Screenshot of Washington House Democrats Tweet.

House Democrats propose budget with revenue gained through capital gains excise tax

An earlier version of this story incorrectly referred to the budget in terms “millions” instead of “billions.”

House Democrats explained Monday how they plan to bring in sufficient revenue to meet the Legislature’s Constitutional obligation to fully fund education.

The price tag on Democrats’ proposed budget is $44.8 billion. Last week, the Republican-led Senate proposed a $43.3 billion budget.

About $7.1 billion of the Democrat’s budget would be dedicated to funding K-12 education.

To pay for it, Democrats suggest cutting down on tax exemptions and introducing an excise tax of 7 percent on capital gains to bring in the revenue needed for the budget.

They also suggest reworking the Business and Occupation tax structure. The highest grossing businesses would see a 20 percent increase on the B&O tax rate, while 72 percent of the lower-earning businesses would get zero tax liability. Smaller businesses could also get a $100,000 deduction under the proposed budget, according to a House Democrat press release.

Republicans go for a much different route: introducing a levy swap that would decrease property taxes in property-poor districts, while increasing the property tax in property-rich districts.

Democrats were explicitly aware of the differences between their budget and Republicans.

Rep. Timm Ormsby, D-Spokane, said the Democrats’ budget is pricier than Republican’s because Democrats are building funding for social services programs. He argued that residents are still recovering from the Great Recession, and need the social safety net, and also that government employees need higher salaries for the positions to remain competitive.

“We think it would be unnecessarily malicious for us to not address the social safety net concerns,” he said.

Sen. Sharon Nelson, Democrats’ Senate minority leader, criticized the GOP’s budget proposal multiple times last week, calling it “cold blooded.” At the budget press conference Monday, Democrats highlighted just how different their proposal was.

“We anticipate there being some differences about how we think about things. So these aren’t apples to apples comparisons. This is apples to zucchinis,” Ormsby said at the budget press conference.

That said, Democrats insisted they would work to find common ground.

“We need to get our definition of terms. We need to decide on rules of engagement. And those would be the things that we’ll need to do in order to initiate this discussion,” Ormsby said.

One point of contention will likely be the capital gains tax, which Republicans have criticized, equating it with an income tax.

Rep. Laurie Jinkins, D-Tacoma, argued against that point.

An excise tax, under state law, is “only applied if you sell something and that’s what makes (the Democrats’ proposed capital gains tax) an excise tax rather than an income tax.”

Democrats also pointed out that the capital gains tax would likely impact a small percentage of the state population. Jinkins said the tax would likely only hit about 50,000 Washington residents. She also said that neighboring states have steeper capital gains taxes than the one Democrats are proposing. Oregon has a 9.9 percent capital gains tax and Idaho has a 7.7 capital gains tax, she said.

Rep. Kristine Lytton, D-Anacortes, said Democrats were hoping to direct taxing structures toward a more progressive model under this budget.

“We got to look at things differently, and this proposal is more bold and more progressive than what we’ve seen come out of the Legislature in many years,” she said at the Democrats’ budget press conference.

The bill will face a public hearing Monday afternoon in the House Appropriations Committee.

Erin Fenner: erin@washingtonstatewire.com, @erinfenner

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