By Michael Mitchell --- Late last night, legislators came to an eleventh hour agreement to choose Washington kids over multimillionaires. By fixing Washington state’s estate tax, lawmakers have prevented the loss of nearly $160 million in resources that go to educating children.
Closing the estate tax loophole is a good place to start, but much more still has to be done to ensure that adequate resources are included in a final budget agreement. Closing ineffective tax breaks and making additional technical corrections would generate revenue that could be used to invest in creating jobs and growing our economy.
The estate tax fix (House Bill 2075) prevents the loss of roughly $160 million in refunds ($97 million) and lost collections ($63 million) due to last year’s Bracken decision. The agreement goes beyond addressing the court ruling and makes broader changes.
Specifically, HB 2075;
- Allows the exemption (currently for estate’s worth up to $2 million) to increase annually by a measure of inflation;
- Increases the rates for the wealthiest households, making the tax more progressive overall;
- and provides a $2.5 million deduction for small businesses. Estates with larger business interests, defined as those with a total value greater than $6 million, would not be eligible to claim this deduction.
Lawmakers should build on this momentum and look for additional ways to bolster resources such as closing ineffective tax breaks and addressing the way our state taxes telecommunication companies.
The House and Senate budgets take very different approaches to generating additional resources. Overall, the House proposes to raise roughly $255 million in revenue by closing tax loopholes currently on the books. Yet, only $47 million of this revenue is actually included in their budget proposal. The remainder ($208 million) must be approved by the passage of HB 2034, which proposes to close or narrow six additional tax breaks in order to invest more in education.
The Senate’s budget proposal closes zero tax breaks, and moves in wrong direction by creating 14 additional loopholes which would cost just over $11 million in the next budget cycle. Independent of its budget, the Senate proposes to raise $47 million in new revenue by transforming the sales tax exemption for Oregonians into a refund program (SB 5871).
Both the House and the Senate have proposed – the House in its budget and the Senate in SB 5873 – to eliminate the sales tax exemption on residential telephone services thus normalizing tax treatment for traditional, wireless and cable telecommunications companies. The fix protects $110 million dollars in resources in the next biennium while also protecting the state from future lawsuits from telecommunication firms.
Any final budget must include additional revenue to grow our economy and build the middle class. Lawmakers have a choice - working families, seniors and kids, or ineffective and outdated tax breaks.
Our Executive Director Remy Trupin released a statement on the final hours of special session. "As the special session winds to a close without a budget, there is a lot at stake.
Lawmakers should not rush to compromise without thinking through the long-term implications. One particularly egregious example is SB 5895 or "education by starvation," this rigid, short -sighted bill would fund education at the expense of all other vital services. It is absolutely the wrong approach to moving our state forward and should be abandoned as part of the negotiations.
In these final days, there is much more at stake than agreement on a budget. The decisions being debated in Olympia will have an impact on Washington state for generations to come. If the final compromise does not include revenue then we have failed to comply with the McCleary decision, and we have short changed our children's future for political ease and expediency."
Stay tuned for our series, " Final Hours of Special Session: What's at Stake."
Part Three: Revenue proposals
We are now accepting applications for the 2013-2014 Betty Jane Narver Fellowship.
We are looking for someone with:
- a commitment to social justice
- facility with quantitative analysis,
- an understanding or a desire to understand policy making,
- a desire to receive mentorship, and a strong interest in pursuing a career involving policy analysis.
Does that sound like you? Or someone you know?
The fellowship is open to any currently enrolled graduate student in a college or university, and recent graduates with a master's degree or Ph.D.
Qualified applicants should have excellent written and oral communications skills, a commitment to accuracy and attention to detail, and a demonstrated interest in fiscal policy. To achieve our goal of training and supporting new voices in the policy arena, we’re especially interested in candidates from diverse backgrounds.
The fellow will receive a biweekly stipend and be responsible for less than 20 hours a week. This position is not eligible for benefits. Reimbursable travel may be required to specific policy-related trainings chosen by the Budget & Policy Center. The fellowship will generally run from November 2013 through April 2014 (this is flexible).
More information on the fellowship can found be found here.
The deadline to apply is Monday, June 24, 2013. Applicants will be contacted within 10 days. If you have any questions, please contact Remy Trupin at remyt(at)budgetandpolicy.org. No phone calls please.
A completed application includes:
• Fellowship Application (including contact information for two references)
• Personal Statement on how government budget priorities and tax policies relate to low and moderate income households in America. Wherever possible, indicate how your personal background has influenced your views. Feel free to also address your commitment to improving the well-being of low and moderate income communities and families, policy areas that are of particular interest to you, and your experience working with diverse communities. (500 words or less)
• College transcript (unofficial transcript will be accepted)
Our 2012- 2013 Narver Fellow, Elena Hernandez, was interviewed about her experience and shares her reflections here.
Our Executive Director Remy Trupin had an op-ed in the Columbian over the weekend, "Washington State Can't Cut It's Way to Job Creation, Prosperity."
