OLYMPIA, Wash. – State Senate Democrats on Thursday released a few ideas to bring in more money to balance the state budget, including taxes on wealthy individuals and businesses, increasing property taxes and decreasing the state sales tax.
They had been long expected to propose wealth taxes to close the state’s multi-billion dollar budget gap over the next four years. They did so saying the state’s current tax system is “regressive” and “unfair.”
“Voters are really interested both in making sure that wealthy people and businesses pay their fair share of the tax burden in our state and that they don’t want to see vital services cut,” said Senate Majority Leader Jamie Pedersen, D-Seattle.
The revenue proposal consists of five parts:
1. A “financial intangibles tax” on people who have over $50 million worth of stocks, bonds and other certain financial assets. Democrats said about 4,300 wealthy individuals would be targeted by the tax.
2. A payroll tax on large employers similar to Seattle’s “JumpStart” tax. About 5,200 companies would fall under the fee, but those who pay the Seattle tax would get a full credit for the state tax.
3. A change in the cap on property tax increases. Democrats called the current growth limit of 1% “arbitrary” and instead propose a combined rate of population growth plus inflation.
“This will help ensure that our local communities have the revenue to reflect the actual cost of providing public safety and community protection services for their communities,” Frame said.
4. Eliminating 20 tax exemptions that have been deemed by legislative auditors as ineffective or obsolete.
5. Reducing the state sales tax from 6.5% to 6% – decreasing state revenues by about $1.3 billion a year.
“As cost of living is rising, Washington’s current regressive tax code puts an additional strain on households that are really struggling to meet their basic needs,” Frame said. “And this proposal reduces that disproportionate impact on low and middle income households.”
When asked if the taxes could force wealthy individuals out of the state, Frame said Washington is a “great place” to work, live and run a business because of the services provided by the state.
“I believe that, and hope that, there is shared value around shared responsibility of funding our public schools and other key public institutions,” she said.
In all, the Senate Democrats say the proposals are set to bring in $17 billion over the next four years for schools, health care and other state services.
“I guess the first thing that comes to my mind is ‘wow, that is a lot of new taxes that they’re proposing,’” said Senate Republican budget lead Chris Gildon, R-Puyallup.
Gildon argued the new taxes are unnecessary to sustain state services, and lawmakers need to limit spending instead. He took issue with Democrats saying they’re targeting the wealthy – while also opening the door for property tax increases.
“That will directly fall on the backs of working families, middle class people who are trying to get by,” he said. “And it will also be a pass-through cost to renters across our state who are already struggling so much.”
The governor’s office did not immediately respond to a request for comment on the revenue proposal.
Democrats said they have been keeping Gov. Ferguson updated on their budget progress. The Democratic executive has made it clear he wanted to exhaust spending cuts first before talking about new revenue.
The spending that all this proposed revenue is gonna go toward is still being ironed out.
House and Senate Democrats are expected to release their own separate budget proposals on Monday. Senate Republicans released their last week.
Everyone has to come together to pass one budget out of the legislature by the time session ends on April 27th.
Albert James is a television reporter covering state government as part of the Murrow News Fellowship program – a collaborative effort between news outlets statewide and Washington State University.
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