The Democrat-controlled state House released their 2015-17 state budget proposal today. Unfortunately, it appears that House Democrats followed the example set by Jay Inslee and introduced a nearly $39 billion budget based on sizable tax and spending increases.
Democrats’ budget includes a spending increase of $5.2 billion, nearly equivalent to Inslee’s proposed spending increase of 15.4%. Of course, it’s also despite the fact that the state will take in $3 billion more in revenue for the next two-year budget cycle (2015-2017). That’s an 8 percent increase from our state’s operating budget of $33.8 billion for 2013-15.
Democrats plan to pay for their more than 15% spending increase with $1.5 billion in tax increases. The tax increases would amount to $2.4 billion in the following biennia (slightly less than Inslee’s $3 billion). Among other new taxes, Democrats proposed a state capital gains income tax at a 5% rate on individuals, with certain exemptions. That contrasts slightly with Inslee’s proposed tax rate of 7%.
Additionally, Democrats proposed a permanent hike in the state business and occupation (B&O) tax on service businesses. It’s a tax rate increase from 1.5% to 1.8%.
Democrats insist the new taxes are needed to meet K-12 education funding requirements as determined by the state Supreme Court’s McCleary decision. They did not act on the Washington Education Association’s Initiative 1351.
House Democrats also did not propose a cap-and-tax scheme.
Other proposed tax alterations include closing or changing several tax exemptions. These include eliminating the sales tax exemption for residents in states that do not have a sales tax (like Oregon), repealing the sales tax exemption on bottled water and on extracted fuel. Tax exemptions for travel agents and prescription drug resellers also would be eliminated. Additionally, the tax exemption for the real estate excise tax on foreclosure sales would be restricted.
GOP state Sen. Andy Hill, chair of the Senate Ways and Means Committee and top budget writer, responded to Democrats’ budget proposal. He stated his concern over the House’s reliance on “volatile tax increases” to meet the meet requirements of the McCleary decision. Hill stated,
“The House’s reliance on volatile tax increases goes against the state’s paramount constitutional duty to fund education with a reliable and stable revenue source. While increasing state spending by $5 billion the House still puts students last, tying education funding to tax increases. I’m not sure if that’s unconstitutional or just unconscionable.”
Citing the state’s projected revenue increase of $3 billion, Hill re-iterated what he has said from the beginning: “Tax increases should be the last resort, not the first response.”
Hill also reminded House Democrats that a complete budget requires them to balance their proposed spending with revenue. He stated, “It would be irresponsible to send a budget to the Senate that does not balance over the next two years much less over the four years required by law.”
Due to pressure placed on Democrat Reps. Frank Chopp and Ross Hunter by House Republicans, the public and members of the Legislature will have time to actually read the budget before a vote is held. A public hearing is scheduled in the House Appropriations Committee on Monday, March 30, at 1:30 p.m. It is tentatively scheduled for a floor vote in the House on Thursday, April 2.
