Washington's tax system isn't working for anyone, according to state Treasurer Jim McIntire.
The regressive system over-taxes working families, McIntire said Thursday at AWB's weekly Lobby Lunch gathering, probably to the surprise of no one in the room.
But McIntire said he also believes businesses are over-taxed, a comment that he knew would raise an eyebrow or two.
"You don't often hear a Democrat say we over-tax business, but we do," McIntire said. "I want to be really clear that it's a problem in the state."
Gary Chandler, AWB's vice president of government affairs, asked McIntire to repeat the statement. He did.
And, McIntire said, you can add education and local government to the list of groups that are ill-served by the outmoded tax structure.
The problem, he said, is that Washington's system -- which includes a regressive sales tax, a complicated B&O tax and a property tax -- was created in the 1930s when the state had a goods-based economy.
Washington now has an information-based economy.
One consequence of the the problem is that the tax system is not capable of adequately supporting the education system over the long-term, no matter what kind of short-term decisions lawmakers make, McIntire said.
And none of the options facing them this year are good, he said, noting that despite an improving economy, the state budget is still about $1.3 billion short of balancing. Add another $1 billion to deal with the McCleary school funding decision and the problem facing lawmakers becomes $2.3 billion.
The good news is that Washington's economy is poised to grow faster than the rest of the country, and the state is perfectly situated between Beijing and New York.
That gives Washington the potential to become "ground zero" in an explosion of economic growth over the next century, McIntire said.
But it also reinforces the need to address the problem with business taxes. If you're a business leader looking to find a foothold on the West Coast, the current tax structure could cause you to steer clear of the state.
And it reinforces the need to invest in education, which is one of the ingredients needed to ensure the state has a workforce capable of meeting the needs of current and future employers.
So what's the solution?
McIntire thinks it could be some kind of "grand bargain" in which the state gets a new tax that's fair to working families and business, and grows with the economy. Such a tax would require bipartisan support and likely include a constitutional amendment ratifying the two-thirds supermajority requirement for the Legislature to raise taxes.
McIntire said he's been quietly talking with lawmakers from both parties about the idea, which lacks specifics at this point.
To do it right, lawmakers would need to assure voters that they wouldn't be gouged, McIntire said.
"It's a tough sell for the voters," he said, "but I think it's possible."
