Washington’s economy is booming now. But it’s time to prepare for a downturn.
Tell legislators to tap the brakes on unsustainable spending.
Washington’s long-running economic recovery and expansion has resulted in unprecedented growth. State lawmakers have leveraged this good fortune to make investments in important programs. But they haven’t paid commensurate attention to preparing for an inevitable downturn. Now, many want to increase spending even further and fund that expansion with tax increases. Meanwhile, experts are warning we should be preparing for the potential of a slowing national economy.
- State and local tax growth in Washington was the highest in the nation from 2015 to 2016.
- The state is projecting tax collections will top $50 billion in the next two-year budget cycle. Lawmakers will have $5.6 billion more in revenue in 2019–21 than they did when they last adopted a budget a year ago.
- Despite record revenue growth, the governor and Democrats in the legislature have proposed billions in new taxes.
- State spending has grown by $11 billion, or 33%, over the last 4 years.
- The 14% and 17% spending increases in the last two state budgets were more than double the average increase of budgets over the previous 20 years.
- The legislature has spent most of the extraordinary revenue growth over the past few budget cycles, instead of saving for a rainy day.
- The recently released House Democratic budget proposal for 2019–21 would increase state spending by 19%.
- The “possibility of a global recession” ranks as the top concern on the minds of corporate leaders.
- Nearly half (48.6%) of U.S. CFOs believe that the U.S. will be in recession by the end of 2019, and 82% believe that a recession will have begun by the end of 2020.
- 73% of investors surveyed expect a recession within the next two years.
- Washington has experienced this boom-bust cycle before. Lawmakers increased spending by almost 18% in the 2005–07 budget and by almost 12% in 2007–09. Even after enacting a $774 million tax increase, lawmakers had to cut more than $3 billion from state programs in response to the Great Recession.
- Washington’s four-year balanced budget requirement and rainy-day fund provision promote state budget sustainability and provide a cushion for economic downturns and emergencies.
- Washington’s state and local business taxes per employee are the 7th highest in the nation and are 16.3% higher than the average state.
- Washington businesses generate more than half of state and local tax revenue, well above the national average. For example, Washington businesses already pay significantly more in B&O taxes than employers in other states do in income taxes.
- In addition to the costs of increased minimum wage, paid family leave programs, and local taxes paid by businesses, Governor Inslee’s revenue package includes a new capital-gains tax, a boost in B&O tax rates, and increases in the real-estate excise tax.