The Blueprint for Rebuilding Washington State
By: Paul Constant
Tags: Labor, Politics, Taxes, Budget, Economics

The Blueprint for Rebuilding Washington State

Governor Inslee, modeling good mask-wearing behavior.

Yesterday, Washington Governor Jay Inslee unveiled his budget proposal for 2021 through 2023. Budget announcements don’t usually make for riveting political theater, but yesterday’s speech gathered far more attention than usual because of its unique historical context. Inslee wasn’t simply announcing a few tweaks on the continuation of business as usual. He was laying out his plan for how Washington state will combat the pandemic and rebuild from the disastrous economic downturn that accompanied the arrival of COVID-19.

Not every political leader confronts a moment like this. Hundreds of thousands of Washingtonians lost their jobs this year. Consumer spending cratered as the lockdown began and, largely because Washington relies so heavily on a sales tax, state revenue collapsed along with it. Washington has nearly 220,000 fewer jobs now than when the pandemic began, and the state’s revenue projections for the next three years are now $3 billion lower. We could lose hours drilling into exactly how bad the numbers are, but the takeaway is that a lot of people are in need of immediate support, and the state doesn’t have the resources it needs to provide that support.

Inslee smartly hasn’t fallen for the austerity trap. Too many politicians, when facing tough decisions during an economic downturn, respond with a series of panicked, knee-jerk cuts that may balance the budget on paper, but which in fact delay economic recoveries for months, and even years. Some Washington agencies that had their budgets cut in 2008 hadn’t even recovered those losses by the time the economic downturn hit this year, harming those who most needed support and assistance during the pandemic. Inslee knows that you can’t cut your way to economic growth, and you absolutely can’t recover from a pandemic by telling people that they’re on their own.

In his $58 billion, two-year budget, Inslee announced he would pursue several new sources of revenue to help rebuild the state — most notably a capital gains tax that would raise over $1 billion in the next budget cycle and twice that in future budget cycles. Washington state famously has the most regressive, upside-down tax code in the nation, where our poorest families pay up to six times more of their income in taxes than the richest. Capital gains would access a tiny portion of the untapped wealth that a handful of Washington’s richest residents continue to claim during a pandemic on the sale of stocks, bonds, and other lucrative assets — an action that is hugely popular with voters in our state.

But Inslee understands that raising revenue isn’t the point — it’s what you do with the revenue that counts. That’s why he’s calling for the state legislature to immediately approve $100 million in pandemic assistance funds for businesses, and another $100 million in rental assistance as soon as they convene in January. With Republicans in Congress still refusing to send stimulus funds to states and cities, Inslee is trying to get immediate relief to the people who have been most imperiled by the pandemic, allowing renters to stay housed and businesses to stay open until the economy can safely reopen again.

All in all, this budget marks a great first step on the long road back from coronavirus. While it does begin to find new sources of revenue, it doesn’t go all the way toward fixing our regressive tax system. Washington has the worst tax structure in the nation; joining the 41 other states that already tax capital gains is a smart move that is long past due, but our goal should be to make Washington the national leader in progressive taxation. There are plenty of other ways to access that untapped revenue in ways that would leave the lives of our very wealthiest residents completely unchanged while making great strides to invest in the people who have traditionally been left behind.

Inslee is also directing more funds to immediate cash assistance programs, child care for low-income families, and other safety net programs. As the vaccine begins to be distributed across the country and as businesses slowly begin to safely reopen, the smartest economic action Inslee can take is to get money flowing through communities. That means getting money into peoples’ pockets so they can spend it at local businesses — thereby creating jobs.

Fifty years of data proves that tax cuts for the wealthy and corporations don’t create jobs or trickle down to the rest of us in any way. A growing body of evidence shows that every dollar of government support creates up to three dollars of economic growth in local communities. And Inslee’s budget equitably focuses that spending on communities that have been hit hardest by coronavirus — for instance, women have lost jobs at a rate far outpacing men, and communities of color have disproportionately suffered job losses, business closures, and evictions when compared to predominantly white neighborhoods. These investments won’t just provide relief for people impacted by coronavirus — they mark a real effort to begin to repair the systemic inequality that has for all of Washington’s history penalized people for their race and gender.

Inslee has learned from the mistakes of the past. This budget won’t abandon our poorest residents to fight for the scraps left behind from austerity measures. Instead, it encourages everyone to participate in the recovery. If we continue in the direction that Inslee has pointed, Washington won’t just survive the pandemic — it will be stronger and more prosperous than ever.