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

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

By - February 20, 2018

Statement:
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.

About Misha Werschkul, Executive Director

As the leader of the Budget & Policy Center, Misha guides the organization’s strategic vision and ensures its position as a leading voice shaping the debate around budget priorities.

Read more about Misha