October 10, 2011

Opinion: A tale of two recessions: the dotcom bust vs. now

This shows the percentage change in state tax revenue since the start of each recession, adjusted for inflation.

Washington state desperately needs additional public resources in order to create jobs and rebuild our state economy. Unless policymakers work swiftly to increase revenues by eliminating wasteful tax breaks or increasing general tax rates, public resources will remain critically below minimally adequate levels for the foreseeable future.

As this graph shows, state tax revenues for fiscal year 2011 — four years after the start of the Great Recession — were 14 percent below 2007 levels, after adjustment for inflation. By 2014, fully six years since the start of the current recession, revenues are projected to remain about 10 percent below pre-recession levels. By contrast, during the previous “dotcom bust recession” of the early 2000s, revenues had fully recovered to pre-recession levels after only three years. After six years they were a robust 16 percent higher than they were in 2001.

This is not a typical recession. It is time to get serious creating jobs and restoring prosperity for everyone in Washington state. Doing so will require smart investments in our state health, education and other public structures. But we can't make such investments without additional resources, which can be generated by modestly increasing state tax rates, eliminating unproductive tax breaks, or both.

Andy Nicholas is a policy analyst with the Washington State Budget & Policy Center in Seattle.

The Daily Journal of Commerce welcomes your comments.

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Previous columns:

• Opinion: Limiting state borrowing means less construction, 05-02-2011
• Letter to the Editor: King County shows how to lead in changing times, 03-14-2011
• Letter to the Editor: A little history on the Sambo's restaurant name, 03-07-2011
• Opinion: Ending Basic Health would cost us all more, 03-07-2011
• Editorial: Legislature could make information less accessible, 01-31-2011
• Opinion: It's time to look at privatizing ferries, 01-10-2011
• Letter to the Editor: UW construction projects are tough on trees, 11-22-2010
• Letter to the Editor: Public art enhances regional rail projects, 11-08-2010