Washington tax collections up $2.6 billion over projection by 2023
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Weeks after Washington lawmakers passed the largest state budget to date, economic forecasts show the state is poised to rake in $2.6 billion more than anticipated.
That number stems from the Washington Office of Financial Management’s latest economic forecast released on Wednesday. The report shows the state is set to receive $1.8 billion more in the current 2019-2021 budget cycle than reported in March. Moreover, based on OFM analysts’ projections, the state can expect to pocket $2.6 billion more than projected by mid-2023.
Those figures put the state’s 2019-2021 budget cycle—which ends this week—at around $53.2 billion with an ending balance of approximately $3.8 billion, including cash reserves. The 2021-2023 budget cycle–which starts on July 1–is expected to generate $58.4 billion for the state.
OFM analysts attributed the mass influx in revenue to sales and use taxes, which it credited as one of the most significant contributing factors to its forecast. Consumers, they wrote, bumped sales and use, public utility and business and occupation tax collections $481 million higher than forecast.
Washington car and truck sales were among the chief sales OFM analysts cited as the catalysts for sales tax collections in the state. In May, auto sales were up 161% over the year, though new vehicle registrations fell 5.8% from where they were in April.
Much of the OFM’s revised forecast also points to the booming real estate market where Washington home prices have surged throughout the pandemic. Since March, the OFM reports real estate excise tax collections were $51 million higher than forecasted and are projected to come in at $65 million higher than expected.
That figure reflects what industry experts refer to as a seller’s market. According to Zillow, average residential home prices surged nationally from $251,000 to $287,000 from March 2020 and May 2021, marking an increase of 12%.
Realtor.com reports the median asking price for a Seattle home was $765,000 in May 2021—up 5.5%. The median sale price was even higher at $856,000. Those figures compound high housing costs around Puget Sound, where prospective home buyers can expect the least bang for their buck in the nation.
Housing construction, the OFM reported, is also booming in the state. In the first quarter, 63,700 units were greenlit for construction—up from 44,400 in the last quarter of 2020. That’s the highest number since 1978. The OFM reports 30,900 of those units were single-family homes, and 32,800 were multi-family units.
All of the above marks a reversal of fortunes for the state, projected to be in the hole for $9 billion a year ago. In that time, Democratic lawmakers have fought to raise more revenue, passing a new capital gains tax in tandem with a tax exemption for low-income families.
The OFM forecast cites positive and negative factors behind the numbers.
The forecast acknowledges that while COIVD cases, hospitalizations and deaths are on the decline, inflation is up across the state, as are new COVID variants. It also cites continuing supply chain problems for certain sectors like manufacturing as building material costs surge.
OFM analysts write that the COVID-19 pandemic could pick back up again if new strains slow recovery. Due to evolving markets, job growth may take a year or more to whittle the unemployment rate down to pre-pandemic levels. The OFM expects jobless rates to dip from 5.4% to 3.4% in 2022.
Washington is poised to lift most COVID restrictions on businesses by the end of June or when Gov. Jay Inslee expects the state to see 70% vaccination rates.
This article was originally posted on Washington tax collections up $2.6 billion over projection by 2023
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