Schmudget Blog

Recent Estate Tax Decision Jeopardizes Investments in Education

Posted by Michael Mitchell at Feb 04, 2013 08:05 PM |

A recent decision by the state Supreme Court will require refunding millions of dollars in estate taxes to Washington state’s wealthiest households, while jeopardizing investments in K-12 education.  Lawmakers can, and should fix the estate tax law so the state can make vital investments in our schools, but it could be difficult due to the rule that allows a small minority of legislators to block the will of the majority.

The ruling, known as the Bracken decision, revolves around estate tax law’s treatment of trusts that enable a married individual with a taxable estate to postpone the payment of taxes until the death of the surviving spouse. The court determined that the state had no authority to tax the estate at the time of the second spouse’s death, requiring the state to refund millions of dollars and stopping future collection of estate taxes from married households.

If policymakers fail to take corrective action, the decision would increase Washington state’s current revenue shortfall, by about $160 million in the upcoming biennium. Worse, the impact of the decision could be ongoing, with revenues falling by nearly 30 percent in the 2015-17 budget cycle.

Topping it all off, estate tax revenues are dedicated towards K-12 investments, so refunds to the wealthiest households will come at the expense of educating children and increasing prosperity. These K-12 investments include:

  • Supporting early intervention for students with disabilities,
  • Improving academic achievement for disadvantaged children,
  • Providing support services for at-risk high school students.

Lawmakers can prevent this revenue loss by passing legislation to ensure that married households pay estate taxes, but this will be difficult. Standing in the way is the “supermajority” rule, which prevents policymakers from raising revenue without a two-thirds vote of the legislature instead of the simple majority required for other forms of legislation to pass.

This requirement has already damaged our state. It has killed jobs, preserved wasteful tax breaks, and stunted economic growth by giving a small group of lawmakers the ability to block the majority. Now it protects a narrow group of the state’s wealthiest residents – people who have benefited from decades of public investments in education, public safety and public health – at the expense of providing quality education and opportunity to our children and future workforce.

Choosing to repair our estate tax would limit refunds from the court ruling, restore the tax to its original intent, and protect our valuable investments in education and opportunity for all Washingtonians.

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HIGHLIGHTS

Legislative Testimony

Senior Budget Analyst Kim Justice recently testified before Senate Ways and Means against a bill that would fund education at the expense of other budget investments. Watch it here. 

Kim 5881

Inside Olympia

Executive Director Remy Trupin appeared on TVW's "Inside Olympia" to discuss the budget, revenue options, and the impact of the McCleary decision going forward. The whole interview can be found here. 

Remy TVW -March 14


Budget Matters 2013

More than 300 people -- advocates, students, lawmakers, and policy experts joined us for our second annual policy conference. We heard from Heather McGhee, Jared Bernstein, and Governor Inslee.

Click here for video clips, photos, and PowerPoint presentations from the break-out sessions.

Our new video has highlights from the day. 

Heather McGhee


Save the date for this year's conference: Friday, December 12th, 2014 at the Washington State Convention Center in Seattle.