One of the more unexpected turns of the pandemic is how it led to a huge surge of tax money into state government.
It was pretty clear from the start that the coronavirus crisis might be a boon to certain industries, like big tech, but government was widely predicted to be gutted.
"Pandemic wrecks state budgets, could trigger deep cuts," was a typical headline from the summer of 2020.
Washington state's forecasters predicted a $5 billion hole in our state's two-year, 2021-2023 budget.
But that was wrong (in defense of the forecasters, it was a once-a-century event). People kept working and spending at much higher rates than anticipated, so tax revenues for the two-year period are now projected to come in $7 billion higher than expected, not $5 billion lower.
That's a $12 billion upside surprise, which is unheard of. (This doesn't include all the federal aid money, which added several billion more.)
What's interesting about this good news is what ruling Democrats here are choosing to do with it. With the exception of some savings in rainy-day funds, they are moving toward spending virtually all of it.
At a budget hearing Monday in the state House, dozens of lobbyists and heads of government organizations and nonprofits gushed about the largesse. With big infusions into transportation, the schools, salary hikes for state employees and other programs like paid family leave, the two-year budget is slated to be roughly 25% larger than the last one — a historic expansion in state spending.
Not every Democrat is completely thrilled, though.
"We've been balancing the budget on the backs of the working class and poor people for decades around here," says Sen. Patty Kuderer, D-Bellevue, "and I felt it was time to ease up on that a bit."
Kuderer, who said she likes the overall spending priorities of the budget, is one of a few Democrats who have been pushing her party to return some of the money to the public with a cut in "regressive" taxes.
"Washington is dead last in the nation in tax fairness," she said Wednesday. "The sales tax is the most regressive of all of them."
Kuderer and Sen. Mona Das, D-Kent, co-sponsored a bill to cut the sales tax from 6.5% to 5.5%. It never got a hearing, though Democrats control the Legislature and the governor's office.
The sales tax chews up far larger slices of low-income workers' pay than it does for the wealthy. Because of our state's overwhelming reliance on sales taxes, the Institute on Taxation and Economic Policy ranks Washington as the absolute worst in its "Terrible Ten" states for gouging the poor. We're just below Texas. The lowest-income workers here pay 18% of their incomes in state and local taxes, while the richest pay 3%.
Democrats started trying to shift this upside-down system last year by passing a capital-gains tax on stock profits of more than $250,000. But they haven't followed up with planned reductions in the regressive taxes — and don't appear very interested this year, even with so much money floating around the Capitol in Olympia.
Politically we are an outlier. The Democratic governor of Maine, gifted with similar surpluses, just announced $500 tax rebates for most taxpayers in her state. The California governor gave what he called "the biggest state tax rebates in American history." The Kentucky governor, also a Democrat, is calling for a one-year sales tax cut and a reprieve on car taxes.
I realize Democrats here can't be seen cutting car taxes like Kentucky, because Mr. Tim Eyman would levitate into the air in bliss. Nobody wants to see that.
On Wednesday, some state Senate Democrats proposed to expand a tax credit for the state's smaller businesses. That's a start. As for the people? They're offering you ... free parking passes at state parks.
We sent our state $12 billion extra, and all we got were these lousy parking tags?
I know, the spending in the entire budget goes for many useful and good things, hence the outpouring of love for it this week. And I kid about the parking passes (please send me one).
But there's a serious, longer-term political issue raised by the critique from Kuderer and Das. Which is that if we're ever going to get out of that Terrible Ten ranking, politicians first have to convince voters they aren't going to simply add all the new progressive taxes on top of the old regressive ones.
It's a big reason voters here keep rejecting a state income tax. According to polls, people worry the new taxes will pile on top of the old, more and more and yet never enough, regardless of how much money comes in.
Democrats, you're proving these critics right.