Schmudget Blog


Kids of color are leading the way into a more racially diverse state

Posted by Jennifer Tran at Apr 11, 2018 12:55 PM |
Filed under: Kids Count, Equity

Our new KIDS COUNT in Washington demographic profile, “Kids are Leading the Way Toward a New Washington,” shows how kids of color are leading our state into a more racially diverse future. The profile – the first release in our State of Washington’s Kids 2018 series – focuses on how Washington state’s population is projected to become majority people of color around 2050, and youth are at the forefront of this trend.

Already, 43 percent of kids in our state are kids of color. And in eight of Washington’s 39 counties, the population of children is already majority kids of color. Latino, Pacific Islander, and mixed-race children are the fastest growing segments of our youth population.

SWK County Map

Kids of color in Washington state are diverse in ancestry, including Mexican, Chinese, Indian, Vietnamese, Filipino, Korean, Ethiopian, Somali, and more. Additionally, over a quarter of Washington’s kids are immigrant or reside with at least one immigrant parent.

As kids of color continue to represent a growing share of Washington’s population, our state needs to create the conditions that allow all our children — regardless of race or ethnicity, immigration status, ZIP code, family income, gender, and whether English is their first language — to thrive. And the State of Washington’s Kids 2018 series provides recommendations for how policymakers can make this a reality. The first issue brief in the series, “Getting All Kids Off to a Healthy Start,” makes recommendations for how lawmakers and community leaders can help Washington’s kids have equitable opportunities for good health.

And in the coming months, keep an eye out for the next State of Washington’s Kids issue briefs. They will look at how our state can ensure kids in Washington have their basic needs met and how our state can ensure all kids have the opportunity to succeed in school and in life.

SWK2018


KIDS COUNT in Washington is a partnership between the Children’s Alliance and the Washington State Budget & Policy Center, supported by the Annie E. Casey Foundation. The demographic profile, “Kids are Leading the Way Toward a New Washington,” is the first release in our State of Washington’s Kids 2018 series, providing a racial demographic overview of Washington’s youth population. This profile is available in a printed folder format. For a hard copy, please contact adam(at)childrensalliance(dot)org.

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Threats to food assistance in Farm Bill could harm thousands of Washington households

Posted by April Dickinson at Apr 05, 2018 07:15 PM |
Filed under: Federal Issues, Poverty

By Misha Werschkul, executive director, and Hana Jang, Narver fellow

When Congress returns from spring recess on April 9, they will begin considering a Farm Bill that could undermine nearly four decades of progress in addressing hunger by including harmful cuts or changes to the Supplemental Nutrition Assistance Program (aka SNAP, and formerly known as food stamps), our nation’s largest and most effective anti-hunger program.

SNAP, which provides food assistance for one in every eight Washingtonians, helps people get back on their feet while boosting health, nutrition, and children’s learning. SNAP reaches over 900,000 Washington residents, including: families with children, teachers, support staff, cashiers, retail staff, home health aides, and many others. Many SNAP participants work, but often have jobs that offer low-wages or not enough hours to make ends meet. Nationally, SNAP keeps more than 8 million people out of poverty – including nearly four million children. And SNAP provides more than $1.3 billion in federal resources annually to help boost Washington’s economy.

SNAP helps 1 in 8 Washingtonians

As Congress begins to debate the Farm Bill, Washingtonians should watch for and reject:

1.    Harmful cuts to SNAP funding. SNAP is an incredibly effective anti-hunger program. Even with a modest average benefit of just $1.33 per person per meal, SNAP has a vital impact in our state, helping hundreds of thousands of our residents put food on the table. Cuts and harmful changes to SNAP that take away people's food have no place in the Farm Bill.

2.    Elimination of state flexibility. Washington state currently uses what’s known as “categorical eligibility” to help SNAP benefits phase out more slowly as a worker’s income increases. Taking away this option would punish people who work more hours or get a better-paying job with the goal of stabilizing their lives before moving away from SNAP.

