Gov. Jay Inslee says it’s time to “buck up” and invest in the state of Washington. He’s recommending a new capital gains tax to help close a $2 billion dollar gap in the next two-year budget.
“It is time to reinvest in our state and this budget does that,” Gov. Inslee said.
The Governor released his 2015-17 budget proposal Thursday. The $39 billion plan is a combination of cuts to current programs and new revenue. The focus is on four key areas: stronger schools, healthier kids, cleaner air, and a fairer tax system.
“There is one simple fact: we cannot balance this budget and educate our children on cuts alone.”
In addition to the charge on carbon polluters unveiled earlier in the week, Gov. Inslee proposes a seven percent capital gains tax on money made from the sale of stocks and bonds above $25,000 for individuals and $50,000 for joint filers. It would begin in 2016 and is estimated to raise $800 million dollars in the first biennium.
“This is a tax on fewer than one percent of Washingtonians,” the Governor explained. “For those folks who have retirement accounts, stock in those accounts when they sell that stock, there will be zero capital gains on that.”
The Governor says Washington’s capital gains tax would be less than similar taxes in Idaho, Oregon and California. Also exempt is money earned from the sale of homes, farms, and forestry.
“This is not intended to show any lack of respect for those who would pay under this proposal. We honor success in Washington. In fact, we treasure it, but we always have to push for fairness.” The Governor later explained why he believes a capital gains tax is a better option over a sales tax increase. “It would be unfair to working families in this tough economy, where you have such incredible income inequality, to put more tax burden on working families. I believe, in this circumstance where we’ve had such wealth creation in this state… That giving a beginning teacher, or a person who’s making $500,000 selling stocks and bonds, at this point we outta ask that wealthier person to step up to the plate.”
Among the other ideas on the list of new revenues, Gov. Inslee wants five tax breaks repealed, the state cigarette tax increased by 50 cents a pack, a new tax on e-cigarettes and vapor products, and a tax on bottled water.
Those new revenues add up to $1.4 billion dollars.
Given the size of the budget shortfall and the State Supreme Court mandate on McCleary, the Governor says statewide cuts are also needed. His budget proposal includes $211 million in General Fund spending cuts. Another $212 million was found by shifting General Fund costs to other fund sources and maximizing federal funds.
“The fact of the matter is we have made reductions of $12 billion dollars since the recession started. We have already slashed mental health way past the bone. We’re in the arteries.” Governor Inslee said as a result the courts have held the state in contempt. “The point is this recession has put us $1 billion dollars in the hole, and we have slashed to the bone and now we’re looking into the cartilage to the tune of about $400 million dollars.”
The largest chunk of Gov. Inslee’s budget is dedicated to schools. He wants to spend $18.2 billion in order to meet McCleary. That would include money for smaller K-3 classes and full-day kindergarten for all students across the state.
Social and Health Services would get $6.4 billion. Washington colleges and universities would be allocated $3.4 billion, but in-state undergraduate tuition would be frozen.
When asked whether he changed his tune from the 2012 campaign when then-candidate Inslee vowed not to raise taxes: “The combination of the legislature not closing these loopholes… and increasing demands in education and mental health, we simply have not been able to generate the revenues necessary to provide vital services to Washingtonians. I have hoped to avoid this route. I have tried to avoid this route, but we now have an obligation to our children. They oughta have a first class education. It is a duty of ours and I intend to fulfill it.”
Immediately following the Governor’s news conference, the Senate Republican’s chief budget writer issued a statement. Sen. Andy Hill (R – Redmond) said, “Investing in student achievement and providing essential services should not depend on risky tax schemes that threaten our economy. Educating our children, caring for those in need and supporting our local economy demands thoughtful, bipartisan budget leadership. Tax increases should be the last resort, not the first response.”
You can see more of the details of the Governor’s 2015-17 budget proposal here.
You can also hear more from Governor Inslee’s budget director, David Schumacher. He is the guest on this week’s “Inside Olympia.”