Invest Tax Surplus In State’s Future

Thanks to a resilient, diversifying economy, Washington state’s treasury holds a larger-than-expected, $700 million surplus. What to do? Back in the 1980s when Democrats ruled and revenues boomed, surpluses became an excuse to enlarge state agencies and invent new spending programs. And sure enough, Gov. Mike Lowry wants to enlarge the payroll of the state’s most bloated bureaucracy, the Department of Social and Health Services. More to his credit, he also has spoken out for education funding.

Meanwhile, Republicans want to give the revenue back, via tax cuts.

Who’s right? The wise path lies between the partisan poles.

There ought to be tax cuts, and there ought to be program enhancements. But they ought to be designed to strengthen the source of the state’s good fortune: the economy. Which taxes do the most harm? Which state expenditures do the most good?

On the tax front, stores that do a big trade in cigarettes gripe that Washington’s high tobacco taxes drive customers to Idaho. To the extent that some of the tobacco tax was for programs the Legislature later killed, there’s a case for a rollback. But some tobacco taxes have broad economic value. They help fund statesubsidized medical insurance. Smokers’ medical bills drive up insurance costs; their taxes can pull costs back down. Further, the economy needs state-backed health insurance so people will leave welfare and take an entry-level, no-fringe-benefits job.

By far the most damaging tax in the state is the business and occupation tax, which punishes smaller, newer businesses - the most prolific source of new jobs. Even a partial rollback of recent B&O increases would boost growth areas all across the business spectrum. That’s crucial. This year’s Boeing and Hanford layoffs could have hurt state revenues, but didn’t due to employment growth elsewhere in the economy.

On the spending side, by far the most constructive state outlays are at community colleges and universities, which equip Washington residents for self-sufficient careers. But our colleges don’t have room for all the kids who’ll want to enroll. Both Lowry and mainstream Republicans acknowledge the need to boost educational capacity. That should take first priority in allocation of the surplus - not further expansion of a discredited social agency.

The issue shouldn’t be how to spend the surplus. It’s how to make surpluses recur, by making the economy stronger. The best social program is a job.

, DataTimes The following fields overflowed: CREDIT = John Webster/For the editorial board