3.    Increased paperwork and administrative requirements. One proposal under consideration is to undo the connection between Low Income Home Energy Assistance Program (LIHEAP) and SNAP, also known as “Heat and Eat,” which allows Washington and other states to streamline administration of food assistance with utility benefit programs. This would result in costly and unnecessary new paperwork and administrative requirements for families and states.

4.    New, untested work requirements. The proposed Farm Bill may include harsh new work requirements and penalties that would eliminate SNAP as a core support for people who are unemployed or experience irregular work schedules. Research suggests that these types of proposals do little to promote work while pushing more people into deep poverty.

Washington’s members of Congress have historically shared a bipartisan commitment to SNAP as an effective way to help feed struggling Washingtonians and get them back on their feet. Our representatives in Congress must reject cuts to food assistance and focus on policies that help create jobs and boost wages instead of punishing people who are already facing economic hardship.

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Final budget brings momentous victories for communities, but property tax cuts will come at a cost

Posted by Kelli Smith at Mar 14, 2018 02:30 PM |

In the final 2018 supplemental budget, Democratic leaders in the state House and Senate reached compromises to make several laudable new investments in our schools and communities – including some very worthy investments that advocates for low-income communities and communities of color have promoted for years. But lawmakers also cut next year’s state property tax using accounting gimmicks that may leave the state in financial trouble for years to come. Not only did budget writers choose to pay for these across-the-board property tax cuts with funds that should have gone toward the state’s emergency savings, they also missed opportunities to strengthen our state tax code. 

No doubt the investments lawmakers made in our communities – from making breakfast available for students in high-poverty schools to expanding health care access – will put many on a much brighter path forward. But these investments would have been more sustainable and better for the well-being of our state if policymakers hadn’t decided to prioritize short-term tax cuts over maintaining healthy fiscal reserves for the longer term.

Lawmakers should not have compromised the rainy day fund to pay for property tax cuts

In a slight variation on what both the House and Senate put forth in their earlier budget proposals, the final budget diverts funds from the rainy day fund to pay for inequitable and unnecessary property tax cuts next year. As we have written previously, any property tax reform should be targeted to low- and middle-income households that already pay a higher share of their income in taxes than the wealthy do. Higher-income households don’t need any more tax breaks.

When economic times are good, as they are now, our state should be building up reserves – not squandering them on tax cuts. Instead of depositing this year’s unforeseen revenue growth into our state’s rainy day fund, budget writers enacted a legislative maneuver that allowed them to get around their savings requirement and instead put that money toward cutting the recently enacted state property tax levy. In the long term, compromising the state’s emergency savings to pay for tax cuts is fiscally irresponsible, and it will leave our communities vulnerable when real emergencies – like natural disasters or major economic downturns – strike. 

Lawmakers missed an opportunity to enact a capital gains tax to bolster community investments and rebalance our tax code

Lawmakers once again had the opportunity this session to make solid investments in schools and other community priorities in addition to ensuring the strength of our state’s long-term fiscal health. They could have done that by closing the tax break on capital gains, which would have generated more than $700 million annually to put toward our most important priorities. This move would have also been a significant step toward rebalancing our worst-in-the-nation tax code, in which people with low and middle incomes pay up to seven times more in taxes as a share of income than the top 1 percent do.

To put the need for this new form of revenue in context: When adjusted for economic growth, our state is still well below the investment levels it had before the Recession (see chart below). That is despite the fact that lawmakers have made significant investments in K-12 schools. 

Lawmakers must get serious about making our tax code more equitable, adequate, and sustainable if they want to ensure we have a state where everybody has the chance to thrive. That starts with closing wasteful tax breaks like the one on capital gains.

Click on image to enlarge.

