The state House Democrats unveiled Monday what tax breaks they want to close for the 2015-2017 budget in place of their discarded capital gains tax proposal.
And, in another move to create a state budget, they introduced a bill to delay implementation of Initiative 1351 — which calls for dramatic reductions in teacher-student ratios in Graces 4-12 — from 2015-2017 to 2017-2019.
Last week, House Democrats withdrew a proposed 5 percent capital gains tax on individuals earning $25,000 a year and couples earning $50,000 a year on investments. That withdrawal was contingent on the Republican-controlled Senate's agreeing to $356 million worth of tax breaks being closed. So far, the GOP has not agreed to that proposal, but has not rejected it either. Washington has roughly 650 tax breaks
On Monday, Rep. Ross Hunter, D-Medina and chairman of the House Appropriations Committee, introduced a bill that outlines all the proposed tax breaks targeted for closure. The appropriations committee held a public hearing on his bill and other budget-related bills Monday with the idea that the Democratic-controlled committee would recommend Tuesday that the full House should pass them. Monday’s hearing was an effort to trim some of the legislative hoops that a final set of main budget bills will have to go through — whenever the Republicans and Democrats agree on them.
On Tuesday, the Legislature will have eight days to get a 2015-2017 main budget to Gov. Jay Inslee’s desk for his signature. If Inslee does not sign the 2015-2017 main budget into law by June 30, the state government will partly shut down on July 1.
There were no surprises in the Democrats’ list of tax breaks to close. All have been targeted in the past.
Their list includes a sales tax exemption on bottled water, a sales tax exemption for people who don’t reside in Washington, a fuel recycling tax exemption designed for sawmills that was later assumed by Washington’s five oil refineries, and preferential business-and-occupation tax rates to resellers of prescription drugs. There's also a preferential B&O tax rate for royalty income, a real-estate excise tax foreclosure exemption, and a plan to address a complex exemption on Internet sales with the idea of making companies with a physical presence in Washington liable for sales taxes.
At Monday’s hearing, business interests that use those exemptions and preferential rates called for keeping the tax breaks intact. Some social services and education interests supported closing the tax breaks, although they added that a capital gains tax would be a more enduring way to raise money for education.
The House Democrats also sent a main budget bill to the House Appropriations Committee on Monday afternoon. The newest Democratic budget trims some of their previous budget proposal’s cost-of-living increases for teachers, plus cuts back on some earlier learning and higher education wishes.
The Democrats’ budget proposal would freeze state college tuition for two years. Meanwhile, the Republicans want to cut college tuition by 25 percent, which would take $354 million to do.
House Majority Leader Pat Sullivan, D-Covington, said in a written statement, “This is not a budget that significantly moves Washington forward. It merely keeps the lights on for another two years. No one in our caucus wants a government shutdown. This budget is a backup plan designed to meet the very basic needs of the state and avoid a shutdown.”
The Senate Republicans’ budget negotiators did not say Monday what they thought about the House Democrats’ bills. Late last week, they did not take a solid stance — pro or con — on the Democrats’ offer to replace the capital gains tax proposal with a plan to close tax breaks. That noncommittal stance was the first time that the GOP leaders did not stick with a hardcore “no-new-revenue” stance.
However, Sen. Doug Ericksen, R-Ferndale, issued a written statement Monday that said closing tax breaks is the same as raising taxes. “They use a euphemism to help them pretend these are not tax increases. They say they want to close tax loopholes. But I think the people of Washington see though it and understand these are taxes on things they need in their daily lives,” Ericksen said.
Meanwhile, the Republicans made no comment Monday on a Democratic bill that would delay implementation of Initiative 1351, which mandates smaller class sizes in public schools, from 2015-2017 to 2017-2019. Both Democratic and Republican legislators want to nullify it because it would cost $2 billion per biennium to put into action, and the state does not have that money in its coffers.
Until Monday, the Democratic position had been to try to drum up two-thirds of the votes each in the House and the Senate to nullify I-1351 completely. So far, the Republicans’ position has been to try for a simple majority in both chambers to send the initiative back to a re-vote in November, gambling that voters would reject it the second time around.