The House budget released this morning recognizes that fixing our broken revenue system is necessary to make progress toward creating shared prosperity in Washington state (a message that was also detailed in the Progress Index we released earlier this week). The two-year spending proposal prioritizes investments for kids and students using $1.5 billion in new revenue. The House proposal makes sizable investments in early learning, makes college more affordable, and keeps the state on track to fully fund basic education for all children by 2018 (required in the McCleary court case). It does this while also protecting the health, safety, and well-being of Washingtonians. Investment highlights in the budget include:

Education* (see graphic for breakdown)

• Adding over 6,000 subsidized child care slots ($72 million)
• Improving the quality and stability of child care ($114 million for Early Achievers and Early Start Act)
• Making the next installment toward fulfilling the constitutional and court-mandated obligation to fully fund basic education ($1.4 billion)
• Providing cost-of-living adjustments and increased health benefits to teachers ($588 million)
• Freezing tuition and increasing financial aid at public colleges and universities ($220 million)

Economic Security**

• Fully restoring the funding that was previously cut for food assistance ($10 million)
• Allowing parents receiving Temporary Assistance to Needy Families to keep a portion of their child support payments ($8 million)

Healthy People & Environment***

• Increasing investments in mental health services ($130 million)
• Adding staff to respond to reports of child abuse and neglect ($16 million)

To make these important investments, lawmakers outlined the steps they intend to take to raise additional resources while also addressing our upside-down tax system. These include:

• Taxing high-end capital gains ($570 million): The House plan would apply a new 5 percent tax on profits from the sale of corporate stocks and other financial assets above $50,000 per year for a married couple ($25,000 for singles). Check out our capital gains tax website for more information on why this is a sensible improvement to Washington state’s upside-down tax system.
• Eliminating seven wasteful tax breaks ($300 million): Tax breaks for the following would be eliminated to help fund improvements to schools: travel agents; prescription drug wholesalers; royalties from licensing software, trademarks, and other “intangible” property; oil refineries; bottled water; nonresident shoppers; and banks.
• Ensuring out-of-state retailers play by the rules ($85 million): Due to federal law, most large, out-of-state retailers get a huge advantage over small “brick and mortar” stores located in Washington state: they don’t have to charge sales taxes. The House plan would help level the playing field by requiring out-of-state retailers who have agreements with businesses located in Washington state to apply sales taxes to goods sold here. 
• Increasing the Business & Occupation (B&O) tax applied to personal and professional services and reducing taxes for small businesses ($532 million): During the Great Recession, policymakers temporarily increased the B&O tax applied to service businesses – ranging from doctors and lawyers to plumbers and hair stylists – to 1.8 percent from 1.5 percent. That 0.3 percent surcharge expired in 2013. The House plan would reinstate it, but would also increase a tax credit for small businesses. The credit would eliminate B&O taxes for businesses with gross incomes below $100,000 per year. Businesses with gross incomes as high as $200,000 per year would benefit from the expanded credit.

While no revenue is included in the budget proposal for capping and pricing carbon pollution, lawmakers have expressed interest in pursuing a proposal that would yield even more revenue.

Stay tuned to schmudget for more-detailed analysis on the budget and revenue proposals in the coming days.

To learn more about what state lawmakers can do to make progress in Washington state, read our Progress Index. And specifically, read more analysis on:

*how state investments are impacting education

**how state investments are impacting economic security

***how state investments are impacting healthy people and environment