2018_supp

On the bright side, the final budget makes progress on strengthening Washington’s communities

Despite the missed opportunities in some parts of this budget, there is a lot to celebrate in terms of the investments that lawmakers prioritized with the resources they had. Included below are snapshots of how well the final budget promotes the well-being of Washingtonians based on the Budget & Policy Center’s Progress in Washington framework

Education & job readiness

Our education system must have the resources to prepare all students – from early learning through higher education – for good jobs and jobs of the future. It should prioritize removing barriers to education and employment for communities of color. Investments in education and job readiness make up 60 percent (1) of total community investments in this budget. In the supplemental budget, lawmakers:

  • Prioritized funding teacher salaries per the Supreme Court’s McCleary order. After House Democratic leaders initially neglected to propose minimum funding for teacher salaries by next school year per the Supreme Court’s McCleary order, budget writers ultimately settled on providing nearly $800 million in additional K-12 school funding to fulfill the state’s paramount duty to fund education. Even though there is still much work to be done to ensure world-class schools for all students, this is a positive step toward bringing the years-long Supreme Court battle to an end. 
  • Expanded learning opportunities for K-12 students. The final budget includes much-needed additional funding for special education, which is critical to providing every student with the resources they need to learn. Lawmakers also included modest funding for a bilingual educator pilot initiative and dual-language programs, which are evidence-based strategies to close the opportunity gap for students who are English-language learners. 
  • Made progress toward ensuring kids have access to a nutritious breakfast each school day. After years of debate and advocacy, lawmakers included funding for Breakfast after the Bell, a program to ensure that more of our state’s lowest-income students have access to a nutritious breakfast each school day. This is a significant step in the right direction toward providing kids with the most basic thing they need to learn: food. 
  • Took significant steps forward to provide financial aid to college students with low incomes. The final budget invests an additional $18.5 million in the State Need Grant, the state’s chronically underfunded financial aid program for college students. This is a significant boost to funding, which will provide financial aid to an additional 4,600 students who need it and cut the program’s wait list by 25 percent next year. The legislature plans to eliminate the wait list by 2022, but they will need to make additional investments in the coming biennium to accomplish this goal. 
  • Focused on targeted, proven child care and family support programs. Lawmakers made some modest but impactful investments in these areas. Chief among them was funding to provide 275 additional families with home-visiting services – a proven and targeted program that gives in-home resources to new and expecting parents to help them lay a strong foundation for their child’s development and health. 
  • Did not make significant progress to improve broad access to early learning for the youngest Washingtonians. Early learning should be one of the legislature’s top priorities in next year’s budget. Lawmakers will need to grapple with how to provide funding for the planned expansion of the state’s Early Childhood Education and Assistance Program, as well as how to strengthen the Working Connections Child Care program to ensure that all families across the state have access to affordable, high-quality early learning and child care.
  • Should have done more to provide outside-the-classroom support for K-12 students who need it. Next year, lawmakers should take up strengthening investments in family involvement coordinators, guidance counselors, and other outside-the-classroom resources to help school kids – especially those facing the most significant barriers to opportunity – get the most out of their education.

Healthy people & communities

Our state should support vibrant communities that allow Washingtonians to lead healthy lives and better connect to and participate in the economy. Investments in healthy people and communities make up 25 percent of total community investments in this budget. Lawmakers: 

  • Expanded health care access for many Washingtonians. Lawmakers improved access to health care for kids from families with low incomes by increasing the reimbursement rate for doctors who care for them. They also rightly included funding to expand access to health care for Washingtonians who are citizens of Compact of Free Association (COFA) nations – the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. Citizens of COFA nations are legal residents of the U.S. who work, pay taxes, and serve in the U.S. military – but are ineligible for Medicaid health care coverage. 
  • Made necessary additional investments in behavioral health services. The final budget includes funding necessary to bring our state’s mental health hospitals into compliance with federal safety standards, which was a priority in both the House and Senate budgets. Lawmakers also included significant funding to improve community behavioral health services and opioid treatment across the state.
  • Fixed health-care-related accounting stunts from last year’s budget. The final budget provides funding to make up for millions of dollars in unrealistic health care and pharmaceutical cost savings assumed in last year’s budget to make the books balance.

