Higher taxes won’t solve state budget woes

Sep 24, 2020
Written by Renée Sunde, President & CEO

The tax environment facing Washington retailers remains uncertain judging from the latest revenue forecast issued this week for Washington State.

State economist Steve Lerch noted the recent sales spurt that resulted from stores reopening from earlier COVID-19-related closures. But he added that growth rates are slowing down.

Though the state expects revenues to be up $2.1 billion from its June forecast for the 2019-21 biennium and up $2.2 billion in the next biennium through 2023, the state still faces a projected $4.2 billion revenue shortfall in the next three years, if current projections hold up over time. The new projected revenue shortfall is roughly half what the state projected in June. The forecast still indicates that the state’s revenue collections will be higher than the previous budget but at a reduced rate of growth.

Regardless, Lerch cautioned members of the Economic Revenue Forecast Council that his forecast comes with “a large degree of uncertainty.”

As state legislators get ready to address state finances during the 2021 session, some are cautioning against deep spending cuts while others are floating various tax increase ideas. The brewing debate only adds to the economic uncertainties’ retailers have faced since the pandemic began to impact our communities last March.

Uncertainty is as tough on retailers as it is on our customers. Lerch outlined several others threats to the state economy including the possible consolidation of Boeing 787 airliner assembly from Everett to South Carolina; the actions of Congress in support of economic recovery; how virus infection levels may change; and whether there is progress in introducing a vaccine. His forecast also does not factor in possible unemployment insurance tax rate increases on employers in 2021 as a result of draining the state’s UI reserves from the unprecedented number of unemployment claims that resulted from COVID-19.

What is concerning is that COVID’s impact on retailers has been far reaching and may continue for an indefinite period. In downtown Seattle alone, more than 100 retailers have closed since the pandemic arrived. Streets are deserted and the future of brick-n-mortar retail is uncertain. Legislators should refrain from adding any new taxes or expenses on overburdened retailers.

What retailers need from legislators is responsible spending and planning for the unknowns that lie ahead. Too much else is up in the air to risk increased costs for doing business.

Though the state unemployment rate has fallen, it’s still more than 8%. Higher costs will only encourage more retail layoffs. Also, retail supports one in four jobs and generates roughly half of the state general fund operating budget. Retail layoffs and more closures will only hurt the state’s efforts to address its revenue shortfall.

Legislators and retailers face a daunting task to plan for the future. What retailers need now is financial relief, not a heavier financial load, from the damage already felt from the pandemic.