by Marilyn Watkins

On May 4, Governor Inslee signed into law two important building blocks of a more fair and equitable economy for Washington state. The Working Families Tax Credit will send money directly to lower-income households, partly making up for the large share of income they pay in state and local taxes. At the other end of the spectrum, a new tax on investment gains over $250,000 in a year will require the wealthiest residents to pay a little closer to their fair share for state services.

The 2021 session of Washington’s legislature may have been the most consequential in decades. Our state legislators faced a major choice. We could emerge from COVID with racial and economic inequality even more deeply entrenched, with opportunity for many of our people permanently restricted by poverty, poor health, and lost education. Or we could respond to the crisis by investing in our people and rebuilding the foundations of our economy to serve the needs of everyone, not just the privileged. These two pieces of legislation put us on that better course. 

Stark economic and racial disparities were evident in Seattle and King County long before the COVID pandemic. Some of the wealthiest people on the planet live here. Over the past decade, the growth of the tech economy brought an influx of high wage professionals to the region, eliminating large swaths of affordable housing and displacing long established Black, Brown, immigrant, and working class communities. Even as the economy boomed, more and more people were driven to economic insecurity and homelessness.

Over the past 14 months of COVID deaths and recession, the super-rich have gained billions more in stock market wealth. Highly paid professionals have mostly worked safely from home at full salary, stockpiling the discretionary income they couldn’t spend on luxury outings. Meanwhile, frontline service workers – disproportionately women from Black, Indigenous, and other communities of Color – have either risked their lives and their families to stay at work providing essential services or lost jobs and desperately needed income. Periodic waves of government assistance along with moratoriums on evictions and utility cutoffs have helped many eke by, but insecurity and anxiety remain high.

Beginning in 2023, the Working Families Tax rebate program will provide an estimated 420,000 Washington households with $300 to $1,200 every year, depending on income and family size. The people who have been hit hardest by growing income inequality and the pandemic are most likely to qualify, including disproportionate numbers of Black, Indigenous, people of color, LGBTQ, and women-headed households. The people who receive those rebates will turn right around and spend that money on rent, child care, groceries, and other necessities, helping local businesses, whole communities, and our entire state economy grow stronger.

The legislature first passed the outlines of a Working Families Tax Credit in 2008, but year after year failed to fund it. This year’s legislation, which passed with large bipartisan majorities, expands the number of people eligible, increases the amount of the rebates, and moves the credit into the base state budget so it won’t require a special appropriation every two years.

The new tax on the capital gains of Washington’s wealthiest residents squeaked through with only Democratic votes – and not all of those. Opponents have already filed a court challenge, but supporters are confident that the tax will stand. The new two-year state budget anticipates $415 million of new revenue starting in July 2022 and $840 million for the 2023-25 budget. That translates into more robust investments in the child care, education, health care, and other services we need for a strong and just economy that allows everyone to thrive.

These two new measures make Washington’s lopsided tax code a little less unfair, but they don’t come close to bringing us to the kind of fair and sufficient tax structure that we need to fuel a just economy. We will still be taxing low- and moderate-income people more than they can really afford and requiring the well-to-do to contribute a paltry share of their income to the public good. For decades as income inequality grew, our state budget has declined as a share of the economy. The result has been disinvestment in nearly everything from higher education, to parks, to public health, with fewer services and higher costs for individuals and families. It’s important to keep the momentum going and build on this year’s legislative successes with even bolder action next year.

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Marilyn Watkins is policy director of the Economic Opportunity Institute, a nonpartisan policy center focused on building an economy that works for everyone.

Featured image is attributed to SounderBruce under a Creative Commons 2.0 license.

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