Declaring that we have a duty to follow our Constitution and provide a quality education to every child in our state, Governor Inslee today unveiled a bold plan to fully fund our state’s K‑12 public schools and end the McCleary litigation.
“We face an opportunity — and an obligation — in this upcoming session to not just put more money into the system we already have, but to invest in the kind of education system all our children deserve,” Inslee said in a statement.
Inslee’s plan calls for the levying of a capital gains tax and a pollution tax as well as the closing of tax breaks not in the public interest. The business and occupation tax would also be increased, but not on very small businesses. This would raise $3.9 billion in new revenue to invest in the state’s K‑12 public schools.
Every school district in the state would receive a significant boost in funding — significant enough to allow for reductions in property taxes. In fact, the governor’s office estimates that 75% of households would receive a property tax cut.
Increasing the business and occupation tax rate for a broad range of personal and professional services from 1.5 to 2.5 percent, generating nearly $2.3 billion in the next two years. Washington, in general, does not tax services to the extent it taxes goods. However, consumers today spend a smaller share of their disposable income on goods and a larger share on services such as those provided by accountants, architects, attorneys, consultants and real estate agents. To make sure very small businesses aren’t impacted, the governor’s plan more than doubles the B&O tax filing threshold to $100,000, providing an additional 38,000 businesses some tax [savings].
Imposing a new tax on carbon pollution associated with the production and consumption of fossil fuels that would generate about $1.9 billion in the next biennium. Half the revenue would be reinvested in clean energy and transportation projects to lower consumer fuel bills and cut greenhouse gas emissions. Additional funds would support projects to build water infrastructure and improve forest health. Funds are also used to offset taxes to businesses and low-income households. The remaining revenue would go to the state’s education needs.
Imposing a 7.9 percent capital gains tax on the sale of stocks, bonds and other assets to increase the share of state taxes paid by a small fraction of the state’s wealthiest taxpayers. It would apply only to the capital gains earnings above $25,000 for individuals and $50,000 for joint filers. Retirement accounts, gains on the sale of residential real property and certain livestock and agricultural land would be exempt. The tax would generate $821 million in fiscal year 2019.
Closing or changing five tax exemptions to raise about $300 million, including eliminating the sales tax exemption for bottled water, limiting the sales tax exemption for vehicle trade-ins and converting the nonresident sales tax exemption to a refund program.
The governor will also propose more than $1 billion in his capital budget for school construction.
Governor Inslee is showing tremendous courage and leadership today by proposing a compelling, well-thought out plan for funding our schools that requires the wealthy to increase their investment in our commonwealth.
For years, the Legislature has procrastinated and punted on revenue reform, leaving us chained to a broken, regressive tax code that isn’t generating the funding necessary to comply with Article IX of our Constitution, which says:
It is the paramount duty of the state to make ample provision for the education of all children residing within its borders, without distinction or preference on account of race, color, caste, or sex.
This plan would begin to address both the inequity in our tax code and the chronic, unjust underfunding of our public schools.
Our research shows that strong majorities of Washingtonians back Governor Inslee’s revenue ideas. Last June, working with Public Policy Polling, we surveyed 679 likely voters and asked respondents if they believed our schools are underfunded and that we need to raise revenue to fully them. Our poll, which was in the field from June 14th-15th, has a margin of error of +/- 3.8% at the 95% confidence level.
63% of the likely voters who responded to the survey agreed that Washington’s schools need more funding. Impressively, 65% support a capital gains tax on the wealthy to make this happen, with 46% saying they “strongly support the idea”.
The specific language of the school underfunding question was as follows:
Do you strongly agree, somewhat agree, somewhat disagree or strongly disagree with the following statement: Washington’s public schools are underfunded, and we need to raise state revenue to fully fund them?
These were the answers:
- Agree: 63%
- 45% “strongly agree” that we need more revenue for schools
- 18% “somewhat agree” that we need more revenue for schools
- Disagree: 32%
- 18% “somewhat disagree” that we need more revenue for schools
- 14% “strongly disagree” that we need more revenue for schools
- 6% answered “not sure”
The specific language of our capital gains tax question was as follows:
Do you strongly support, somewhat support, somewhat oppose or strongly oppose taxing the capital gains of wealthy individuals to help pay for public schools, colleges and universities?”
These were the answers:
- Support: 65%
- 46% “strongly support” a capital gains tax
- 19% “somewhat support” a capital gains tax
- Oppose: 33%
- 9% “somewhat oppose” a capital gains tax
- 24% “strongly oppose” a capital gains tax
- 2% answered “not sure”
We began asking a capital gains tax question in our statewide polls after Governor Inslee first proposed levying one two years ago as part of his 2015 budget.
House Democrats responded to Governor Inslee’s idea by getting to work on specifics, but obstructionist Senate Republicans refused to play ball and a capital gains tax did not make it into the 2015–2017 biennial budget.
However, Governor Inslee’s proposal did resonate with the people of Washington, who our research shows have become increasingly supportive of the idea.
In 2015, when we first asked the capital gains tax question, we found 55% of respondents in favor, with 43% strongly supportive. Those numbers increased this year to 65% supportive overall, with 46% strongly supportive.
Respondents to our surveys have also expressed support for raising revenue to fund public schools by going after big polluters.
For the past two years, we’ve asked this question in our statewide polls:
Do you strongly support, somewhat support, somewhat oppose or strongly oppose implementing a cap-and-trade system, where polluters would be charged a fee to reduce carbon dioxide emissions and fund public schools and transportation projects?
Support for this idea also increased since we first asked about it. In 2015, 37% said they strongly supported this idea and that figure remain unchanged this year. However, the percentage of those somewhat supportive increased from 18% to 22%, for a total of 59% of respondents supportive this year.
Total opposition clocks in at just 36%.
In this plan, Governor Inslee is proposing pollution penalties instead of a cap and trade system. But the basic concept of going after big polluters and using the revenue to invest in our schools and in transportation projects is the same.
The Governor is offering a climate protection action plan and a school funding proposal in the same package. That’s really, really smart.
Governor Inslee’s decision two years ago to put versions of these same ideas on the table is paying off. Washingtonians have become more enthusiastic about levying a capital gains tax and imposing pollution penalties. The Governor is wise to reintroduce these ideas and insist the Legislature seriously consider them.
Hostile Republicans will undoubtedly have very unkind things to say about this plan and Governor Inslee’s forthcoming budget. They will be eager to denounce the Governor’s strategy. But they will not be offering an alternative plan of their own, because they are not interested in fully funding our K‑12 schools.
Heck, Michael Baumgartner has introduced a resolution to repeal those introductory words of Article IX. To him and his fellow extremists in that caucus, following the plan of government our founders gave us is just too hard… so he’s proposing we just do away with the part that says it’s our paramount duty to amply provide for the education of our youth. That’s not leadership; it’s appalling cowardice.
Governor Inslee is showing us today what real leadership is. And we can’t thank him enough. Way to go, Governor! We’ll be showing up in Olympia next year to help you and Superintendent-elect Chris Reykdal fight for our students and teachers.