figure).

Here’s the referenced graph:

We’ve also become accustomed to writing that Washington’s economic performance was consistently among the best the nation, so this comment in the ERFC report is also a departure. 

In June, after the forecast was complete, the U.S. Department of Commerce, Bureau of Economic Analysis (BEA) released state personal income estimates for the first quarter of 2021. According to these estimates, Washington personal income rose from $524.7 billion (SAAR) in the fourth quarter of 2020 to $579.7 billion in the first quarter of 2021. The 49.0% increase (SAAR) in Washington personal income was the 46th best among the states and District of Columbia and was significantly lower than the 59.7% growth rate for the U.S. as a whole.

The ERFC explains,

Once again, changes to personal income from Covid-19 relief programs dominated overall personal income growth, accounting for 90% of Washington personal income growth in the first quarter. Most of this was in the form of another round of direct payments to individuals. Washington’s below average personal income growth was almost entirely due to a below average contribution of transfer receipts which added 55.3 percentage points to U.S. personal income growth but only 44.9 percentage points to Washington personal income growth.

Tri-City Herald editorial: capital gains tax hurts farmers, business owners and others planning for retirement

The editorial board of the Tri-City Herald is the latest to point out that the new capital gains tax is a bad idea. The editorial leads off with a real world illustration of the tax’s impact on a local resident.

Kevin Bouchey of Richland should be relaxing and enjoying his first year of retirement. Instead he is anxious that the state is going to take away money he was counting on.

That’s because Gov. Jay Inslee and the Washington state Legislature — led by a Democratic majority — pushed through a capital gains tax earlier this year that is upending Bouchey’s plans…

Bouchey told the Herald he owns non-exempt assets that if sold would produce long-term capital gains of more than $250,000 — the threshold for the new tax.

He worked hard on his farm for decades to get to where he is today. Now it’s like he’s being punished by state lawmakers for being successful.

That’s how a lot of small business owners feel. The editorial adds that voters have consistently opposed income taxes and that this capital gains tax appears to be lawmakers’ “work-around.” Then this:

Their sly approach is maddening and indicates a disdain for the constitution and for Washington state voters.

And for people like Bouchey, unexpectedly taxing his nest egg seems cruel.

If state lawmakers want to impose an income tax, there are more honest ways to do it.

The two lawsuits filed against the tax have been consolidated. Eventually, the case will work its way to the state Supreme Court. In the meantime, the Herald points out that a work group is studying tax reform. The editorial concludes,

Democrats shouldn’t undercut those efforts by imposing a capital gains tax that hurts farmers, business owners and others who now find their retirement plans are in jeopardy.

Sounds like an invitation for a legislative reconsideration, one likely to be declined.

WA Research Council looks at striking growth in state property taxes

It seems like a long time since Washington lawmakers struggled with the state Supreme Court’s order to fully fund basic education. In fact, it’s not been so long. The court agreed that the state was had achieved compliance in June 2018. And a big part of the state’s compliance involved raising the state property tax.

The Washington Research Council looks at just how much that decision has affected state property tax collections. The accompanying graphic, reproduced below, is striking.


That spike in property tax collections is remarkable. The WRC writes,

The chart shows the growth in revenues from FY 2000 from each of these sources. Revenues from the state property tax grew slowly but steadily through FY 2017. Then, they jumped by 31.4% in FY 2018, 21.8% in 2019, and 6.2% in 2020. Now, state property tax revenue growth since 2000 is 168.5%—that’s higher than the other two top tax sources, and higher than the growth of all state tax revenues. (Growth in B&O tax revenues is a still high 149.8%.)

As alluded to in our opening, the WRC points out the McCleary effect.

The substantial property tax growth is due to the changes to the tax that were made as part of the state’s response to the McCleary decision on school funding. We described the changes in our 2020 report on McCleary. The state property tax increased to $2.70 per $1,000 of assessed value in calendar year (CY) 2018, decreased to $2.40/$1,000 in CY 2019, and increased to $2.70/$1,000 for CY 2020 and 2021. The Legislature also suspended the statutory property tax growth limit of 101% from CY 2019 through CY 2021.

