A Pew Charitable Trust study earlier this year found Washington state’s revenue grew more over the past year than any other state in the country. Now, the state Economic and Revenue Forecast Council’s (ERFC) latest forecast estimates the state will receive billions more in tax revenue through 2023 than what was previously expected.
Yet while so far six states have already sought to cut taxes, statements made by key ranking state budget writers make it uncertain whether Washington state residents will see a direct tax reduction.
Senate Ways and Means Chair Christine Rolfes (D-23) said at ERFC’s June 23 meeting that “We’ll get new numbers in the fall, and those are the numbers the governor leads with. Certainly this is good news, but I wouldn’t start writing a budget based on these numbers today.”
She added that if there’s surplus revenue it could go toward the working families tax credit. “I feel confident that we’ll be able to put that into play and increase some of the rebates that we all agreed to.”
House Appropriations Chair Timm Ormsby (D-3) offered similar reservations regarding the revenue estimates. “These are very good numbers. Take them for what they are, knowing that it is a snapshot and we have been through a wild ride.”
The legislature’s actions this session add further doubt to a direct tax rate cut. Despite record revenue after a temporary drop during the economic shutdown, state lawmakers enacted a seven percent capital gains income tax that included an emergency clause preventing a voter referendum. Although capital gains revenue is highly volatile, the tax will be dedicated to basic education programs – if it survives an ongoing legal challenge.
The most recent ERFC revenue forecast estimates that the record-level flow into state coffers is only going to go up, starting with a 9.9 percent increase over the 2019-21 biennium. The 2023-25 biennium is expected to generate $62.15 billion – a 6.4 percent increase over the prior two years.
Last June, ERFC forecasted that the 2023-25 revenue amount would be $54 billion, which is $8 billion less than what now is expected.
While some lawmakers note that the estimates aren’t written in stone, others such as Rep. Ed Orcutt (R-20) and Sen. Lynda Wilson (R-17) argued the optimistic outlook makes it high time for tax cuts.
Wilson told colleagues at the ERFC meeting that the situation “open(s) up a door of opportunity to give back to the taxpayers of Washington and consider a tax rebate. Right now, we’ve got California and Oregon returning money back to their taxpayers. I don’t think we need to be looking at anymore tax increases, for sure.”
Also advocating for tax cuts was Washington Policy Center Government Reform Director Jason Mercier. In a June 23 video he said “repeat after me: it is time to cut taxes. Today’s revenue forecast provides lawmakers an opportunity to…finally provide some broad-based tax relief. If they were only to just do a portion of that in sales tax relief, you would still be able to have a significant amount in reserves while signaling to Washingtonians there is a direction for taxes in Washington that always doesn’t go up. If not now, when?”