Washington State’s Untapped Wealth Is the Key to Building a Better Future
By: Paul Constant
Tags: Labor, Politics, Budget, Taxes, Economics

Washington State’s Untapped Wealth Is the Key to Building a Better Future

With a new wave of coronavirus infections flooding our hospitals, Washington State is poised to enter a dark winter. And just as it did this spring, Washington’s economy is certain to take a nosedive as the number of infections skyrocket. As people stay home to keep themselves and their families safe, consumer spending will dip again, small businesses will lose customers, and employees will be laid off. Stimulus funds from the federal government aren’t likely to arrive until after the Biden Administration takes office in January — if, indeed, they arrive at all, with a potentially divided Congress holding the pursestrings.

Now, as legislators prepare to head back to Olympia to figure out what to do with a budget deficit in the 2021 session, they face a stark choice. Editorial boards and pundits will call on lawmakers to respond with knee-jerk cuts, slashing those essential services that have provided a lifeline for so many Washingtonians in need. Lawmakers should do exactly the opposite: numerous studies since the Great Recession show that cutting budgets during a recession only slows the economic recovery, killing the consumer demand that creates jobs.

The Congressional Budget Office explored the importance of stimulus spending during the last economic crisis, and they found every $1 that local government spends directly purchasing goods and services generates up to $2.50 in positive economic value, while every dollar spent on providing direct cash assistance to people in need generates up to $2.10 in positive economic value. Tax cuts for the wealthy return, at best, a paltry 60 cents of every dollar spent by the government. The reason for that is simple: when people have money, they spend it in their local communities, which creates jobs, which increases consumer spending even further in a positive feedback loop that’s good for everyone — not just the wealthiest people and corporations in the state.

So we clearly need to shore up our budget and invest in our people. But where would we get the money from? Is it even possible to raise enough to patch up our ailing budget? Thankfully, yes — and it wouldn’t take much. A report published by Kitty Richards of the Roosevelt Institute this summer crunched the numbers and found that less than 1 percent of Washington’s personal income — just 0.92 percent — would cover the entire shortfall. In context, that’s a tiny amount of money.

It’s clear that to hold our economy together and to get money flowing through our communities, our leaders in Olympia have to invest in Washington state right now. But what can they invest when our state budget is in desperate need of revenue? We can’t make that money up by increasing sales taxes. Washington State has the most regressive tax structure in the United States, by which I mean our taxes penalize the poorest Washingtonians the most — and remember, low-income Washingtonians are the people who have taken the worst hit from the coronavirus recession.

Obviously, given our state’s regressive tax structure and the outsized impact of COVID on those on the lower end of the economic spectrum, nobody’s suggesting that we tax everyone equally. But we could easily muster that amount if we took a serious look at Washington State’s untapped wealth. Washington State is home to ten of the top 400 wealthiest Americans, and 12 companies in the Fortune 500. Just over seven percent of all Washington households are millionaire households, which pay less in taxes than their poorer neighbors.

That wealth has been undertaxed for too long. It’s time for our leaders to look into reasonable solutions like a capital gains tax, an excessive CEO compensation tax, or other progressive revenue policies that can harness untaxed wealth to make up the losses we’ve all suffered this year and to reinvest in Washington’s future.

Even mentioning the “t”-word will summon the usual trickle-down crowd, who will warn — with absolutely no evidence — that applying a small tax to our wealthiest neighbors will cause them to kill jobs and move away from the state. That’s simply not true — it’s a scare tactic used to terrify us into inaction. A Stanford study found that millionaires don’t migrate because of taxes, and a Guardian report corroborated those findings.

And just as raising the minimum wage didn’t inspire Washington businesses to move out of state, neither will rebalancing the tax code. The reason? Washington state has the two qualities that every business needs — a strong customer base and a diverse, talented workforce. That’s why when media outlets compile lists of which states are the best for business, Washington is always at or near the top.

The fact is, Washington State needs to invest in its people right now. After a year of lockdowns and layoffs and closures and growing personal debt, we need to position ourselves to come out of this coronavirus strong on every level. We also must acknowledge that the damage the coronavirus has done to our economy has targeted some communities more than others, and plan our recovery accordingly.

Time and again during this crisis, the people of Washington have done their part to flatten the curve and protect their neighbors. The lockdown was an absolutely necessary measure to fight coronavirus, but it also left too many Washingtonians on the brink of disaster. They lost their jobs, they had to shut down or drastically reconfigure their small businesses, they dug into their savings, and they deferred their dreams for the foreseeable future.

We’ve all sacrificed for this pandemic, but the sacrifice is by no means evenly shared. If you’re an upper-middle-class office worker, you’ve probably had to adjust to working from home while also helping your kids adjust to remote learning. But if you’re a blue-collar Washingtonian, you’re much likelier to have lost your job. Black and brown communities are much more at risk of coronavirus infections, and their economic impact has been much deeper and more painful than that of their white neighbors. A staggering number of women have lost their jobs since the downturn began — far more than men.

After all our shared sacrifice this year, the worst thing Washington State could do would be to return to a damaged status quo and limp forward as though nothing ever happened. We have it in our power to turn this crisis into an opportunity, to repair the damage caused by the virus, to address the uneven economic impact of the downturn by centering women and communities of color in the recovery, and to invest in a future for Washington that’s better and stronger for everyone. It’s time for our leaders to do their part and honor the sacrifices we have made this year by directly addressing the economic crisis.