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Senior Fiscal Analyst Andy Nicholas testified this morning in support of the House Revenue Package, HB 2224. Here’s why the Budget & Policy Center supports this common-sense bill:
House Bill 2224 is essential to ensuring the future prosperity of Washington state. By equitably and responsibly raising about $1.5 billion in new resources in the coming two-year budget cycle, the measure makes important investments in schools, health care, and other important priorities.
Attempting to fully fund basic education without the new resources included in HB 2224 would be deeply irresponsible. Such an approach would result in devastating cuts to higher education, health care, public safety, and other investments that create jobs, improve Washingtonians’ health and well-being, and help build a strong state economy.
The new revenue resources would come from capital gains tax, the closure of wasteful tax breaks, the implementation of the Washington State Market Place Fairness Act, and a Business and Occupation (B&O) tax surcharge. The benefits of each are as follows:
House leaders wisely followed Governor Inslee’s lead by including a new tax on high-end capital gains, or profits from the sale of corporate stocks and other financial assets. The tax would be:
Closing wasteful tax breaks:
Investing in programs that help create jobs would be much better for our state economy than wasting resources on failed tax breaks. House Bill 2224 would generate $300 million per biennium by eliminating seven wasteful tax breaks including those for prescription drug wholesalers, oil refineries, travel agents, software royalties, bottled water, non-resident shoppers, and banks.
Washington State Market Place Fairness Act:
Due to federal law, large out-of-state internet retailers have a huge advantage over small “brick and mortar” retailers located in Washington state: They don’t have to charge sales taxes on Washingtonians’ purchases. The Washington State Market Place Fairness Act is a bold proposal that would require the large multi-state businesses that have agreements with Washington state businesses to collect and remit state and local sales taxes to the Washington State Department of Revenue. This allows Washington state to:
Reinstate a B&O tax surcharge and reducing taxes for small businesses:
During the Great Recession, policymakers adopted a temporary 0.3 percentage point increase in the B&O tax rate paid by businesses in the service industry, which expired in 2013. Reinstating that surcharge now would generate $530 million in new resources in the coming budget cycle to help fund schools and other important priorities. It is important to note that:
The bottom line is that these components of House Bill 2224 represent a smart, common-sense path to building a more prosperous state for all Washingtonians – and to creating a state where we all have the opportunity to make economic and social progress.
For further analysis on the need for increased revenue in Washington state, see the Revenue section of our new Progress Index. (Read the full Progress Index here.) And stay tuned to schmudget for more-detailed analysis on the budget and revenue proposals in the coming days.