Since the 2010 legislative session adjourned earlier this year, you have, no doubt, heard about the tax increases we approved. But as talking heads slam us for the modest increases, they oftentimes forget, as they say, the rest of the story.
As our national and state economy crumbled, one-third of our state’s revenues disappeared, amounting to a $12 billion gap in our two-year budget. Forty-seven other states, run by both Democrats and Republicans, have seen similar shortfalls. Unscrupulous lending practices and global economic collapse caused this crisis — not “tax-and-spend Democrats.”
Washington’s shortfall is especially severe because half of our budget is supported by the sales tax — that’s more than twice the national average. We are over-reliant on consumer spending and are especially susceptible to national economic trends.
In 2009, we cut more than any Legislature in state history to close the then $9 billion budget hole. We eliminated waste, made across-the-board administrative cuts, laid off thousands of public employees, tapped into the rainy day fund and gutted core funding for higher education. For the first time since 1951, the two-year budget we approved in 2009 was smaller than the preceeding budget.
After we adjourned in April 2009, the economy continued to decline. And we began the 2010 session facing a $2.8 billion shortfall in a budget that had already been stripped to the bone the session before. I entered the session committed to not passing another all-cuts budget, believing that while the public wanted to see reform and cuts, it didn’t want to risk public education, public safety and our economic recovery.
Demand for public services like schools, affordable health care, emergency assistance, job training and state financial aid all increase during a recession — just as the government’s ability to pay for them decreases. Unlike businesses that lose customers during tough economic times, government gains them. It is during recessionary times when public infrastructure is most needed to provide support and protection for those hardest hit and pave the way for economic recovery.
So this year, for the first time in 17 years, state lawmakers cast a vote to increase taxes. While it was a difficult vote, cutting millions more from public schools, higher education, early learning and public safety would lead to long-term disastrous effects for all of our communities.
The new revenue totals $794 million. By closing corporate loopholes we shifted the tax burden to those who can pay from those who cannot.
We also temporarily increased the Business & Occupation tax rate for business services, like lawyers and accountants, but worked to offset the effect of this by permanently increasing the small business tax credit. So now many small businesses will actually be paying less in B&O taxes.
On the consumer side, we focused on nonessential items and extended the retail sales tax to bottled water, gum and candy. We also increased the cigarette tax by $1 a pack. Finally for the next three years, consumers will see an increased tax on soda and beer, but not Washington’s microbrews.
Over the last two years, the Legislature has cut $5 billion from state government. For every $1 raised in new revenue, we cut $4.40 in state spending. We seized the opportunity to reform government. But reforming government shouldn’t mean abandoning our values. This modest new revenue:
• Maintains funding for class size reductions in grades K-3;
• Preserves critical preschool programs for children under 3;
• Protects child care for 37,000 working families;
• Maintains health care for almost 500,000 of Washington’s children;
• Secures state financial aid for 57,000 at-need college students;
• And provides affordable health care for 69,000 working Washingtonians.
No one likes to raise taxes. It is never an easy vote to take. But when I voted “aye,” it was a vote for our future.
— Sen. Joe McDermott represents the 34th Legislative District, which includes Vashon and Maury Island, West Seattle, Burien and White Center. He serves as assistant floor leader.
