WashingtonVotes NEWS: House Democrats seek capital gains tax to help fund proposed 2017-19 supplemental budget
With 15 days left in this year’s scheduled legislative session, Democratic House and Senate leaders this week released their respective supplemental budget proposals to add more spending to the current $43.7 billion budget for 2017-19 they approved last year.
The House Democrat’s proposal, HB 2299, would add some $365 million to increase General Fund spending to just over $44 billion, while the Senate Democrats say they want to add $1.1 billion to bring the revised budget to $44.8 billion (SB 6032.)
The House plan would spend down nearly $1 billion in budget reserves to provide for a short-term state property tax cut. It also includes a seven percent capital gains income tax for investment income above $25,000 for individuals and $50,000 for joint filers. Currently Washington state has no income tax.
Last year, the legislature passed a property tax increase of more than 80 cents per $1,000 of assessed value in response to the state Supreme Court’s McCleary ruling on school funding. A corresponding decrease in many local levy rates won’t be effective until next year, and many Washington homeowners are experiencing sticker shock as they get their property tax bills this month.
To include the tax on capital gains income in their proposed budget, the House, which is narrowly controlled by Democrats, would have to pass HB 2967. The bill cleared the House Finance committee on Monday but has not yet been scheduled for floor action. House Democrats proposed a capital gains tax last year, but the bill died when House leaders decided not to schedule it for a vote.
This year, Democrats control the Senate and the House, but Senate Majority Leader Sharon Nelson has said that she doesn’t have the votes in her caucus to pass a capital gains tax. Republicans strongly oppose imposing a capital gains tax. They say it is a volatile revenue source and an unconstitutional tax on income. States that do have a capital gains tax classify it as an income tax.
The Senate Democrat’s proposal would add $972 million to the education budget to pay for salary increases for teachers and other school staff.
The proposal would also spend $403 million from the state’s reserve funds for a one-time, 31-cent cut in the state property tax rate for 2019. Using funds from the state’s Rainy Day reserve fund would require a 60 percent majority vote in the Legislature, making Republican support for such a plan essential to passage.
The supplemental budget proposals were released a week after the state revenue forecast projected a $1.3 billion in additional revenues from existing taxes through the 2019-21 biennium. In a statement this week, Sen. John Braun, R-Centralia, the ranking minority member on the Senate Ways and Means Committee, called the Senate proposal “a good starting point,” but urged fellow lawmakers to push for more substantial property tax breaks this year. He added that “I strongly disagree with the House’s plan to raise taxes when the state just received the largest revenue forecast increase in a decade.”
It is likely that both chambers will pass their budgets quickly this week. This would set the stage for budget negotiations during the final two weeks of this session, leading to adjournment scheduled for March 8th.
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