Effective & accountable government

The state government supports the foundations of our communities. Our public institutions should efficiently and reliably ensure that all Washingtonians can meaningfully participate in our democracy. Investments in effective and accountable government make up 9 percent of total community investments in this budget. Lawmakers:

  • Enacted reforms to enable people to re-enter their communities more easily after being incarcerated. This budget includes funding to help administer long-needed reforms to our state’s legal financial obligations (LFOs), which are high-interest legal fines and fees imposed by criminal courts on top of a criminal sentence. The reforms in this bill will remove some of the financial barriers that previously incarcerated Washingtonians face when they re-enter their communities.
  • Strengthened resources to help people with low incomes navigate the legal system. Lawmakers boosted resources for people with low incomes who need civil legal help. This will have significant positive impacts on the lives and communities of those people who need such legal support.

Economic security

All Washingtonians should have access to employment opportunities, living-wage jobs, and financial security and stability; and they should be economically secure in the face of a financial emergency. Investments in economic security make up 2 percent of total community investments in this budget. Lawmakers:

  • Restored some of the devastating cuts made in recent years to poverty-reduction programs. The final budget takes some significantly positive steps to improve services for Washingtonians with low incomes by undoing some of the cuts made in recent years to basic assistance grants for people who participate in WorkFirst, the State Food Assistance Program, and the Refugee Cash Assistance Program. The budget also expands eligibility for the Housing and Essential Needs program, which provides housing-related assistance to people unable to work because of disabilities.
  • Made common-sense reforms to public-assistance programs. Lawmakers smartly raised the financial-asset limit for people with low incomes who receive public assistance. This move will improve a previous law in which people living in poverty were forced to sell a decent car or spend down their savings to below $1,000 in order to receive help climbing out of poverty. 
  • Set up a study to ensure the WorkFirst program can meet the needs of the thousands of families that need help getting out of poverty. The budget includes funding for an important study of how the state could take steps to halt the rapid decline in the WorkFirst caseload, which is leaving more than 33,000 Washington families in poverty without basic support. The study calls for the state to investigate the impact of implementing recommendations the Budget & Policy Center made in our recent policy brief, “Reinvest in WorkFirst: How we can restore the promise of basic support to Washington families facing poverty.”

(1) Percentages mentioned in each value area do not add up to 100. That is because funding for prisons and policing, which are not part of the Progress in Washington value areas, constitute 5 percent of spending from the Near General Fund + Opportunity Pathways account.

 

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In final budget, lawmakers should take the best from House and Senate proposals

Posted by Kelli Smith at Feb 23, 2018 05:10 PM |
Filed under: State Budget, Capital Gains

The state House and Senate, both controlled by Democrats this legislative session, have proposed budgets that contain strong investments that would take steps toward ensuring that all Washingtonians have what they need to prosper. Lawmakers have the chance to enact much-needed new forms of revenue and make our tax code more equitable. There is no reason lawmakers shouldn’t include the best ideas from each proposal in their final budget. 

As they create this final budget, they should also take into consideration the fact that state investments in communities have still not reached pre-Recession levels. In fact, overall near general fund spending in each of these budget proposals is still below spending levels in the 2007-09 budget cycle, when adjusted for economic growth. At the end of the day, the state budget must reflect our values and meet the needs of our communities in a real way. 

Lawmakers should close the tax break on capital gains, reject new tax breaks

The House’s budget proposal includes a plan to close the tax break on capital gains, which would be a significant step forward in making our tax code more equitable. Washington’s tax code is completely upside-down: low- and middle-income households pay up to seven times more in state and local taxes than the top 1 percent do. A capital gains tax would affect fewer than 2 percent of the wealthiest Washingtonians – and only modestly at that. Further, revenue from a capital gains tax would diversify and strengthen our tax code, putting resources for important community investments within reach. Budget negotiators should include this common-sense proposal in the final budget.

They should also reject new tax breaks that siphon resources out of our communities and turn them into tax giveaways for special interests. A prime example of such a giveaway is the proposed rural manufacturer tax break, which is funded in the House’s budget. It’s a narrowed version of the flawed manufacturer tax break that Governor Inslee smartly vetoed last year. This tax break would cost the state millions of dollars a year that could be used instead to fund schools, help families put food on the table, or provide much-needed senior services. The bottom line is that right now is the time to clean up our tax code to invest in the priorities we all care about – not add more tax breaks.

