State must raise revenue to break vicious cycle of austerity | Andrew Villeneuve

On Monday, Washington’s Legislature will convene for a special session in Olympia to figure out how to close another depressingly large budget shortfall. Unlike the federal government, the state is required by law to maintain a balanced budget – and the budget that the Legislature approved several months ago assumed that revenues would be higher than they have been.

On Monday, Washington’s Legislature will convene for a special session in Olympia to figure out how to close another depressingly large budget shortfall. Unlike the federal government, the state is required by law to maintain a balanced budget – and the budget that the Legislature approved several months ago assumed that revenues would be higher than they have been.

Since actual revenue didn’t match projected revenue, we once again have a deficit that needs to be closed. Earlier this month, Gov.Chris Gregoire unveiled her initial “all cuts” plan for dealing with the deficit. That initial proposal would more accurately be termed the Let’s Destroy Washington budget, because most of it is concerned with completely dismantling or destroying vital public services that Washingtonians rely on.

Washington cannot afford what Gov. Gregoire is proposing. What we’ve all got to remember is that eviscerating vital public services doesn’t just hurt the people who depend on those services. It hurts all of us.  When services are eviscerated, it means that public workers have to be laid off. When public workers are laid off, unemployment goes up, consumer spending falls, and revenue from consumption taxes falls.

It’s a vicious cycle that will slowly but surely destroy our communities and our livelihood.

We have to stop it.

Gov. Gregoire has just proposed “buying back” some of the services her plan puts on the chopping block by raising the state sales tax by half a penny. That would be better than destroying services like Disability Lifeline or Basic Health, but there are better revenue alternatives.

What the Legislature ought to consider doing is putting several proposals for raising or recovering revenue on the ballot. Secretary of State Sam Reed’s office says that holding a special election in March is already going to cost $8 million. Since holding a statewide election will require that we print and mail ballots plus voters’ pamphlets to our state’s 3,662,026 registered voters anyway, why not give the people of Washington several options to choose from?

Here are a few possibilities:

• Allow voters to decide whether to close outdated and unnecessary tax loopholes, like the exemption Wall Street banks currently enjoy on the interest of first mortgages, the exemption for elective cosmetic surgery, the exemption for private jets, or the sales tax exemption for out of state shoppers. Ending just these four tax expenditures alone would restore tens of millions of dollars to our common wealth – and there are dozens upon dozens more we could consider sunsetting.

• Allow voters to decide whether to approve a small increase in the state’s property tax levy (which is already dedicated to education) to cancel out destructive cuts that would harm our public schools. The property tax, unlike the sales tax, isn’t tied to consumption, so it’s a more dependable source of revenue. Voters have repeatedly shown a willingness to raise property taxes at the local level to help fund school districts. A modest increase in the statewide levy could help us avoid shortening the school year and avoid gutting levy equalization.

• Allow voters to decide whether to simplify and streamline our complicated and arcane business and occupation tax, which is riddled with exemptions that benefit some companies at the expense of others. Reforming the business and occupation tax would make our tax system fairer and provide a reasonably-sized revenue boost.

Raising the sales tax, as the governor has proposed doing, should be the very last option considered — not the first.

Not only is the sales tax regressive, it’s unreliable. If consumer spending in Washington ends up falling in the short run, then sales tax revenue will fall as well, putting us right back where we started.

What’s more, the total sales tax that most Washingtonians pay is already pretty high. The sales tax on a $5 footlong from a Puget Sound area sandwich shop is already around 45 cents. On a $10 purchase, the sales tax is nearly a dollar.

We do need to raise revenue to break the vicious cycle of austerity that we’re trapped in as a state. But we need to do so thoughtfully.

The Legislature should consider other ideas, including the ones I’ve outlined above, before doing anything with Governor Gregoire’s proposal.

Andrew Villeneuve, a 2005 Redmond High graduate, is the founder and executive director of the Northwest Progressive Institute, a Redmond-based grassroots organization. Villeneuve can be reached at andrew@nwprogressive.org.