Gov. Inslee proposes capital gains tax, B&O tax hike, and modifying levy cap
Among Washington Governor Jay Inslee’s most recent 2019-2021 budget proposal is a capital gains tax, other tax increases, and modifications to the state’s levy cap in an effort to increase revenue.
According to the governor’s proposal:
Washington has one of the most diverse and resilient economies in the nation. And, like much of the country, the state is in the midst of one of the longest-ever stretches of continuous economic growth. Even so, our state and local governments still struggle to find enough revenue to sustain their budgets. This is partly due to the rising cost of providing services to a growing and aging population. But it is also the result of an outdated and inefficient state tax system that fails to keep pace with the growth of our economy — a tax system that puts too much of the burden on people at the lower end of the economic scale and does not require the very wealthiest to pay their fair share.
The governor’s proposal for the 2019-2021 budget would drop the levy cap starting in 2020. Inslee says this shouldn’t be an issue so long as the state continues to meet its obligation to fully fund K-12 education.
“I think it’s reasonable to restore the ability of local communities to control their own destiny, to determine whether their voters want to make additional investments in their schools,” Inslee said Thursday.
The levy cap would stick for 2019 to help offset property tax increases, but in 2020, it would revert to a traditional, more simplified plan allowing districts to levy up to 28 percent of their combined federal and state dollars.
Upon the announcement, Washington Education Association President Kim Mead praised the levy modification, saying that Washington educators like Governor Inslee’s proposal.
“Washington educators are pleased Gov. Inslee’s budget proposal provides funding for the newly negotiated agreement to improve health insurance for K-12 educators,” Mead said. “Gov. Inslee’s budget plan also calls for restoring levy flexibility, which will allow school districts and voters to meet the specific needs of their students beyond state-funded basic education.”
“We urge the Legislature to support the Governor’s educator health care and school levy proposals and his plan to fund training for para-educators who work with students,” she said.
Capital gains and business taxes
To help fund sweeping changes to Washington’s mental health care system, and fund orca recovery, Inslee proposes to increase the business and occupation tax, while introducing a capital gains tax.
Most of the revenue from the total $3.7 billion tax package proposed by Inslee comes from an increase in the B&O tax on services provided by accountants, attorneys, and real estate agents among others.
A new 9 percent capital gains tax would raise about $975 million in fiscal year 2021. This capital gains tax would target earnings from the sale of stocks, bonds, and other assets above $25,000 for individuals, and $50,000 for those who file jointly.