During this special legislative session, as lawmakers grapple with how to balance the state budget, we need to protect public investments that help create middle-class jobs and grow our economy.
Now more than ever, it is crucial that the public understands the harm done by recent cuts to education, health care and other vital services, and what's at stake if lawmakers continue to pursue that course. Providing a basic education is the state's paramount duty and in its McCleary decision, the Washington State Supreme Court ruled that the state is not meeting its constitutional obligation to give our children an adequate basic education. A down payment on the court's requirements will mean an additional $1.4 billion in the 2013-2015 biennium, according to the Joint Task Force on Education Funding.
It is important to note that Washington state has a revenue problem, instead of, as has been characterized by some, a spending problem. The Columbian in its May 8 editorial, "Prepare for Pain," had some factual errors about the size of the state budget, incorrectly classified federal versus state funds, and used questionable sources to calculate the size of state government.
While we would all like to believe that future revenue growth, without changes in the tax system, will be enough to cover McCleary and our other needs, rebuild our state in the wake of the Great Recession and put people back to work, the truth is the economy is growing slowly, at best.
In fact, revenue will be about $2.7 billion short of the amount needed to sustain existing levels of public services and fund court-ordered improvements to education in the upcoming 2013-15 budget cycle.
Due to a sluggish revenue recovery over the 2011-13 budget cycle, legislators cut more than $5 billion from investments that help make Washington state a great place to live and work. That's not just numbers on paper — that's more kids in crowded classrooms, people going without health care, families paying more in college tuition and going deeper into debt.
These things matter. In part, because our state tax system is old and crumbling, and our resources have been dwindling as a result. Crafted in the 1930s and focused primarily on taxing tangible goods, our revenue system is incapable of keeping pace with a 21st century economy oriented more toward services — such as pet grooming and teeth whitening — to which sales taxes ought to be applied. As a share of the state economy, revenues that help pay for services Washingtonians depend on are only at 70 percent of what they were in 1995, and are projected to keep falling into the foreseeable future.
The inadequacy of Washington state's tax system is compounded by the fact that it is upside down. For households earning less than $20,000 a year, state and local taxes are nearly 17 percent of their income. At the other end, our state's top 1 percent richest households — those making over $430,000 a year — pay 2.8 percent.
The best choice legislators could make for our state would be to lay a foundation for a strong economy by creating a robust and equitable revenue system that improves our schools, roads, health care and other public investments; ensures better opportunities for all kids; helps create better jobs; and rebuilds the middle class.
A good place to start would be eliminating tax breaks for big, profitable companies if those breaks aren't helping to create jobs in Washington state. As we move forward with the special session, it is imperative that the public has accurate, honest information about the investments we make together through our state budget — and for lawmakers to acknowledge that further cuts will only set us back.
Also, catch Remy on TVW last week talking about the state budget. Watch it here.
Our Executive Director Remy Trupin released the following statement this morning: "As lawmakers convene today for a special session, they should fully fund education as required in the McCleary decision and stop trying to balance the budget with tricks and gimmicks that don’t add up no matter how creative the math.
It is time to choose middle class families and workers over tax breaks for big companies that aren’t creating jobs in Washington state. The best choice legislators could make for our state would be to lay a foundation for a strong economy by creating a strong and equitable revenue system that sustains public investments, ensures better opportunities for all kids, creates better jobs and rebuilds the middle class.
The inability of legislators to make the right choices during the regular session drove the need for a special session. It is not too late to change course."
Update: Jordan Schrader with the Tacoma News Tribune has agreed to join the Budget Beat call this Friday. He will share his observations from covering the legislature.
About Budget Beat
During the legislative session we've been hosting calls twice a month, on Fridays at noon, to bring you important updates from Olympia, timely policy analysis, and useful resources to keep you informed and help you make an impact.
On each call we:
- Provide legislative updates and breaking news from Olympia
- Highlight a relevant policy issue or legislative proposal
- Encourage participants to share information, resources and upcoming events
By Elena Hernandez, Narver Fellow -- The federal Earned Income Tax Credit (EITC) encourages work and promotes a path to the middle class. A new report by the Center on Budget and Policy Priorities (CBPP) provides detailed information about the impact of the EITC, and the related Child Tax Credit (CTC), on low and moderate income families in Washington state.
The EITC is an important tool for promoting work, improving the educational outcomes of low-income children, increasing work effort and earnings in adulthood. Washington state could amplify these benefits by fully funding the Working Families Tax Rebate (WFTR), a state version of the EITC that was enacted in 2008, but never funded.
According to the report, 449,000 Washington state households benefited from the EITC and 368,000 from the CTC in 2010. Combined, the credits helped lift 208,000 Washingtonians out of poverty, including 108,000 of children. Not only do these credits help keep parents in jobs, they also help their children – our future workforce – succeed in the long run. Making sure that our children get the education and skills they need for successful careers is vitally important to ensure Washington state’s future prosperity.
Read the full CBPP report here. For more information on the Working Families Tax Rebate, check out our primer.