Washington Democrats Propose $3B Tax Package, GOP Predicts Special Session

Mar 27, 2017

Democrats in the Washington state House have proposed a $3 billion tax package to help fund schools and social services over the next two years. The budget and tax plan unveiled Monday includes a new tax on capital gains.

House Democrats said their budget plan will help the most vulnerable in Washington.

“We’re putting money into human service programs, housing, homelessness, civil legal aid, public defense, parks and ensuring the quality care for our aging and developmentally disabled,” House budget chair Timm Ormsby said. “It represents a contract between generations.”

The budget also aims to fully fund schools as required by the Washington Supreme Court.

So how would House Democrats pay for their nearly $45 billion two-year budget? In part with a $3 billion tax package that includes a new tax on capital gains on the sale of stocks and bonds. They would also boost the Business and Occupation tax for higher earning companies and raise the real estate excise tax for homes over $1 million.

At the same time House Democrats said they would exempt nearly three-quarters of businesses from paying any B&O tax and lower the real estate excise tax rate for homes under $250,000.

“This is a bold proposal, no doubt about it,” House Finance Committee Chair Kris Lytton said. “But it also sets us up for solving some of the problems we need to solve around education funding and then not doing massive cuts to essential services.”

It’s a test Democrats said the Senate budget passed last week fails. Democratic Gov. Jay Inslee praised the House budget. But Senate Republicans quickly pounced. They panned the proposal and warned it may take a special session to get a final budget deal.

“Big picture, very disappointed with their position on taxes,” Senate Ways & Means Committee Chair John Braun said.

He and his fellow Republicans have proposed a new state property tax levy that would replace local school levies. Braun attacked the idea of a capital gains tax.

“This is an income tax,” Braun said. “We believe it is not consistent with either the constitution or the will of the people, so we don’t think it’s viable.”

“This is not an income tax,” Lytton responded. “This is an excise tax.”

Democrats argued their plan makes Washington’s tax system fairer, while also bringing in new dollars. They called the Republican property tax plan “convoluted” and said it unfairly hits homeowners in the Seattle area.

But the disagreement isn’t just over policy. It’s also over process. Democrats said they will pass their budget off the floor of the House this Friday. But they don’t plan to pass their tax package -- at least not right away.

Lytton said that’s because of past experience.

“In 2013, we passed packages, two different times, revenue packages over to the Senate,” she said. “They were not heard in committee and they were not given any consideration.”

But Braun said until the House does pass its tax plan, negotiations on a final budget can’t truly begin.

“They need to bring a complete proposal,” he said. “I’m certain we will talk to them, but you can have no real negotiations until they show that everything they want to do is more than just a spending list.”

Washington lawmakers have until April 23 to find agreement on a budget—or go into an overtime session. Something former budget chair Dino Rossi -- who’s filling a vacancy in the state Senate -- said he’s concerned may happen.