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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: State fiscal conditions
September 25, 2012 at 9:50 AM

Inslee, McKenna and the economic debate

I despise the false-equivalency of “both sides do it” journalism, but in reading about the economic debate between gubernatorial candidates Jay Inslee and Rob McKenna, I say both sides to make important points.

Inslee is correct to focus on enhancing the clusters most important to the state: Clean energy, aerospace, life sciences, agriculture, information technology, military and maritime. A B&O tax credit for small businesses that hire people is also worth a look. McKenna is wise to want to emphasize funding education and push for paring back regulations that hurt job creation.

The reality is that if low taxes and “light” regulation were the key to economic success, then Mississippi would be Singapore. If all state government had to do was “get out of the way,” then Boeing, for example, would probably have built the Dreamliner elsewhere. State government must do many things well in partnership with business.

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Comments | More in Aerospace/Boeing, Politics and the economy, Ports of Seattle and Tacoma, State fiscal conditions

February 15, 2012 at 1:28 PM

How Washington and the Northwest stack up on taxes

The Tax Foundation is out with its latest report on state-by-state taxes. Nationally, the per-capita tax burden is $4,160, while in Washington it’s $4,408, 11th in the country. Elsewhere in the Northwest: Oregon, $3,761 (25th) and Idaho, $3,276 (36th). Connecticut at $7,256 ranks first in tax load, while Mississippi at $2,678 is 50th. The numbers come from fiscal 2009.

As a percentage of state income, Washington’s tax burden is 9.3 percent, below the national average of 9.8 percent. In Oregon, it’s 9.8 percent and 9.4 percent in Idaho.

The research organization also ranks states by their overall tax climate as of July 1, 2011. Washington’s overall rank is 7th thanks to its No. 1 ranking in income tax. Otherwise, the state ranks 30th in corporate taxes; 48th in sales taxes (which fall hardest on low-income people); 18th in unemployment insurance taxes, and 22nd in property taxes. Idaho’s overall ranking is 21st, while Oregon’s is 13th.

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Comments | More in Pacific Northwest economy, State fiscal conditions, Tax policy

June 27, 2011 at 10:30 AM

What Washington state can learn from Texas (not what you think)

Texas’ economy is doing better than most places. According to the president of the Dallas Fed, the state has accounted for 37 percent of all net new jobs created since the recovery began. Not surprisingly, the editorial page of the Wall Street Journal stated this was because of its “free market and business-friendly climate.” This has become a meme.

The reality is more complicated. Texas remains a petroleum superstate even 40 years after the continental United States entered peak, as well as the entry point for much imported oil and a powerhouse of refining and chemicals. It’s an urbanized state with three of the nation’s largest cities, two of which, Dallas and Houston, have numerous corporate headquarters. Austin is a high-tech mecca and Houston is one of the world’s top medical centers. Texas has benefited most among the states from NAFTA and trade with Mexico.

Government plays a big role, too. The state’s powerful congressional delegation sends home the money, whether dominated by Democrats or Republicans. Houston’s status as a major city was in no small part because of the decades of federal funding steered its way by every Texas leader from LBJ to the Bushes (e.g., the Houston Ship Channel, federal grants for research, the headquarters of NASA). San Antonio’s economy enjoys a stable foundation of big military installations. The state’s universities, especially UT-Austin and Texas A&M, receive huge federal support, as well as consistent state backing even in bad times. The state used tax increases to take UT-Austin from a football mill to a world-class university. Dallas has built one of the nation’s most popular light-rail systems thanks in part to Uncle Sam. Texas’ oil and agriculture sectors enjoy big tax breaks and subsidies.

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Comments | More in Energy, Natural resources, State fiscal conditions, Tax policy

June 8, 2011 at 9:30 AM

State GDP data make clear Washington still digging out of recession

Washington’s gross domestic product grew a mere 1.6 percent in 2010 as the state battled to emerge from the Great Recession, according to new data from the U.S. Commerce Department. That was considerably lower than the national increase of 2.6 percent and among the lowest in the far west (Nevada’s contracted by 0.7 percent). Finance, non-durable goods manufacturing, utilities and construction all contracted here.

The numbers on economic activity seem at odds with some anecdotal evidence of Washington’s recovery, such as Boeing’s strength, Amazon.com’s hiring and a recovery in certain parts of commercial real estate. But Washington has continued to struggle with weak revenues, severe government budget cuts and relatively high unemployment. No wonder, then, that the state turned in such weak monthly job-growth numbers. Still, Oregon, with a much worse unemployment problem, turned in growth of 3.4 percent powered by durable goods manufacturing.

North Dakota, taking advantage of shale oil development and no overbuilding from the housing boom, saw its state GDP grow 7.1 percent (and that growth is exaggerated by coming from a small base). New York, with Wall Street booming, grew 5.1 percent.