Lawmakers should not use the rainy day fund to pay for property tax cuts 

While the details of the House and Senate proposals differ when it comes to the use of rainy day funds, both plans would raid our state’s emergency savings to pay out statewide, across-the-board property tax cuts. As we wrote when lawmakers raised the state property tax last year to fund schools, any reforms to the property tax should be targeted specifically to making the tax more equitable for low- and middle-income families. Across-the-board cuts just give higher-income households more tax breaks they don’t need.

More importantly, using the state’s emergency savings to pay for tax cuts is incredibly irresponsible under any circumstances – but especially so during good economic times when our state should be building up reserves, not drawing them down. The rainy day fund is an essential safeguard to fund the most critical foundations – such as safe hospitals, functioning schools, and responsive emergency services – when our state endures an economic downturn or a natural disaster. 

Instead of paying out property tax cuts to many households who don’t need it, lawmakers should think about the well-being of our entire state. That means ensuring we have the resources we need to invest in our communities now, and that we have reserves to weather emergencies.

The final budget should invest in Washington’s communities

Included below are snapshots of how successful the two budget proposals are at promoting the well-being of Washingtonians, using the Budget & Policy Center’s Progress in Washington framework

Education & job readiness

Our education system must have the resources to prepare all students – from early learning through higher education – for good jobs and jobs of the future. It should remove barriers to education and employment for communities of color. Here’s how the budgets stack up in terms of: 

K-12 schools. One of the most significant differences between the House and Senate proposals is that the Senate increases funding for K-12 teacher salaries by $778 million this budget cycle to comply with our state Supreme Court’s McCleary order by the 2018 school year. House budget writers opted to ignore the Court’s order and instead put off fully funding McCleary until next year, a choice that would leave teachers and students in limbo for yet another year. Budget negotiators should follow the Senate’s approach and fulfill their court mandate to fund schools now. Students – and their teachers – have waited long enough.

Both budgets would also increase funding for special education – a positive step toward ensuring that schools can provide a rich learning environment based on the needs of all of their students. 

In addition to meeting the minimal requirements of McCleary, budget writers should ensure that the final budget contains ample funding for services that we know give students the best access to opportunities. These include investments such as Breakfast after the Bell – an essential step toward ensuring that kids who may otherwise show up to school hungry have access to breakfast each school day. The Senate budget contains some funding for the program, but more is needed in the final budget. This is a moral imperative: kids can’t focus on learning when they’re hungry. The final budget should also include additional funding for family involvement coordinators and guidance counselors, as proposed by the House, to ensure that students have the resources they need outside of the classroom. 

Early learning and child care. Both the House and Senate propose small but important new investments in the state’s home visiting program, which has proven effective at providing in-home resources related to infant care, child development, and parenting skills. While this is a step in the right direction, state lawmakers should commit to expanding access to affordable child care and fully funding high-quality early learning to serve more kids from low-income families. 

Higher education. The House budget proposes a substantial new investment of $158 million over the next four years in the State Need Grant, our statewide financial aid program, which would eliminate the long-standing waitlist of eligible but unserved students by 2021. This would be a remarkable step forward to put higher education within reach for thousands of students from low-income families and ultimately strengthen Washington’s workforce. The final budget should take the House’s approach.

Healthy people & communities

Our state should support vibrant communities that allow Washingtonians to lead healthy lives and better connect to and participate in the economy. Here’s how the budgets stack up in terms of: 

• Health care. In last year’s budget, lawmakers assumed millions of dollars in unrealistic health care and pharmaceutical cost savings in order to make the budget balance. Those savings predictably did not materialize, so both plans would restore funding to those areas to make up the difference. 

Both budgets include an increased reimbursement rate for doctors who provide care for kids from low-income families, as well as increased funding for behavioral rehabilitation service providers who deliver intensive, comprehensive care for kids with high-level behavioral health needs. 

