Arrow-right Camera
The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

A progressive lab on the West Coast

By Jim Tankersley Washington Post

Voters up and down the West Coast are quietly poised to extend a massive economic experiment this Election Day, probing the limits of how much states can soak the big guys to help the little guys.

Their efforts – in three of the hottest state economies in the country – defy decades of conservative arguments about cutting taxes to spur economic growth. And advocates are already planning how to export them to the rest of the country.

The new West Coast model is higher taxes on the rich, higher spending by the state and widescale efforts to lift the working poor, all in the pursuit of stronger and more evenly shared growth. It is on the ballot in three states: Washington voters appear likely to raise the minimum wage statewide to $13.25 an hour, and to mandate paid sick leave for workers. Californians are set to essentially make permanent an income tax surcharge on millionaires to fund education. In Oregon, it will be a down-to-the-wire battle to see if voters will bolster their state budget by taxing large corporations. The fight over that measure has already broken Oregon records for spending on a single ballot measure: more than $20 million from opponents and more than $10 million from proponents.

“The West Coast is becoming more, not just the laboratory, but the breeding place for progressive beliefs,” said Bill Whalen, a research fellow at Stanford University’s conservative Hoover Institution think tank. “It’s hard to argue against it when you’re in rather flush economic times.”

Oregon’s and California’s economies grew faster than any other state’s in 2015, and Washington wasn’t far behind. Innovation and superstar cities are powering that growth, in tech hubs such as Seattle, Portland and the San Francisco Bay Area, and the entertainment capital of Los Angeles.

The booms, though, have been slow to spread beyond major metro areas. State lawmakers have struggled to balance their budgets, slashing aid to higher education and straining to fund schools at what they consider to be adequate levels.

Along the way, all three states have charted tax-and-spend courses that offend conservatives. The states’ Democratic governors all received F grades from the conservative Cato Institute on its annual Fiscal Policy Report Card this fall.

The Cato rankings prize what conservative economists have long preached for state budgets: cutting taxes and reducing spending. That mix, combined with light government regulation, has been the conservative formula for attracting businesses and investment and growing state economies.

That calculation drove Republican governors in Kansas and Louisiana to slash tax rates in recent years – and to pare back government services. Backlash to that calculation, in part, is driving the West Coast movement.

“Nationally, we’ve had a real experiment over the years on slashing corporate taxes, and even slashing taxes on the wealthy,” said Martin Hart-Landsberg, a professor emeritus of economics at Lewis and Clark College in Portland who supports the tax measure before Oregon voters. “The argument was, this was going to go into higher profits, which was going to turn into more investment, and we were all going to gain. That hasn’t happened.”

What is happening along the Pacific Coast, instead, is a two-pronged attempt to boost growth through more regulation and, yes, higher taxes. It is already winning and already spreading.

The airport town of SeaTac approved the nation’s first scheduled $15-an-hour minimum wage in 2013. Since then, dozens of states and cities have raised minimum wages. The movement has been funded by a liberal Seattle millionaire named Nick Hanauer, who contends that putting more money in the hands of workers will boost economic growth.

If Washington voters approve the wage measure as expected, “from Mexico to Canada, along the Pacific, you’re going to have high-wage economies,” said Zach Silk, president of Civic Ventures in Seattle and an adviser to Hanauer.

Silk said minimum wage increases are a first step to ensuring that prosperity spreads beyond workers in tech hubs.

California’s ballot measure is an extension of an emergency step voters approved in 2012 to avert drastic schools cuts after the Great Recession. It would continue a tax surcharge on the highest earners in the state, one that has, so far, not appeared to slow growth.

A recent poll by the Hoover Institution shows it is near-certain to pass. Whalen, who was once a speechwriter for a Republican governor of California, Pete Wilson, said that is largely because California Democrats have yoked the tax increase to education funding, quite effectively.

Labor unions and many Democrats in Oregon are trying a similar tactic to push Measure 97.

The measure was crafted by political activists to appeal to populist Oregon voters who dislike big corporations and are frustrated with a seemingly endless series of school funding crises over the past two decades.

Measure 97 would assess a gross receipts tax on corporations whose annual sales in Oregon exceed $25 million, raising an estimated $3 billion a year for schools, health care and other state programs. Supporters argue that Oregonians would not, in effect, pay any of that tax. They say most of the companies subject to it, such as Wal-Mart, are headquartered elsewhere and would not raise prices in Oregon to offset their growing tax bill.

Opponents include some Democrats, such as former Gov. John Kitzhaber. They have argued that Oregonians would, in fact, pay more, and the tax increases would reduce job growth. Those appeals appear to be working: Polls show support for the measure has fallen below 50 percent.

Still, advocates say the fight, win or lose, has given them valuable information on how to sell future tax increases, on the West Coast or otherwise.

“The thing that people need to believe, and know, is we really can make large corporations pay. If they really were confident that this would be paid by corporations and shareholders, we’d be winning 90-10,” said Ben Unger, executive director of Our Oregon, which authored the measure.

“If we win, it sets a model, without a doubt, for how other states can do this,” he said. “Even if we lost, we still have the core foundation of the right approach.”