State senators call on governor to suspend long-term care insurance tax

MyNorthwest reports state senators from both parties want to see the state’s long-term care insurance legislation fixed and are calling on the governor to act now. The letter they sent the governor sets out their concerns. They point out that the governor has made use of his emergency powers to suspend state statutes during the pandemic.

With the emergency still in effect, we are requesting that you suspend the fast-approaching tax assessment and deadline for employees to opt out of the new long-term services and supports trust program.

As you know, unless they become exempt from the program, employees across Washington will soon begin paying an assessment every time they receive a paycheck. Many employees are seeking to become exempt from the new tax in this fragile economy, but they face a November 1 deadline to acquire insurance that is currently unavailable. Your intervention to suspend the tax and insurance purchase deadline would provide temporary relief to employees who face a major new tax and give time for the Legislature to work on a solution.

Furthermore, the Legislature is aware of the need to address some key issues that have been called to your attention by a diverse coalition of stakeholders. These include better defining the opt-out process, addressing employees who reside in neighboring states, determining whether veterans’ benefits qualify for opt-out, and avoiding additional disruptions of the private insurance market, among several others.

MyNorthwest writes,

The coalition features prominent lawmakers from both sides of the aisle, including Republicans John Braun, Phil Fortunato, Mike Padden, and Judy Warnick, and Democrats Mark Mullet, Steve Hobbs, and Tim Sheldon, among others, totaling 23 state senators in all.

Earlier we wrote about a similar appeal sent to the governor by a business, labor, and local government coalition numbering more than 160 groups.

Business economists scale back GDP growth expectations for 2021, anticipate full employment recovery by end of 2022.

Today’s Outlook from the National Association for Business Economists is a little more modest than their previous release.

“NABE Outlook survey panelists have moderated their expectations about the prospects for economic growth in 2021 since May,” said NABE President-elect David Altig executive vice president and director of research, Federal Reserve Bank of Atlanta. “The median forecast calls for a 4.0% annualized growth rate in the third quarter of 2021 for inflation adjusted gross domestic product, or real GDP. The panel’s view has become more tempered about 2021 as a whole, as its median real GDP growth estimate for 2021 is 5.6%, compared to the 6.7% forecasted in the May 2021 survey.”

“Inflation expectations have moved up significantly from those in the May 2021 survey,” added Survey Chair Holly Wade, executive director, NFIB Research Center, “but panelists anticipate inflation will ease in 2022. “Over half—58%—of the survey respondents consider the balance of risks to economic growth in 2021 to be to the downside, while 16% expect the balance to be to the upside, a complete reversal from the May survey results,” continued Wade.

“Panelists point to a variant of the coronavirus against which the vaccines may be ineffective as the main downside risk.”

The jobs recovery will take a while, panelists still think.

The panel’s view on the timing of a job recovery is nearly identical to that reported in the May outlook survey. Two-thirds (67%) of survey respondents anticipate nonfarm payrolls will return to pre-COVID-19 levels by the end of 2022, similar to the 66% in the May survey. Twelve percent expect this to occur beginning in Q2 2022, 26% anticipate it to occur in Q3 2022, and 29% expect it in Q4 2022. One-third of panelists—33%—anticipates the job recovery to occur in 2023 or later, a result unchanged from that in the May survey.

More at the link.

Another big bump in projected state revenues in today’s forecast: Up nearly $1 billion from June estimate.

The September revenue forecast adopted by the Economic and Revenue Forecast Council again increased projected tax collections. And, as the summary slide above shows, the increase is substantial: $927 million.

Some takeaways from the revenue notebook:

The state economy continues to look strong overall.

