If Democrats in the state House are serious about adjourning the 2015 legislative session on time (April 26), they will release their budget by March 23. As GOP Sen. Andy Hill recently pointed out, a key characteristic of an honest budget is its timely release. It is vital Democrats introduce and pass their budget next week, as promised, so that the state Senate can follow-up shortly after. The two sides need time to “resolve the differences between the budgets and adjourn on time.
Certainly, ample time is needed to resolve the inevitable differences between the Democrat-controlled House budget and the Republican-controlled Senate budget. When Jay Inslee released his budget proposal prior to the start of the 2015 legislative session, he granted insight into just how much time Democrats and Republicans will need to resolve budget differences.
This Throw Back Thursday, we are taking a look back on our green governor’s budget proposal and what Democrat lawmakers have hinted they will include in their budget as opposed to what they are likely to reject.
In December 2014, Inslee released a $39 billion budget that comprised a spending increase of 15.4%, new taxes to the tune of $1.5 billion (over $3 billion in the 2017-19 biennia) and a generous dipping ($600 million) into the state’s revenue reserves—including $450 million from the state’s rainy day fund. Inslee also packed his most wished-for items into his budget, complete with a state capital gains income tax, a cap-and-tax scheme and pricey state employee pay hikes (an estimated cost of $867 million).
Inslee proposed historic tax hikes, breaking his no-new-taxes campaign promise, 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. Unfortunately, for Inslee and other Democrats, the 8% increase is not enough. They want a 15.4% increase, demanding taxpayers fund the pricey, unsustainable agendas of their biggest campaign supporters (including the Washington Education Association and state employee unions). And, as we recently discovered for a fact, Inslee never fails his campaign supporters.
So, which aspects of Inslee’s budget are Democrat lawmakers likely to incorporate into the House budget?
As Shift reported, Democrat Rep. Ross Hunter—the lead budget writer—recently hinted that the House budget might include a state capital gains income tax. Hunter said that the state should “move in the direction of fairness and a capital gains (income) tax would do that.” Hunter defended the capital gains income tax using the “fairness” argument so often employed by his colleagues. Of course that argument is false—a capital gains income tax has disproportionate impact in the long term, therefore, is not fair. The volatility of the tax makes it a highly unreliable and damaging form of taxation.
But, that’s not the only concern a state capital gains income tax would bring. The tax may be unconstitutional. Inslee and his fellow Democrats refer to the state capital gains income tax as an “excise tax.” Of course, a capital gains income tax is not an excise tax. It is a tax on income. And, as Shift recently reported, that fact means that it is likely unconstitutional.
Democrats’ inclusion of a state capital gains income tax would be a point of contention. Republican lawmakers would put up a fight and lawyers would begin preparing a legal case against the tax. But, as Sen. Hill recently pointed out, before any of negotiations or action could take place, Democrats would have to muster enough votes to pass it as part of a separate tax bill.
Democrats will likely also move forward with Inslee’s state employee pay hikes. Democrat lawmakers have lined up to defend the result of Inslee’s secret negotiations with the top union executives who support their campaigns. Democrats justify forcing working families to foot the bill for $867 million worth of state employee pay increases by claiming state workers have gone six years without pay increases and, in turn, that has hurt retention rates.
As Shift reported, both claims are false. Republican state Senator John Braun used simple facts to disprove the claims that (1) state employees have gone six years without pay increases and (2) there is a state employee retention problem. The facts reveal two key conclusions. First, the vast majority of state employees are being compensated higher than four years ago. In fact, their salaries have risen faster than inflation. Second, the state does not have a systemic retention problem. In fact, the state has a commendably low turnover rate that is well below the national public sector average.
Democrat and Republican lawmakers will likely clash on this issue as well.
One issue lawmakers are not likely to deal with is Inslee’s cap-and-tax scheme. Democrat lawmakers, in all likelihood, will ignore Inslee’s cap-and-tax proposal. As Shift reported, the reality is that Republicans are not alone in their opposition to Inslee’s plan. The cap-and-tax scheme does not even have enough support to pass the Democrat-controlled state House.
Inslee’s cap-and-tax bill only garnered 37 co-sponsors (all Democrats) in the House. The lack of majority co-sponsors is a testament to the lack of support—he needs 50 votes—the policy has among Democrats who are worried about the policy’s economic impacts. More, Inslee knows his cap-and-tax scheme does not have the support of many members of his party. Inslee refused to defend his policy—what he labeled a “moral obligation”—before the House Environment Committee though he would have received an overwhelming sympathetic acceptance by Democrat members.
A budget battle is brewing. The sooner it begins, the sooner the conflict can be resolved and the more likely it is the Legislature will adjourn on time. That’s why it is vital Democrats in the state House do not delay and issue an honest budget (a budget that lives by these rules) by March 23.