Dear Friends and Neighbors,
With just a few weeks to the finish line for the 2023 session, the state’s three main budgets—operating, transportation, and capital—have taken center stage here at the Legislature. These spending plans will steer the state’s tax revenue investments for the next biennium (2023-25).
The first step to evaluating these budget proposals is understanding the amount of tax revenue lawmakers have to work with. Several days ago, the Washington State Economic and Revenue Forecast Council released its quarterly revenue projection. Based on their assessment, despite historic high yields even during the pandemic, our state’s economic cycle has shifted. Although things aren’t bad (yet), they’re not great either.
- First, the good news: The forecast estimate includes $194 million more in the 2021-23 budget cycle, which goes through the end of July this year.
- Now, the bad news: They estimate the state will have $483 million less for the 2023-25 budget cycle; and about $541 million less for 2025-27.
This forecast is an important signal that our state’s economy is cooling. Unfortunately, the majority party controls the budget. During the past ten years, out-of-control spending has more than doubled the state’s operating budget.
When evaluating the state’s spending plans for the next two years, we need to be concerned and even cautious. That means setting priorities on spending, not creating new government programs, and definitely not asking struggling taxpayers for more money to feed government spending.
Watch my latest video update on the revenue forecast, state budgets, and other legislative topics:
Capital Gains Income Tax
A few days ago, the Washington State Supreme Court broke nearly a century of legal precedent by upholding the state’s capital gains income tax. In the 7-2 ruling, the court asserted the capital gains tax is an excise tax, not a property tax, which the state constitution limits to 1% annually.
The 7% capital gains tax, approved by the majority party as a new tax in 2021, will impact the sale of stocks, bonds, and other high-end assets of more than $250,000. Although lauded by progressives as a “tax on the rich,” the reality is letting this tax stand could open the door to future state income taxes.
Long-Term Care (LTC) Program and Payroll Tax
With no House Republican votes, a new long-term insurance payroll tax was established in 2019 with House Bill 1087. Beginning on July 1, 2023, most workers in Washington, including part-time and temporary workers, will pay $0.58 per $100 of their earnings for the WA Cares Fund, a state-run, long-term care insurance program.
To learn more about the program and the cost for taxpayers, click here.
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Please contact me if you have questions about the legislative process or public policy issues facing our region and state.
It’s an honor to serve you!