Tempted to Tax: Our looming $3.2 billion deficit
October 31, 2008 · Updated 11:05 AM
When the Washington State Legislature begins its regular session in January, lawmakers will need to close the upcoming $3.2 billion deficit.
While Gov. Christine Gregoire has said she has no plans to increase taxes, there is little doubt the Legislature will consider raising taxes to balance the budget.
In February 2008, when the budget shortfall was expected to be “only” $2.4 billion, House Speaker Frank Chopp (D-Seattle) said he would not rule out higher taxes in dealing with next year’s budget.
While some are contemplating hiking taxes, it’s worth pointing out that Washington residents are already heavily taxed.
According to the 2008 Cost of Government Day study by Americans for Tax Reform, Washingtonians must toil until July 22 just to pay for all taxes and regulations imposed by federal, state and local governments.
Put another way, Washington state residents must work 203 days — more than half of the year — before they even begin to pay for food, gas, housing and the other necessities of life.
If recent history is any indication, things will not be getting any better.
From 2005 through 2007, the Cost of Government Day for Washington fell on July 7, July 21 and July 18, respectively.
While Washington has no personal income tax, its Cost of Government Day is the fifth-highest in the nation.
Only California, New York, New Jersey and Connecticut have more burdensome taxes and regulations than the state of Washington. For example, the state’s gas tax of 37.5 cents per gallon is the costliest in the country.
At 16.43 percent, state and local wireless taxes and fees are the second highest in the nation.
Washington state’s 6.5 percent sales tax rate ranks as the sixth highest in the country.
Washington’s economic outlook ranks 30th in the nation, according to Rich State/Poor State by Arthur Laffer and Stephen Moore. Laffer and Moore cite a number of factors that contribute to Washington’s weak economy. Among them is the state’s minimum wage—the highest in the nation—which will jump from $8.07 to $8.55 an hour on Jan. 1, 2009.
Other factors include the estate/inheritance tax, anti-right to work laws and debt service as a percentage of tax revenue that ranks 10th in the nation.
In conclusion, Washington legislators must take responsibility for the situation they have created. When the legislature passed the 2007-09 budget, spending knowingly exceeded forecasted revenue by nearly $1.3 billion.
This excessive spending resulted in substantial projected deficits for future biennia, which have come full circle.
The state’s population is growing and revenue is increasing—just not at the rate some lawmakers thought it would.
Lawmakers should pledge to taxpayers that they will not resort to tax increases to bail themselves out of the $3.2 billion self-inflicted deficit created by their spending.
They should instead concentrate on reviving the priorities of government budget process, which has been neatly buried under four years of prosperity, politics and convenience.
Brett Davis is an analyst for the Evergreen Freedom Foundation’s Economic Policy Center, focusing on the Transparency in Government Project.