In another post, we reported the Tax Foundation analysis that found Washington’s effective property tax rate on residential property was 0.84%, ranking the state 27th in the nation. That was for 2019. Notably, that was for the combined state and local property tax. The WRC post focuses on the state-only property tax. Also, we’d add that, even before the McCleary response, Washington relied on property taxes to support the state budget to a far greater extent than most other states. In 2016, property taxes made up 9.3% of state tax revenues; for all states combined, property taxes amounted to just 2.0%.

State Employment Security Department reports another decline in weekly unemployment claims

Unemployment insurance claims fell again in Washington, reports the state Employment Security Department.

During the week of July 4 – July 10, there were 5,488 initial regular unemployment claims (down 7.4 percent from the prior week) and 340,204 total claims for all unemployment benefit categories (down 0.9 percent from the prior week) filed by Washingtonians, according to the Employment Security Department (ESD). 

  • Initial regular claims applications are now 86 percent below weekly new claims applications during the same period last year during the pandemic.
  • The 4-week moving average for initial claims is at 6,615 (as compared to the 4-week moving average of initial claims pre-pandemic of 6,071 initial claims). That level represents the lowest levels of initial claims for regular benefits since the onset of the COVID-19 pandemic last year, and the fifth consecutive week initial claims have reached a new pandemic low.
  • Initial claims applications for Pandemic Unemployment Assistance (PUA) and continued/ongoing claims for all benefits decreased over the week.
  • Initial claims applications for Pandemic Emergency Unemployment Compensation (PEUC) increased slightly over the week. 
  • Decreases in layoffs in Educational Services and Construction contributed to the decrease in regular initial claims last week.

As we wrote earlier, claims nationally also declined


Tax Foundation: Washington has nation’s 4th highest combined state/local sales tax rate

It won’t surprise anyone to learn that sales taxes in Washington are among the highest in the nation, although it might surprise some that California, known for its progressive income tax, has the highest state sales tax rate. 

The Tax Foundation has released its annual look at sales taxes across the country. The map above shows the combined state and local sales tax rates in the 50 states and DC. 

Five states do not have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of these, Alaska allows localities to charge local sales taxes.[1]

The five states with the highest average combined state and local sales tax rates are Louisiana (9.55 percent), Tennessee (9.547 percent), Arkansas (9.48 percent), Washington (9.29 percent), and Alabama (9.22 percent). The five states with the lowest average combined rates are Alaska (1.76 percent), Hawaii (4.44 percent), Wyoming (5.39 percent), Wisconsin (5.43 percent), and Maine (5.50 percent).

Of the five states with the highest rates, Tennessee and Washington are the only two with no income tax.

The easiest comparison is with state-only rates.

California has the highest state-level sales tax rate, at 7.25 percent.[2] Four states tie for the second-highest statewide rate, at 7 percent: Indiana, Mississippi, Rhode Island, and Tennessee. The lowest non-zero state-level sales tax is in Colorado, which has a rate of 2.9 percent. Five states follow with 4 percent rates: Alabama, Georgia, Hawaii, New York, and Wyoming.[3]

No state rates have changed since April 2019, when Utah’s state-collected rate increased from 5.95 percent to 6.1 percent. 

Four of the top five states have income taxes.

Now to the local rates.

The five states with the highest average local sales tax rates are Alabama (5.22 percent), Louisiana (5.10 percent), Colorado (4.82 percent), New York (4.52 percent), and Oklahoma (4.45 percent).

All are in states with income taxes. And to us they look awfully high.

Much more at the link, including a discussion of the competitive effects.

The conclusion:

State and local governments should be cautious about raising rates too high relative to their neighbors because doing so will yield less revenue than expected or, in extreme cases, revenue losses despite the higher tax rate.