Too often, elected officials forget to connect the dots and do the math. Put another way, they fail to look at the complete picture and add up all the costs of government to taxpayers.
It happened in 1993 when then Gov. Mike Lowry and state lawmakers increased taxes, enacted a pricey new health-care program, raised permit fees, and added more workers’ compensation and unemployment costs. In total, our state’s businesses faced $1.1 billion in new costs, half of which were tax increases.
This year, Gov. Chris Gregoire and lawmakers are staring at a struggling economy which, at last check, is producing $2.8 billion less tax revenue than budgeted. That is like a family facing the same amount of bills as last year with 10 percent less money.
Something has to give.
Generally in a bad economy, families and small businesses have no choice but to cut expenses and go without. However, that isn’t the traditional remedy for government. Elected officials opt for a combination of program cuts and tax increases.
That isn’t the best approach.
At the Association of Washington Business Policy Summit, the governor rightly said, “Tell me a tax that we are going to increase that will give you $1 billion that doesn’t hurt business, hurt individuals, hurt our economic recovery.” Now, as the Legislature gets down to re-balancing the two-year budget, Gov. Gregoire and lawmakers are considering anywhere from $700 million to more than a billion in new taxes.
We all recognize that the governor and lawmakers are between a rock and a hard spot. The recession has reduced tax revenues while increasing the need for state services.
But lawmakers should remember that, just as a rising tide lifts all boats, a growing economy brings in more tax revenue for our schools, colleges and people in need. By hobbling employers with higher taxes and fees, lawmakers are inadvertently shooting themselves — and our fragile economic recovery — in the foot.
Private sector employers are the engine of our economy. So the focus in Olympia needs to shift to stimulating the private sector so it can get stronger and produce more jobs, which in turn will reduce unemployment, lessen the need for state services and produce more tax revenue.
Legislators also need to focus on the total costs to families and employers at all levels of government: federal, state and local. Congress and the president are borrowing more money and plan to hike taxes and fees to pay for the trillions they are spending. State lawmakers want to hike taxes and expand unemployment benefits. Local governments are looking to raise taxes as well.
Each group sees their increases as minor, but added together, the burden becomes unsustainable. It is the total of all these tax and fee increases that will send the economy into a tailspin.
If we are to restore our economic vitality and create jobs, all levels of government must act in concert, carefully prioritize spending and connect all the dots.
In addition, if elected officials want to fix the economy and put people back to work in the private sector, they need to worry about how much they are spending.
For example, the national health-care reform and global warming proposals each add well over a trillion dollars in new costs when our national debt is more than $13 trillion and growing. That is nearly $40,000 of debt for every man, woman and child in America.
Gov. Gregoire rightly points out that each statistic in the state budget represents a real person. Similarly, each tax and fee hike also takes money out of the pockets of a real person — the taxpayer — who is struggling to get by.
The decisions will be gut-wrenching, but these are hard times. There are no magic solutions, only hard choices. But to make the best possible choices, politicians must first connect the dots and do the math.
Don Brunell is the president of the Association of Washington Business