  • We expect a 2.4% increase in Washington employment this year which is up from the 2.0% increase in the June forecast. We expect above-average growth through the remainder of the forecast as the economy continues to recover from the recession. We expect employment growth to average 2.2% per year in 2022 through 2025 compared to 2.3% per year in the June forecast. Our forecast for nominal personal income growth this year is 6.5%, up from 6.0% in the June forecast. Personal income growth will slow next year as the extraordinary stimulus of the last two years is withdrawn. We expect personal income growth of only 1.7% in 2022 compared to 1.5% in the June forecast. Our new forecast for nominal personal income growth in 2023 through 2025 averages 5.3% per year compared to the 4.8% rate in the June forecast.

Employment remains below pre-pandemic peak.

  • We have three months of new Washington employment data since the June forecast was released. Total nonfarm payroll employment increased 60,700 in June, July, and August which was 5,700 less than the increase of 66,400 expected in the forecast. Washington employment is now 125,400 (3.6%) lower than at its February 2020 peak. Private services-providing sectors added 48,000 jobs in June, July, and August. The manufacturing sector added 2,100 jobs despite the loss of 200 jobs in aerospace manufacturing. Construction employment increased by 1,900 jobs. State and local government employment increased by 9,500 jobs in the three-month period but federal government employment decreased by 800 jobs.

Inflation and COVID are threats.

  • Threats to the U.S. and Washington economies include the uncertain impact of COVID-19 and the potential for higher inflation.

And, overall, the state has a whole lot more money to spend, save, or give back in tax reductions.

  • The preliminary total of GF-S, ELTA, OPA and WEIA revenue for the 2019-21 biennium is $53.132 billion, 15.3% higher than 2017-19 biennial revenue. Forecasted total revenue for the 2021-23 biennium is $59.341 billion, an increase of 11.7% over expected 2019-21 biennial revenue, and forecasted total revenue for the 2023-25 biennium is $63.082 billion, an increase of 6.3% over expected 2021-23 biennial revenue.

The Associated Press reports,

Steve Lerch, the chief economist and executive director of the council, noted that since the last update there has been improvement in employment numbers, both nationally and in the state, and that the residential real estate market remains strong. Downsides include higher inflation, rising COVID-19 cases and ongoing supply chain issues.

The Washington Research Council writes,

At its quarterly meeting today, the state Economic and Revenue Forecast Council (ERFC) updated its forecasts of state revenues. These new forecasts add more than $1.8 billion to the amount available over the current biennium and next bienniums…

As always, the ERFC also adopted optimistic and pessimistic alternative revenue forecasts for the general fund–state (which produces 95% of total NGFO revenue). Under the optimistic scenario, revenue exceeds the baseline forecast by $2,962 million in 2021–23 and by $5,642 million during 2023–25. Under the pessimistic scenario, revenue falls short of the baseline forecast by $3,046 million during 2021–23 and by $5,750 million during 2023–25. The ERFC assigns a 20 percent probability to the optimistic scenario and a 30 percent probability to the pessimistic scenario.

We anticipate tax talk should be muted in the upcoming short 2022 legislative session, but there may yet be more scrambling to further increase spending. The temptation should be resisted.

Tax Foundation documents the progressivity of the federal tax system. Fiscal federalism is working as it should.

The Tax Foundation has published an analysis showing just how progressive is the U.S. federal tax structure. 

While the image that rich Americans pay little taxes is popular, it’s a misconception: high-income individuals already pay a large share of taxes, even when compared to their share of national income.

Data and analysis from the preeminent nonpartisan governmental research organizations confirms this pattern.

This August, the Congressional Budget Office (CBO) released its annual Distribution of Household Income report, this year relying on data from 2018. The report examines the distribution of household income (as one might guess), as well as taxes and transfer payments. The data shows that top-earning households pay substantial federal taxes. Notably, while the top 1 percent of earners took home 18.3 percent of market income in 2018, they paid 25.9 percent of all federal taxes; by the same token, the top 20 percent of earners received 59.1 percent of market income yet paid 68.9 percent of federal taxes.

And,

The Joint Committee on Taxation (JCT) published an analysis reaching a similar conclusion about the distribution of the tax code in 2018. My colleague Garrett Watson discussed the data this May. The original report found that the burden of federal taxes was much higher on high-earning households. They paid a much higher effective rate in total, similarly thanks to the progressivity of the personal income tax. 

