Why Democratic Sen. Guy Palumbo did not vote for a capital gains tax

Washington State Democrats were pushing for a new capital gains tax over the recent session. It failed, partially because of lawmakers in their own party did not vote for it. Lawmakers like Senator Guy Palumbo.

But that doesn’t mean the fight for capital gains is over in Washington state.

“I think our caucus and our budget chair actually did the right things on capital gains … not booking it for the operating budget, because capital gains is a volatile tax and we are due for a recession within the next three years,” Palumbo told The Jason Rantz Show on KTTH.

RELATED: Washington capital gains tax dies in Olympia

He argues that lawmakers shouldn’t craft an operating budget to include a volatile tax when you are facing an economic downturn – a time when stocks and businesses don’t often sell. But such a tax or some other funding source is going to be needed in Washington. Sen. Palumbo also argues that the state simply needs to pay for its services. Education funding is a good example.

“Walking into this year, we had a bow wave created by McCleary when we voted on that in 2017 …. So we knew that was coming in this budget cycle and we had to pay for it,” Palumbo said.

“Then you add in employee contracts that are signed with our state employees,” he said. “That was $1.6 billion over four years. And we were also under a court order to deal with mental health … and that requires major investments as well, which we did this year. That’s got to come from somewhere. We also asked agencies to take a haircut and tried to save money where we could, but there are just some financial realities you have to deal with.”

The senator further noted that despite the state Legislature fully funding K-12 education, as ordered by the court, Washington is still coming up short.

“The problem that we are dealing with right now is the 2017 Republican version of McCleary plan which lowered property taxes,” he said. “I’m not trying to be partisan, but it’s a fact. It lowered property taxes this year in local school districts to $1.50. That created a funding gap in some of our larger school districts like Seattle and Tacoma. That’s just math. That’s not Democratic math, that’s not Republican math, that’s just math.”

Palumbo admits that when the Legislature put an extra $1 billion up for education last year, they expected school districts would spend it wisely. Rantz points out that school districts, like Tacoma, bargained much of their money away to teachers unions.

“We thought it did have the sideboards for how it could be spent,” he said. “There’s no denying that certain districts bargained that away.”

The Washington State Legislature ended its 105-day session last Sunday. It passed a $52.4 billion budget, with $800 million coming from a handful of new taxes, and a hike to the B&O tax.

Hear Sen. Palumbo’s full interview with Jason Rantz here.

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