Higher revenue forecast excites Washington tax reformers
(The Center Square) – Washington state coffers aren’t hurting, according to the latest quarterly revenue forecast showing a major increase in tax revenue for the current 2021-23 biennium.
Economic Revenue Forecast Council (ERFC) Executive Director Stephen Lerch reported “for this biennium, an increase of $898 million for all funds subject to the budget outlook.”
According to the Friday morning forecast, total state revenues are expected to grow 13.4% between the 2019-21 and 2021-23 biennia and 6.3% between the 2021-23 and 2023-25 biennia.
Washington state enacts budgets on a two-year cycle, beginning on July 1 of each odd-numbered year. For example, the budget approved for the 2021-23 biennium remains in effect from July 1, 2021 through June 30, 2023 and is referred to as the 2021-23 biennial budget.
Revenues for the current budget cycle are now projected to be $60.2 billion, with projected revenues for the next two-year budget cycle at about $64 billion.
Lerch said that compared to this year’s first revenue forecast in March, overall revenues increased $3.6 billion for the current biennium and $4.1 billion for the next.
“We continue to see very strong collections growth,” Lerch said during the virtual meeting of the ERFC. “So, really strong.”
The positive revenue forecast stems in large part from good news such as an increase of 23,100 jobs in Washington state since the September revenue forecast, as well as strong retail sales and residential real estate transactions.
In-state negative factors include new COVID-19 cases flattening rather than declining, supply chain and logistic challenges, and higher inflation.
“So…when we have higher inflation, of course that is going to be reflected in the higher cost of things subject to the retail sales tax, and so, yes, inflation will be a definite positive for the revenue forecast,” Lerch said. “It’s going to cause the forecast to go up for sure.”
It remains to be seen if the strong growth outlook results in any tax relief as part of any final budget. Republican legislative members of the council said tax cuts should part of the plan, while Democratic budget writers were more cautious.
“I’ll begin just by saying this is a good revenue forecast, by any standard,” said Democratic Rep. Timm Ormsby, chief budget writer for the House. “It provides me with relief more than optimism.”
He went on to say, “I think all things are on the table with the resources that are available.”
Republican Sen. Lynda Wilson said she would continue pushing for tax relief.
“I think with the Washington state budget having grown 90% over the course of the last 10 years – that’s about four times the rate of inflation, which is more than double the median private sector growth – so I am going to continue to advocate for property tax reform,” she said.
Jason Mercier, director of the Center for Government Reform at the Washington Policy Center, said now is the time for sales tax relief.
“If the legislature can’t cut the sales tax with this budget outlook and massive ongoing revenue increases, it’s hard to envision a scenario it ever would,” he said. “We know that pay raises for government employees will be included in the supplemental budget. Will there be any tax relief also?”
Democratic Gov. Jay Inslee will release a supplemental budget proposal next month ahead of the start of the 60-day legislative session that begins January 10, with budget leaders in the House and Senate putting out their own proposals after the start of session.
The next state revenue forecast will be in February.
Disclaimer: This content is distributed by The Center Square
