Stability of Washington Revenue, Expenditures

The sponsors of Initiative 1033 have claimed at various times that both Washington's revenue (taxes) and expenditures (spending) are out of control and that their schemes will introduce sound financial management.

Nothing could be further from the truth. In reality, both Washington State's revenue and expenditures have been historically stable. Revenue and expenditures, as a general rule, tend to rise and fall with the economy, although at times both have actually lagged significantly during periods of rapid economic growth.

When state and local taxes across the nation are compared as a percentage of personal income - which is economists' preferred measurement, because personal income accounts for economic activity and demand for services - Washington ranks thirty fifth out of fifty states. That means the residents of most of the other states are investing more than we are in our public services. Although our tax structure is regressive, we are not, as Tim Eyman has claimed, overtaxed.

The following chart, from the Department of Revenue, shows that only in recent years have Washington and its municipal governments begun to climb out of a historical decline in the percentage of taxes collected.

Washington and All State Historical Average, Taxes

We do not need Initiative 1033 to keep revenue in check... revenue is already down for the current biennium due to bad economic conditions. The budget cuts the Legislature has already voted for are bad enough. Initiative 1033 would make them all permanent and force even more cuts later.

For more: Tim Eyman trying to sell I-1033 by purposely misleading the public and the press on taxes

The following chart tracks Washington State expenditures as a percentage of total personal income over the last quarter decade. Although our state has experienced significant increase in demand for services (owing to population growth, economic development, etc.) during the same time period, the size of our common wealth in proportion to personal wealth has remained relatively constant. In the most recent biennium (2005-2007) the percentage was only slightly lower than what it was in the 1983-1985 biennium.

Washington and All State Historical Average, Taxes

In other words, spending is not out of control. Sometimes it doesn’t even keep pace with economic growth, as was the case in the late nineties. To help meet the incredible demand for services, the Democratically-controlled Legislature has in recent years strengthened funding for services such as schools, health coverage, and environmental protection. The Great Recession has not reduced demand for services, but it did reduce the amount of available revenue, leading to a large budget deficit. The Legislature erased the deficit in 2009 with a combination of federal stimulus dollars and painful budget cuts, opting not to increase revenue. The budget cuts are not reflected in the chart above because the data provided by the Office of the Revenue Forecast Council and the Office of Financial Management doesn’t encompass the current biennium.

If Initiative 1033 passes in November 2009 it would artificially restrict the revenue available to be invested into public services for years to come. All services would be frozen at current levels; budget cuts would be permanently locked in. And that’s the best case scenario. The worst case scenario is that service levels would regress, to a point where the state, its counties, and cities would have to lay off thousands upon thousands more front line public servants (firefighters, teachers, etc.) because there would not be enough revenue available to keep them all employed. Over time, this would devastate our communities and our economy, trapping us in a permanent recession that we would not be able to climb out of.