Dear Friends and Neighbors,
We are fast approaching the end of the 2013 legislative session. I am hopeful we will finish on April 28 with a bipartisan agreement on overall government spending, the transportation budget and education funding.
In this brief update, I will give you an overview of the governor's $1.27 billion tax increase proposal as well as an update on my efforts to authorize private online schools in Washington state.
As always, please feel free to contact me with questions or concerns on these or any other issues before the state Legislature.
Governor's proposed budget, tax plan
On March 28, the governor released his outline for a state operating budget. It included the addition of $1.2 billion in new and higher taxes on all Washingtonians.
I worry that new and higher taxes will erode our base of good jobs, including those in aerospace. Employers of all sizes need tax certainty so they can plan for the future – whether they feel they can hire more employees or, with looming taxes, shrink to keep their businesses afloat.
Here are some things to keep in mind as we debate the state operating budget and tax increases:
- State revenues are expected to grow 6.6 percent, or $2 billion, for the 2013-15 budget cycle without new taxes.
- Washington's personal income (inflation adjusted) growth is forecast to be lower — about 2.3 percent. “This reflects the fact that January 1, there was an increase in payroll taxes,” according to the State Chief Economist Steve Lerch.
In addition to lower incomes and higher unemployment levels statewide, I am concerned the governor does not fully fund education first, as the priority the state Supreme Court and our state constitution tells us it is. But rather he funds everything else first and relies on the following tax increases to fund the McCleary enhancements:
- Makes permanent the 0.3 percent business and occupation (B&O) tax surcharge: $534.0 million
- Makes permanent the 50-cent beer tax, and extending it to small brewers: $127.6 million
- Limits the vehicle trade-in exemption to the first $10,000 of value: $94.8 million
- Repeals the sales tax exemption for local residential telephone service (House Bill 1971): $83.2 million
- Extends the sales tax to custom computer software: $78.5 million
- Increases B&O tax rates for most industries by 25 percent: $66.2 million
- Instates a sales tax for non-residents shopping in Washington state: $63.7 million
- Increases the sales tax on bottled water: $51.5 million
- Increases the use tax for extracted fuel, except hog fuel: $40.8 million
- Increases the tax rate for resellers of prescription drugs: $29.0 million
- Increases the B&O tax for long-term rental of commercial real estate: $27.8 million
- Increases taxes for import commerce: $24.1 million
- Increases the sales tax for farm auction purchases: $5.6 million
The total for the governor's tax plan is $1.2 billion. I strongly believe we need to prioritize spending on K-12 education, public safety and protection of our most vulnerable. I would welcome your feedback on this information and your thoughts on budget priorities.
Tax incentive vs. tax loophole
With all the talk about “closing tax loopholes” to spend more than the $2 billion in additional tax collections the state will receive, it's easy to just agree. However, “tax loophole” is thrown around a lot. The reality is these are tax incentives put in place by the entire Legislature, which has been controlled by Democratic majorities for a decade.
There has always been a thoughtful debate on how we encourage employers to locate and/or expand in Washington. I agree we also need thoughtful debate to review tax incentives to ensure they are doing what they were intended to do. However, relying on them to balance a spending gap could hamper what feels like a slow-moving economic recovery.
Private online school legislation
As I have mentioned in the past, there are many ways to achieve change in policies governing all parts of state government. Early this session, I introduced House Bill 1304 at the request of a constituent to update current laws, so private schools can offer online programs like our public schools.
Fortunately, I also worked with Sen. John Braun from Lewis County in the 20th Legislative District to get a bill with identical language introduced in the Senate. Although my bill stalled in the House, his bill passed the Senate and is now well-situated to pass through the House. So I'm hopeful we'll still get this important policy in place to allow our kids another option in getting a quality education in Washington state.
Watch my legislative video update