The following graph depicts the escalating tax rates as income rises.

TF also reports,

The Treasury Department has also released data confirming the above pattern. In a reportreleased this April, they estimated the distribution of federal tax burden across the income spectrum in 2022. According to these estimates, the top 1 percent under current law will pay the highest average effective tax rate, when considering all federal taxes. This difference is largely due to the significant progressivity of the individual income tax: the bottom 40 percent of taxpayers on average pay negative effective personal income tax.

There’s much more in the report and we encourage you to click through.

This, we again point out, is the way the system is supposed to work under fiscal federalism. As the Washington Research Council wrote in a still-relevant 2018 report,

We also point to a key principle of fiscal federalism (a theory allocating responsibilities among the three levels of government), which holds that redistributive tax policies are best enacted at the national level. Adding this dimension to the analysis leads to our third finding:

3. All state and local tax structures are regressive. But when the steeply progressive federal income tax system is considered, the overall federal-state-local tax burden is progressive in Washington and every other state, and the differences among the states represent smaller proportions of households’ tax burdens.

This report, of course, will not settle the debate about tax policy in Washington. Those who prefer a highly progressive tax structure may examine the data, accept that Washington is perhaps not the “most regressive” state in the nation, and still contend that Washington should adopt a more progressive tax system. States with an income tax typically rank as more progressive than those that lack one. Others may examine the data and conclude that, within the context of fiscal federalism and the expressed preferences of Washington voters, the state’s tax structure is satisfactory.

Right.

Charter school enrollment soared during pandemic, up 7.1% while other public school enrollment fell 3.3%.

The National Alliance for Public Charter Schools has published a report with the provocative (and long) title: “Voting with Their Feet: A State-level Analysis of Public Charter School and District Public School Enrollment Trends.” The group’s announcement highlights the key finding:

Voting with Their Feet: A State-level Analysis of Public Charter School and District Public School Enrollment Trends shows hundreds of thousands of families switched to charter schools during the first full school year of the pandemic. During the 2020-21 school year, charter school enrollment grew 7%, the largest increase in half a decade.

Nearly 240,000 new students enrolled in these innovative, student-centered public schools, despite a sharp decrease in overall public school enrollment during the same period. Of the 42 states evaluated, 39 experienced charter school enrollment increases, while only three saw modest decreases. By comparison, district school enrollment dropped precipitously in every state.

Why?

During the 2020-21 school year, the pandemic forced schools of all types to close their doors and switch to remote learning. Many families were dissatisfied with the quality of what was available to their children. And that dissatisfaction led them to learn more about the other educational options available. For many families, charter schools’ nimbleness and flexibility made them the right public school choice.

Washington, which caps public charter schools, had a big percentage jump, but from a very small base.

A table later in the report shows the state’s charter school enrollment from 2019-2020 to 2020-2021 increased from 3,163 to 3,712, while other public school enrollment fell from 1,137,945 to 1,090,618.

The unanswerable question, of course, how would the enrollment pattern had the state adopted a less restrictive public charter school law? The national data clearly suggests the direction of the trend, if not the magnitude.

We recommend reading the report. More at Axios.

State reports 4,850 regular unemployment claims filed last week, down 10 (0.2%) from previous week.

Pretty much no change in unemployment insurance claims filings over the last two weeks. 

The state Employment Security Department reports,

 During the week of September 12 to September 18, there were 4,850 initial regular unemployment claims, down 0.2 percent from the prior week. Total claims filed by Washingtonians for all unemployment benefit categories numbered 112,948, down 55.4 percent from the prior week, primarily due to the expiration of federal pandemic benefit programs the previous week.  

