Modest Shift To State Budget Would Address The Entire Deficit

In debates about Washington State’s budget deficit, it is too rarely said - Washington’s state and local taxes are lower than average. They are lower than every blue state, several purple states, and about a dozen red states too. We could easily address our budget gaps by moving us modestly up the ladder, cautiously remaining in the “normal range.”

Below you can see how state and local taxes cluster. #28 Washington is at 8.61%, 0 #18 Indiana is at 9.09% and #14 Utah at 9.46%. None are significant outliers.

Right now our budget gap is $16B over four years, and substantially less than $4B in the first year. If we modestly raised our taxes to match conservative Indiana’s, it would raise $4 billion per year, enough to totally tackle our deficit. If Washington raised our taxes to match uber-conservative Utah’s, that would increase our annual tax take by almost $7 billion dollars per year.

In other words, if we simply matched our taxes to a hyper-conservative state like Utah’s tax rates, remaining close to the middle of the tax distribution, we could address the entire budget gap, and fully fund public schools, and set aside $1 billion a year in resiliency funds for dealing with Trump’s inevitable attempts to cut off funding for states.

(We could also go to “high tax” without seriously compromising our economy, as I’ve argued before. If we were to tax at just below California’s rate, we’d have $19 billion more a year to work with!)

So when centimillionaire and Microsoft Executive Brad Smith acts like small tax increases that would accomplish even less than what I have proposed here will snuff out business in this state - he is peddling propaganda to pad the profits of his company.

That’s his job, I guess.

But the rest of us - especially our lawmakers - need to understand that he is not speaking of anything remotely resembling reality. Smith is a smart guy, no doubt, so it is striking that he has apparently never bothered to learn how state tax rates impact economies, jobs, and businesses—as well that he does not acknowledge that Washington dedicates less of its economy to state and local taxes than so much of the country.

As a conservative UW Economics Professor recently testified to the legislature that Washington “is a tax haven like the Cayman Islands.” The notion that moving us from “a bit below median” to “a bit above meidan” and nowhere near to outliers would be some sort of catastrophe is simply indefensible.

To be fair to Mr. Smith, Upton Sinclair was on to something when he said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

But our salary is not, and we do not need to fall for this baseless business jingoism.