NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Friday, March 29th, 2019

Senate Democrats unveil their own capital gains tax plan, but it doesn’t fund our schools

Four days after the House Democrats unveiled a proposal to levy a capital gains tax on extraordinary profits, the Senate Democrats have introduced their own capital gains tax proposal… but it doesn’t fund education like the House plan would. Instead, the revenue would be used to reduce other taxes.

Specifically, according to the caucus:

Under the bill, expected revenues of $780 million starting in 2021 would fund:

  • Working Families Tax Credit ($220 million): A tax break for 400,000 of the state’s most underprivileged families – phase-outs begin when income is greater than $19,000 per year.
  • Small businesses tax cut ($260 million): Up to $3,000 in B&O tax [reductions] for businesses grossing less than $2.5 million in revenue annually. This would apply to approximately 350,000 – or 90 percent – of Washington small businesses.
  • Senior property tax reduction ($15 million): A property tax reduction for approximately 21,000 households to help senior citizens with economic and housing stability.
  • Eliminate sales tax on certain products ($235 milliom): Sales tax ended on diapers, medical and mobility equipment, feminine hygiene products and over-the-counter medications.

“Taxes are an investment we make together to pay for good schools, clean air and water, safe neighborhoods and countless other necessities every single one of us needs. It’s a good deal but we are not paying for it in a smart or balanced way,” said Senate Majority Leader Andy Billig. “Those that can least afford it are asked to carry an outsized share. This plan will help fix our broken tax structure.”

But the Senate Democrats’ proposal wouldn’t help us meet our paramount duty as a state, which is to amply provide for the education of all youth residing within Washington’s borders, as the House plan does. We strongly prefer the House plan (developed by State Representative Gael Tarleton, a member of NPI’s board).

Our research is clear: voters support levying a capital gains tax and using the revenue to fund our K-12 schools, colleges, and universities.

58% of likely 2018 Washington voters surveyed by Public Policy Polling last May told us they support a capital gains tax to fund education, up from 57% in 2017.

37% said they opposed it, down by four points from 2017.

Respondents were asked:

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?

Answers were as follows:

  • Support: 58%
    • Strongly support: 40%
    • Somewhat support: 18%
  • Oppose: 37%
    • Somewhat oppose: 10%
    • Strongly oppose: 27%
  • Not sure: 5%

Our survey of six hundred and seventy-five likely 2018 Washington State voters was in the field May 22nd-23rd, 2018. The survey used a blended methodology with automated phone calls to landlines and online interviews of cell phone only respondents. The poll was conducted by Public Policy Polling for NPI, and has a margin of error of +/- 3.8% at the 95% confidence level.

Our survey also found that voters across the state continue to believe new revenue is needed to support public education. The McCleary case has been dismissed, but that doesn’t mean our schools are fully funded… and Washingtonians know it.

We asked the following question after the McCleary case had been dismissed (worded identically to a question we asked in 2017, when the case was still active):

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?

61% of respondents said they agreed with that statement, while only 37% disagreed. Answers in each category were as follows:

  • Agree: 61%
    • Strongly agree: 37%
    • Somewhat agree: 24%
  • Disagree: 34%
    • Somewhat disagree: 18%
    • Strongly disagree: 16%
  • Not sure: 5%

It’s worth noting that tax swaps have gone 0 for 2 at the ballot in Washington within the past twenty years. We’re talking big swings and misses.

In 2004, manipulative initiative promoter Tim Eyman proposed funding a property tax cut by expanding gambling with Initiative 891. Voters overwhelmingly said no.

More recently, in 2016, CarbonWA proposed levying a pollution tax and using the proceeds to reduce the sales tax, cut the business and occupation tax, and fund the Working Families Tax Credit. CarbonWA’s I-732 was overwhelmingly rejected.

We agree that addressing the inequity of our current tax code is extremely important. But we cannot continue to neglect our paramount duty.

The House Democrats’ proposal would address both the inequity in our tax code and raise vitally needed revenue for schools through a capital gains tax on extraordinary profits of 9.9%, with the proceeds committed to the Education Legacy Trust.

That’s the approach that our polling shows voters support.

Electoral history also suggests it’s the way to go.

In the mid-2000s, the Legislature and Governor Gregoire successfully restored the estate tax, tying it to the Education Legacy Trust, after a court challenge from the right wing. The right wing then tried to overturn the restored estate tax at the ballot with Initiative 920. They failed miserably. Voters overwhelmingly voted to keep the estate tax flowing to the Education Legacy Trust.

We urge the House to pass its capital gains tax proposal and for the Senate to take up that proposal in lieu of the one floated by the Senate Democratic caucus today.

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