Washington state's revenue system needs reasonable reform
Guest columnist Remy Trupin argues that lawmakers must approach budget crisis with balanced approach — including new revenues such as a modest increase in the sales tax and closing loopholes. For longer-term stability, he suggests a capital-gains tax.
Special to The Times
HOW do we rebuild Washington state's economy to create jobs and offer widely shared prosperity?
Unfortunately, that question has been lost in the debate over our state revenue crisis. And it should be on everyone's mind as lawmakers convene next week for a special session.
Some lawmakers are only asking how to cut deeper into education, health care and other essential public services. Others are narrowly focused on a short-term bandage to stop the bleeding, but have no idea what to do after that.
Instead we need a balanced approach — one that recognizes that Washington has an opportunity to take immediate steps to stabilize the situation and, just as importantly, institute long-term solutions so we have the resources to invest in our future when the current crisis passes.
State lawmakers have already cut $10 billion from our public and community services, and over the next month they are set to cut $2 billion more.
We can see the impact in classrooms, neighborhoods and dwindling opportunities. Now is the time to turn it around and get back to making the investments needed to put Washington back on the path to long-term growth and prosperity.
How do we rebuild a stronger economy? By investing in job training in high schools, community colleges and universities. By making sure working parents can afford child care and giving every 5-year-old an opportunity to learn. By letting people see a doctor when they get sick and providing preventive care so they get sick less often. By strengthening the community services that Washington families rely on.
A good way to start making all of that a reality is by reforming the revenue system to make it stable and sustainable. Yes, we need short-term revenue to meet the most immediate needs — which we can get, in part, by modestly increasing the sales tax and eliminating ineffective tax breaks and loopholes.
But just as importantly, we need long-term structural reform to help fuel economic recovery and stabilize our tax system. A new tax on some capital gains — profits from the sale of corporate stocks and bonds — would help address these fundamental problems.
Initially, a modest 5 percent capital-gains tax would generate more than $500 million per year for health care, education and other public priorities. Revenues from the tax would grow significantly in the following years as the economy continues to slowly rebound.
The tax would not apply to home sales, retirement savings and income, or assets willed to family members. And excluding the first $10,000 of capital gains from taxation means that 97 percent of households in Washington would pay no additional taxes.
Up to half the money from a capital-gains tax could be dedicated to our state Rainy Day Fund. That would help us save more when times are good so we can better withstand future recessions. This would reduce the need to impose damaging service cuts when our public health and education systems are most needed.
The decisions we make now will determine our quality of life for generations. Our choice is between a Washington that attracts innovation with both natural beauty and strong public structures, or a Washington that deteriorates as schools, health care, public safety and job training are consistently underfunded.
Instead of lowering our standards with a never-ending list of cuts that force us to do without and damage the ability to create jobs, or thinking that a short-term fix is the end of our civic duty, we as a state should focus on what we are willing to do together to rebuild an economy that works for all of us.Remy Trupin is the executive director of the Washington State Budget & Policy Center.
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