While many say they support his ambitious budget proposal, Washington's Democratic lawmakers Friday gave mixed reviews of Gov. Jay Inslee's $3.7 billion tax package. Three moderate Democratic senators say they are unlikely to support a capital-gains tax.
OLYMPIA — While many say they support his ambitious agenda for the state, Washington’s Democratic lawmakers Friday gave mixed reviews of Gov. Jay Inslee’s multibillion-dollar tax package to fund his proposed 2019-2021 budget.
Inslee on Thursday unveiled an $54.4 billion plan that would boost education spending, combat climate change, help save critically endangered orcas and reshape Washington’s troubled mental-health system.
Many Democratic state lawmakers say they share those priorities, and the party this year holds its most comfortable majorities in recent memory. Democrats control the Senate 28-21 and the House by 57-41.
But Inslee’s proposal represents a roughly 20 percent increase over the existing state operating budget, which some lawmakers are finding hard to swallow. And to help pay for it, the governor wants a 9 percent tax on some capital-gains earnings, a hike in part of the business-and-occupation tax and a restructuring of the real estate excise tax.
“I’m not sure that all of the three — if any — have legs,” said Sen. Dean Takko, D-Longview.
Takko was one of three moderate Democrats who said they were reluctant to support a capital-gains tax. Democratic Sens. Mark Mullet of Issaquah and Steve Hobbs of Lake Stevens also said they weren’t too keen on the idea.
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“Certainly there’s a lot of good things there that we should do and need to do,” Takko said about Inslee’s policy proposals. But, “Do we fund them to the level that the governor wants?”
Mullet was even less enthusiastic, noting that Washington’s strong revenue growth over the past several years has added billions to the state’s coffers.
“I really would like to find a way to pay for the things that are important to us by prioritizing the money that we have,” he said.
Sen. Christine Rolfes, D-Bainbridge Island and the chief Democratic budget writer in the Senate, said on Thursday that most Democrats share Inslee’s priorities. But the tax increases are “probably more ambitious than the Legislature will be able to pass,” she said.
Democrats in recent years have pushed for a capital-gains tax to fund government or relieve property taxes, and to make Washington’s tax system more progressive.
Ever since Inslee and lawmakers approved the 2017 bipartisan school-funding plan, many Puget Sound-area Democrats have called for lower property taxes, possibly offset through a capital-gains tax.
Property-tax cuts are one area where Inslee and some Senate Democrats differ in the upcoming budget debate.
“The governor did not include a cut to property taxes as it would have to come at the expense of something else — like behavioral health, education, orcas, opioids and homelessness,” Inslee spokeswoman Tara Lee said in an email.
Sen. Manka Dhingra, D-Redmond, said she intends to introduce a property-tax-reduction bill to help some disabled veterans and seniors stay in their homes, similar to a proposal she sponsored last year. Dhingra supports a capital-gains tax, but said it would be ideal to have at least some of that money go toward property-tax relief.
Disagreements over where revenue should go have stalled previous tax proposals that Democrats otherwise agree upon, said former Rep. Kristine Lytton, D-Anacortes, who chaired the House Finance Committee and retired this year.
Republicans have broadly agreed on the need to improve the mental-health system and to continue prioritizing the education system. But they’ve rejected the need for new taxes. As the economy has boomed, so has the state budget. In 2013, lawmakers approved a two-year budget of about $33.5 billion.
With the growth in existing tax revenue, the state will have about $50 billion for the upcoming budget cycle even without new taxes.
Rep. Bruce Chandler, R-Granger, said he worries about what might happen when Washington eventually gets caught in a recession and revenues dip.
“To have a budget that has essentially doubled over the last decade … is not a rate of growth that we’re going to be able to sustain,” said Chandler, the ranking Republican on the House Appropriations Committee. He added later, “I think that we have to be prepared for the economy to change and have a plan for that, how to get through that and be stable.”
As for a capital-gains tax, “The voters have rejected anything that remotely resembles an income tax,” Chandler said. And the governor “did not give any reason why that would change.”
Democrats have long chafed at Washington’s tax system — which has no income tax and relies heavily on the sales tax. They argue that it is unfair to lower-income and middle-class people.
In his budget proposal, Inslee gave numbers showing how the state’s tax system has failed to capture the economy’s growth as the service sector becomes more dominant. Washington collects less money in state and local taxes per $1,000 of personal income than the national average, according to the state Office of Financial Management.
In addition to Dhingra, Democratic Sens. Patty Kuderer of Bellevue and Joe Nguyen of West Seattle said they’d also like to see a capital-gains tax approved this year.
“I think we are all very much aware that we have the worst tax structure in the country,” said Kuderer. “It’s time we take a good, hard look at who is shouldering most of the burden.”