The state Economic and Revenue Forecast Council estimates state revenue will be $4.5 billion less than previously forecast for the 2019-2021 budget and $4.3 billion less for the 2021-2023 budget, Stephen Lerch, the council's executive director, said Wednesday in a meeting conducted by teleconference. According to a report by the council, over half of the decrease is from declining sales taxes as a result of the outbreak of the novel coronavirus, which causes COVID-19, a respiratory disease.
Lerch said that collections from the state's Revenue Act taxes declined 6% in March from the same month in the previous year and 14.4% in April compared with that month in the previous year. He noted that the March percentage was comparatively smaller because March is usually a month with larger collections. The state's Revenue Act includes most of Washington's major tax sources, including retail sales and use taxes and business and occupation taxes, according to the state Department of Revenue website.
In a news conference Wednesday, Democratic Gov. Jay Inslee said it was too soon to determine if new taxes might be considered to address the budget gap. Inslee instead pointed to his announcement that day canceling a scheduled wage increase for nearly 5,600 government employees and ordering furloughs, which will save $55 million in spending for the next year, as appropriate action.
"I am making decisions in the proper way at the proper time," Inslee said.
Before any decision on potential new taxes, Inslee said, the government will have to look through the budget and will have to wait to see if the federal government passes an additional stimulus package. Lerch noted in the presentation that a potential stimulus package had not been incorporated into the forecast.
While most other revenue forecasts had gone down, cannabis tax revenue is expected to rise by $36 million for the 2019-2021 biennium and $18 million for the 2021-2023 biennium as compared with a February forecast, Lerch said.
Lerch also noted that the forecast had accounted for an expected invalidation of the state's tax on large financial institutions, which was ruled unconstitutional in May.
Raising taxes on employers while they address the negative impacts of the pandemic would make it harder for them to recover, Rep. Ed Orcutt, R-Kalama, told Law360.
"I am opposed to new taxes. Let's not forget that taxes were raised in 2019," Orcutt said. "Budget writers should [be] and have been looking at areas where cuts can be made to have the least impact possible."
Senate Ways and Means Committee Chairwoman Christine Rolfes, D-Bainbridge Island, said in the Wednesday meeting that she was not ruling out potential tax proposals.
"As one of the lead budget writers in the Senate, I'm saying everything is on the table right now," Rolfes said. "Right now, the goal is do no harm. But we cannot recover the economy until we have the virus under control, and that requires spending."
Inslee said that a special session was a possibility but that he would call one only if there was a reasonable chance that meaningful legislation would be passed.
"I don't think it's productive to call people to have them sit around and twiddle their thumbs and argue with one another, and not be able to actually get something done," Inslee said.
A proposal by Rep. Frank Chopp, D-Seattle, would create a capital gains tax and a tax on large corporations to help pay for state expenditures as it recovers from the pandemic. King County Assessor John Wilson has asked the Legislature to consider proposals to allow counties to provide commercial property tax relief from the pandemic by allowing revaluations and providing abatements similar to those available for natural disasters.
Inslee's office declined to provide additional comment. Rolfes did not respond to requests for additional comment.
--Editing by John Oudens.
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