Both budget proposals also include important funding that would expand health care access to Washingtonians who are citizens of Compact of Free Association (COFA) nations – the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. Citizens of COFA nations are legal residents of the U.S. who work, pay taxes, and serve in the U.S. military – but are ineligible for Medicaid health care coverage. The final budget should take the Senate’s approach of fully funding this investment. 

• Behavioral health. Both House and Senate leaders propose increasing funding for Western State Hospital to comply with federal safety and quality requirements, and they both propose additional investments in community behavioral health treatment services. These are steps in the right direction to improve the quality and accessibility of behavioral health care across Washington’s communities.

Effective & accountable government

The state government supports the foundations of our communities. Our public institutions should efficiently and reliably ensure that all Washingtonians can meaningfully participate in our democracy. 

Both budgets include funding to help people access essential public services, such as: enhancing our state’s emergency 911 system, streamlining how people access family law courts, and strengthening resources for Washingtonians with low incomes who need civil legal help. In addition, the House plan includes funding for economic development, such as a small business innovation exchange, which would support small businesses owned by women, veterans, and people of color. These are critical services that should remain funded in the final budget. These programs not only have significant impacts on the people who use them, but they also make all of our communities stronger.

Economic security

All Washingtonians should have access to employment opportunities, living-wage jobs, and financial security and stability; and they should be economically secure in the face of a financial emergency.

Both budgets smartly propose to strengthen services for Washingtonians with low incomes by restoring cuts made in recent years to grants for people with lower incomes who participate in WorkFirst, State Food Assistance, and Refugee Cash Assistance programs. The final budget should include those investments, plus proposals by House leaders to expand eligibility for the Housing and Essential Needs program, which provides housing-related assistance to people unable to work because of disabilities. It should also raise asset limits for low-income Washingtonians who receive public assistance, as proposed by the House.

The House and Senate budget writers have until March 8 to finalize their budget. With opportunities for new revenue and a number of good ideas on the table, they should be able to come up with a spending plan that will benefit all of Washington’s communities into the future. 

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House budget smartly proposes capital gains tax, but ignores Supreme Court’s order to fund schools this year

Posted by Melinda Young-Flynn at Feb 20, 2018 07:03 PM |
Statement from Executive Director Misha Werschkul

In their just-released budget proposal, House Democratic leaders revealed a plan that would improve equity in our state tax code by closing the capital gains tax break enjoyed by 2 percent of the wealthiest Washingtonians. We applaud the House’s move toward a more balanced tax code, but there are some drawbacks to the plan – including putting off funding teacher salaries another year and drawing from the state’s rainy day fund – which could threaten the long-term well-being of our communities.


Expanding on a similar proposal from their counterparts in the Senate, House leadership proposes a nearly $1 billion withdrawal from the state’s rainy day fund to provide property tax cuts across the state for the next two years. As we noted in our response to the Senate’s plan, this is a short-sighted use of the state’s emergency savings, which are meant to help keep schools, hospitals, and other critical services running when the state experiences an economic downturn. The rainy day fund should not be used to pay for tax cuts – especially during these good economic times.

Moreover, while closing the tax break on capital gains is a significant step toward rebalancing our upside-down tax code – in which low- and middle-income Washingtonians pay up to seven times more in taxes as a share of income than the top 1 percent – dedicating that revenue to across-the-board property taxes is a missed opportunity to generate additional revenue to strengthen our communities. Higher-income households do not need more tax breaks. 

Instead, lawmakers should focus on investments that lift up Washingtonians with low and middle incomes who already pay more than their fair share of taxes to support the community investments that serve us all. They should also prioritize meeting the state Supreme Court’s deadline to provide critical support for teachers and students by the start of the 2018 school year. 

Lawmakers in both chambers have an opportunity to set our state on a path toward a stronger and more equitable tax code to fund thriving communities. Closing the tax break on capital gains is an excellent start. 

