Senate Democrats roll out budget and accompanying “Fix Our Tax Code” plan

The Senate Democrats introduced their operating budget proposal on Friday totaling $52.2 billion -- an increase of $7.5 billion over the last biennium.

K-12 education accounts for 60 percent of the increase in spending with increases of $4.5 billion and an additional $937 million in special education funding. Other major increases include behavioral health and long-term care.

The Senate proposal, like the House version released last week, includes revenue increases, however, these increases differ and focus on restructuring the tax system.

“Sometimes I think that we talk about taxes in entirely the wrong way,” said Senate Majority Leader Andy Billig, D-Spokane. “Government is us coming together to do the things that would be too expensive or inefficient to do individually, so we work together our common good. It’s a good deal and we pay for it with taxes.”

Washington’s tax structure ranks worst in the nation in tax fairness with lower income individuals paying nearly 18 percent of their income in taxes while wealthy Washingtonians pay three percent, said Billig.

The graduated Real Estate Excise Tax would bring in $421 million and is proposed separately from the budget in Senate Bill 5991. Currently, the Real Estate Excise Tax is at a flat 1.28 percent.

The proposed rate changes would begin at .75 percent for sales under $250,000 and end at 2.5 percent for sales over $5 million. There would be a tax reduction for sales under $250,000, no rate change for sales between $250,000 and $1 million and the increase would be for sales between $1 million and $5 million. The house budget proposal had a similar Real Estate Excise Tax change but rates differ.

Changes in non-resident sale tax exemptions and preferential tax rates are expected to bring in $64 million with the legislation proposed in SB 5997. A preferential business and operations, also known as B&O, the tax rate for prescription drug resellers and the travel booking industry are expected to raise $38 million and is housed in SB 5988.

The Senate Democrats propose a capital gains tax but the proposed budget does not rely on it. Still, Billig said it’s a priority in tax code rebalancing efforts.The capital gains tax would fund a variety of tax reductions and credits focused on working families, B&O tax reductions for small business, senior property tax reductions, and the elimination of sales tax on certain products like diapers, feminine hygiene products, or medical equipment.

Senate Minority Leader, Mark Schoesler, R-Ritzville, does not oppose the idea that Washington’s tax system is unfair but sees other solutions to the issue.

“One of the main arguments that Democrats make when they again demand a state income tax on capital gains is that it’s about fairness,” said Schoesler, in an email, Friday. “If the Democrats really care about tax fairness, they should take advantage of our historically large revenue surplus and actually cut regressive taxes that affect low- and middle-income people the most.”

Wildfire prevention would be funded by an insurance premium surtax for wildfire prevention and suppression is housed in SB 5996 and is estimated at $91 million over the biennium. The increase would be from 2.0 to 2.52 percent on property, auto and casualty insurance, with the funds going to a new account, the Wildfire Prevention and Suppression account.

“The budget that we are introducing today represents our shared values in investing in our kids, our families, our neighbors, many of whom are struggling and need help,” said Chair of the Ways and Means Committee Sen.Christine Rolfes, D-Kitsap County.

New investments in education are totaled at $540 million with focuses on school employee health insurance, mental health and safety, and special education. Early learning and childcare proposed new funding totals $100 million for the biennium. Higher education funding proposals are focused on scholarship and grants with new funding at $292 million.

Behavioral health, which encompasses mental health and substance use disorder, would see an investment of $283 million with focuses on community beds and services, state hospital operations, and the Trueblood settlement.

Trueblood was a court case regarding the constitutionality of the length of time individuals with mental disabilities spend in jail while waiting for court-ordered competency evaluation and respiration. The state reached a settlement in 2018, and the case is reflected in the behavioral health legislation this session.

“We are not just trying to solve one problem when it comes to behavioral health.  We are really trying to look at the entire spectrum of care starting from our children and our children’s mental health, to doing early intervention, to taking a look at crisis intervention, taking a look at Trueblood, taking a look at state hospitals, and really taking a look at a comprehensive plan when it comes to behavioral health,” said Chair of the Senate Behavioral Health Committee Sen. Manka Dhingra, D-Redmond.  

Homelessness projects would receive $23.4 million with programs including permanent supportive housing, vulnerable child care, Veterans Stewardship account grants, and additional investments to the Housing Trust Fund, which supports affordable housing development.

The Senate proposed budget, like the House proposed budget, has funding to reduce the rape kit backlog in Washington State and reduce processing timelines.

Reserve funds, including the“rainy day fund” are expected to have $2.97 billion at the end of the biennium.  

“The budgets are different but they’re based on shared values. We may spend more in one area, they spend more in another but we value the same things and so I expect that the negotiations will be cordial and efficient and we’ll get done on time,” said Rolfes.

The House of Representative was expected to vote and pass its version of the budget, Friday. The Washington State Legislature is required to pass a budget before adjourning and is scheduled to end session on April 28.