This is good news:
Consumers boosted their spending in October at the fastest pace in seven months, while their incomes rose by the largest amount in nine months — both good signs for future economic growth.
Consumer spending rose a sharp 0.6 percent last month, the Commerce Department reported Thursday. It was the biggest increase since a similar gain in March and was three times faster than the 0.2 percent September performance. Incomes, which provide the fuel for spending, were up 0.5 percent in October, a significant pickup from a 0.2 percent September gain.
The U.S. economy expanded at a solid 3.5 percent annual rate in the July-September quarter…The third quarter figure follows a robust expansion of 4.2 percent in the April-June quarter. Six months of healthy growth have put the U.S. economy on track to expand in 2018 at its fastest pace in 13 years.
Economists predict an eventual slowdown, yes, but so far things look pretty good. That bodes well for state revenues, as reflected in the recent revenue forecast.
As we wrote recently, the strength of the economy and tax collections has some saying it’s time for a tax cut. Others suggest that lawmakers would be better off holding on to reserves, hedging against the downturn. And, still others contend that more taxes may be necessary.
Seattle Times reporter Joseph O’Sullivan writes that House Speaker Frank Chopp is in the new taxes camp.
[Chopp] sketched out his priorities for the legislative session, which include focusing on Washington’s troubled mental-health system, improving student financial aid and working on an array of housing issues. He said lawmakers must come up with new revenue to fund existing services and needed new programs in Washington’s 2019-21 state operating budget.
Some old themes will be sounded again.
New revenue could include a capital-gains tax, which House Democrats and Gov. Jay Inslee have proposed in recent years.
“That’s going to be considered,” said Chopp. “There’s been a caucus proposal for many years, and you should expect some movement on that.”
He also acknowledged the possibility of using a capital-gains tax to lower state property taxes, which House Democrats proposed in 2018.
The Senate Republican leader rejects the notion.
Senate Minority Leader Mark Schoesler, R-Ritzville, panned the idea of a capital-gains tax. Republicans say it’s a tax on income and thus unconstitutional in the state.
He also said capital-gains tax revenue isn’t dependable enough to fund any real tax relief. To make Washington’s tax system less regressive, Schoesler said, “Why not a small reduction in the sales tax?”
But state budget officials and the governor’s office have said $50 billion will not be enough to fund the natural growth of existing government programs, pay for needed improvements in the mental-health system, fund collective-bargaining agreements for state workers and make other necessary changes and additions.
Inslee spokeswoman Tara Lee wouldn’t say whether the governor’s budget plan — scheduled for release in December — would include a capital-gains tax proposal.
But, “New revenue is going to be needed,” she said. “I think the governor is looking at all options.”
And that sets the stage for the budget debate in 2019.
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