  • Initial regular claims applications are 75 percent below weekly new claims applications for the same period last year during the pandemic.
  • The 4-week moving average for regular initial claims was 4,997, a decrease of 127 from the previous week’s 4-week moving average. During the same time in 2019, it was 5,146.
  • Decreases in layoffs in manufacturing & professional, scientific, and technical services contributed to a decrease of 10 regular initial claims over the previous week.
  • Although federal benefit programs, including Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) as well as the additional $300 per week for most claimants, expired the week ending Sept. 4, 2021, benefits will continue to be paid after 4, 2021 for individuals whose claims are pending in adjudication or on appeal if they are determined to be eligible for payment.

Earlier, we reported a very slight uptick in national claims.

Utah helps boost rural economies by allowing state workers to work remotely.

Earlier, we linked to Association of Washington Business president Kris Johnson’s column on how remote work expands opportunities for rural economies. We’ve just seen evidence of how one state is making it happen.

The Daily Yonder reports:

“I like being able to avoid the traffic. I like the smaller population. Where we live, we’re close to the mountains and have access to national parks and entertainment and shopping,” the 46-year-old Medicaid program specialist said “If I can just stay out of the larger cities. I would just be happy for the rest of my life.”

Borrego is among a growing number of Utah residents working for the state government but outside of the capital of Salt Lake City. It’s part of an initiative to allow government workers to do their jobs remotely, thereby allowing them to remain in smaller communities outside of the Wasatch Front, a metropolitan region of Utah that stretches along the Wasatch Range, containing major cities like Salt Lake City, West Valley City, and Provo.

The story continues,

Utah Governor Spencer J. Cox released his One Utah Roadmap in January, a guide to the administration’s first 500 days in office. In the roadmap, which is broken down into various categories, Cox named a goal to “streamline and modernize state government,” which according to the guide can be achieved by several means, including restructuring and re-examining how to make government work in a remote working world. 

“We find that we have more stability in some of our rural areas, less turnover,” said Casey Cameron, executive director of the Utah Department of Workforce Services. “They aren’t leaving for other jobs in the community. These sometimes are some of the best jobs in these communities and they really provide for that economic stability for those families to participate in these jobs.”

Read the whole thing. Here’s the close.

Ocean Muterspaugh, who lives in Monticello, is a Temporary Assistance to Needy Families (TANF) program specialist. 

The 44-year-old said working from home has cut down significantly on her time at work. She used to eat lunch at the office, so she would spend about 10 hours at work. Now, she’s able to work eight hours per day, giving her more time with her family. 

“I feel like the rural communities have more of a voice,” she said. “Not to say they didn’t before. But prior to Covid, I would have never been eligible for this position I have because it was only open to more urban areas. There is talent and people lost in the positions because they don’t live in urban settings.”

Right.

Nationally, weekly unemployment claims up 16,000, to 351,000. Increase attributed to delta variant.

National claims for unemployment benefits rose last week, according to the U.S. Department of Labor.

In the week ending September 18, the advance figure for seasonally adjusted initial claims was 351,000, an increase of 16,000 from the previous week’s revised level. The previous week’s level was revised up by 3,000 from 332,000 to 335,000. The 4-week moving average was 335,750, a decrease of 750 from the previous week’s revised average. The previous week’s average was revised up by 750 from 335,750 to 336,500.

The advance seasonally adjusted insured unemployment rate was 2.1 percent for the week ending September 11, an increase of 0.1 percentage point from the previous week’s revised rate.

The increase was higher than expected in the consensus forecast.

The Associated Press reports that concerns with the delta variant explain part of the upturn.

The number of Americans applying for unemployment aid rose last week for a second straight week to 351,000, a sign that the delta variant of the coronavirus may be disrupting the job market’s recovery, at least temporarily.

Thursday’s report from the Labor Department showed that jobless claims rose by 16,000 from the previous week. As the job market has strengthened, unemployment aid applications, which generally track layoffs, have tumbled since topping 900,000 early this year, reflecting the economy’s reopening after the pandemic recession. The four-week moving average of claims, which smooths out week-to-week swings, registered its sixth straight drop — to a pandemic low of 336,000.

Overall, things are improving. Haltingly.