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Senate budget proposal makes key necessary investments, but paying for tax cuts with rainy day funds would undercut state’s long-term fiscal health

Posted by Kelli Smith at Feb 19, 2018 06:55 PM |
Filed under: Property Tax, State Budget
Statement from Executive Director Misha Werschkul 

The budget proposal just released by Democratic leadership in the Senate would strengthen investments in our communities, but it misses an important opportunity to begin to rebalance our upside-down tax code. Highlights of the Senate’s proposal include robust investments in key areas, such as providing nearly $900 million in additional funding to schools, an effort to finally fulfill the state’s duty per the Supreme Court’s McCleary decision, and strengthening investments in mental health. 


The Senate’s plan would also reduce the state property tax rate by 11 percent in 2019, which would result in about $400 million in lost revenue for the state. But instead of championing common-sense fiscal policies like closing the tax break on capital gains – which would generate over $700 million a year – to make up for that lost revenue, Senate leadership is proposing to draw down our state’s rainy day fund over the next several years to pay for the tax cut.

Providing across-the-board tax cuts without replenishing the lost revenue is ill-advised. And drawing down the rainy day fund – especially as our economy is booming – to pay for those tax cuts is fiscally irresponsible. The bottom line is that the rainy day fund represents emergency savings that our state will need to maintain schools, health care, and other critical investments when the next economic downturn inevitably hits. The House and Senate should reject this short-sighted approach and instead enact common-sense policies that will clean up our tax code and provide the resources we need to move forward as a state.

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Our testimony on House Bill 2967 and the need to close the capital gains tax break

Posted by Melinda Young-Flynn at Feb 16, 2018 02:54 PM |

Executive Director Misha Werschkul testified on February 16 at the House Committee on Finance in support of closing the tax break on capital gains in our state. Below is the testimony she prepared.

Misha cap gains testimony 2018Thank you Madame Chair and members of the committee for putting forward this proposal and for your commitment to promoting equity in our state tax code.

As you know, Washington state has the most upside-down tax code in the country – in which low- and middle-income households pay up to seven times more in taxes as a share of income than the richest 1 percent. The Budget & Policy Center supports closing the tax break on capital gains because:

  • It would take a first step toward rebalancing our tax code, by requiring the very wealthiest Washingtonians to pay a tax on profits from the sale of high-end financial assets. This proposal excludes middle-class investments like the sale of homes, farms, and small family businesses, as well as assets in retirement accounts or college savings accounts. As a result, fewer than 2 percent of the very wealthiest Washingtonians would be impacted by this proposal. This is a modest tax increase for the richest – only 1.5 percent of their incomes on average – but it would constitute a significant step forward in rebalancing our tax code.
  • It makes the tax code more sustainable. This is common-sense fiscal policy to provide new resources for the investments that help our communities thrive. This is not a new concept. Forty-one states have enacted capital gains taxes, and every one of those states has a tax code that is more equitable than Washington state’s. Because of our overreliance on a handful of relatively regressive taxes, our tax code also suffers from structural inadequacies. We’ve seen the effects of that structural deficit as we’ve grappled with how to fund public schools. Enacting a tax on capital gains would diversify our state’s revenue streams and make the tax code more sustainable in the long term.

That said, we believe that using the revenue from closing the tax break on capital gains to provide across-the-board property tax cuts is a missed opportunity to address the structural inadequacies of our tax code. Our state’s property tax is a core pillar of funding for public services like public schools. Higher-income households do not need another tax break. A better approach to promote family economic security is to enact targeted reforms to help low- and middle-income families and raise needed revenue to invest in schools, effective mental health services, and other areas. 

We encourage lawmakers to use revenue from closing the tax break on capital gains to:

  • Strengthen investments in schools and early learning, health care and mental health, work supports, senior services, or a host of other priorities that would provide a brighter future for all of our communities.
  • Fund the Working Families Tax Rebate to help keep working families out of poverty and take an additional step toward rebalancing the tax code; and/or
  • Enact a property tax safeguard rebate (or circuit breaker), a targeted approach to keeping property taxes from taking too large a chunk out of family budgets for low- and middle-income homeowners and renters.

Thank you for your work on this. We look forward to continuing the discussion.

 
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