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March 18, 2011 at 12:59 PM

Looking inside Washington’s budget shortfall

Every time it looks like chief state economist Arun Raha might be ready to deliver some good news, events slam his forecast back into the red. The latest report, delivered Thursday, shows the state will see a $700 million shortfall in revenues over the next two years.

The new forecast takes into account higher oil prices, and worries about the effect of the disaster in Japan. In addition:

The recovery continues to face other headwinds – slow job growth; a sluggish housing market; tight credit for small businesses; consumer retrenchment after the holidays; and fiscal drag from the federal stimulus winding down, as well as, cuts in state and local government expenditures.

Now the governor and Legislature face even worse Sophie’s Choices, and so do state workers. It would be helpful if austerity were not used to demonize public servants, who are not the enemy. The problem, however, goes deeper.

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November 19, 2010 at 10:05 AM

The recessionary feedback loop of sick state finances, weak start-ups

A continued drab “recovery” means less tax dollars means more cuts to state government means more of a drag on recovery. That’s one of the feedback loops holding back both Washington and America’s economy. It may get worse as federal stimulus, much of which went to covering state shortfalls, winds down with no prospect for Stim 2.

It could have been worse, according to a new Commerce Department report. Washington’s GDP fell 0.7 percent between 2008 and 2009, while the U.S. figure was a drop of 2.1 percent. Oregon: down 2.4 percent; Idaho, 3.1 percent. Sunbelt states without the oil riches of Texas performed poorly, with Arizona down 3.9 percent; North Carolina, 3.2 percent; South Carolina, 2.5 percent; Nevada a stunning 6.4 percent.

The performance had little to do with tax policy and government size than the composition of the economy and a world still hungry for commodities. Farm, mining and energy-rich states did better (helped by federal subsidies) in a crash centered in finance and real estate. Modest population size also seemed to help in some cases. Washington’s diversified economy helped it avoid a worse fall.

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Comments | More in Great Recession, Jobs/Unemployment, Outlook, State fiscal conditions

July 29, 2010 at 10:05 AM

The big refi sees state benefit from low rates, continued credit-market appetite

One of the few bright spots in the fiscal crises facing states has been the chance to take advantage of low interest rates to sell bonds and refinance debt. Washington State Treasurer James McIntire’s office held an $831 million bond sale Wednesday. Thanks to the low rates in the credit markets that meant $21.6 million saved on future interest costs of the new debt vs. budgeted expenses. It also saved $42.4 million on previously issued bonds.

Consider it like a much larger version of a home refi: The homeowner gets a lower rate and so pays less in interest over the life of the loan.

McIntire estimates that since last January, Washington has saved an estimated $647 million in debt-service costs. The bonds are used for everything for schools and roads to affordable housing and energy upgrades. Savings for the 2009-11 budget cycle reached more than $51.8 million. The estimate for debt-service savings for 2011-13 is $97.7 million. Multiple bidders competed for the latest sale, showing continued appetite for Washington bonds in the credit markets.

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December 11, 2009 at 10:15 AM

The governor disowns the budget — what now?

Top of the News: I was out of town when Gov. Gregoire rolled out and disowned her budget, balancing it as required by law but saying new revenue must be found to avoid further brutal cuts. Many of these would affect the most vulnerable residents of the state.

State fiscal crises are in headlines around the country. But the media do a poor job of explaining their holistic connection to the overall economy. Whatever happens with housing or inventories or the trade deficit, these state collapses will be among the biggest factors holding back recovery.

Washington faces a $1 billion gap. In Arizona the shortfall is twice that much. According to the Nelson Rockefeller Institute of Government, third quarter tax collections in the states fell 10.7 percent vs. the same period last year.

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November 20, 2009 at 10:05 AM

State and local government deficits will be major drags on recovery

Top of the News: Washington state’s budget deficit has grown to $2.6 billion, showcasing yet another factor that will keep the national economy in at best a slow recovery, if not an ongoing slump.

State and local government cuts don’t just take away many needed government services, they also throw potentially millions more into the ranks of the unemployed and hurt private companies as contracts are eliminated. Ethan Pollack of the Economic Policy Institute looks at the consequences, explaining that while the stimulus has helped, it hasn’t gone far enough to ease this drag on the economy.

All totaled, states face a $357 billion budget gap for the two years beginning in 2010. Local governments must contend with another $80 billion. Those in the worst shape, according to the Pew Center for the States, are California, Arizona, Rhode Island, Michigan, Oregon, Nevada and Florida. California, Michigan and Nevada also have unemployment above 12 percent (the other big jobless victim is South Carolina).

Pollack estimates that each dollar of spending cuts by state and local governments causes $1.41 in lost economic activity. Meanwhile, hard times raise the demand for government services. And America continues to fall behind on investment in infrastructure, education and research, a poisonous gift that will keep on giving in the big reset.

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