Gov. Jay Inslee believes he has arithmetic on his side.
In his budget proposals for education, transportation and the overall state budget, the governor has identified his spending priorities for the next two years, proposals that provide a starting point for discussions as the Legislature begins its session in mid-January.
But Inslee likely faces bigger battles over how he recommends paying for his education and transportation budgets and the rest of the state budget. Most controversial are a capital gains tax and a carbon tax on industrial polluters.
The capital gains tax would result in about $798 million in fiscal year 2017 by collecting a 7 percent tax on earnings on the sale of stocks and bonds above $25,000 for individuals and $50,000 for joint filers. Homes, farms and retirement accounts would be exempt from the tax.
The carbon tax, which would charge the oil, gas and other industries for each ton of carbon dioxide they emit, would provide an estimated $379 million annually to the general fund, a 40 percent share of the revenue the tax would generate.
Inslee defends the tax proposals as the fairest method for collecting necessary revenue and rebalancing a tax system, which the governor’s office calls the most regressive in the nation, which relies heavily on a sales tax that places a heavier burden on low- and middle-income families.
“The upper 1 percent are paying 2 percent of their income, while the bottom 20 percent are paying 17 percent (of their income in taxes),” Inslee said Thursday during a budget briefing with The Herald and other Sound Publishing newspapers in Bellevue.
Inslee’s tax proposals were quickly criticized, first because he campaigned in 2012 on a pledge to veto new taxes, then on the taxes themselves. The Association of Washington Business criticized the carbon tax as an “untested, unsustainable solution to the state’s long-term needs.” While the Washington Policy Center, a conservative think tank, criticized the capital gains tax as a “wildly volatile” funding source, we would make the same point about the state’s reliance on the sales tax, which is what was largely responsible for the state’s funding crunch during the Great Recession.
We’ll give Inslee a pass on the promise to veto taxes. We’re less concerned about pledges made on the campaign trail than we are about honestly sizing up current financial realities. And Inslee believes his critics are “venting and raging against arithmetic.”
In defending his budget, Inslee said he sought to provide strong schools, faster transportation, cleaner air and a fairer tax system. His spending and tax proposals could serve those four goals.
We hope that political realities and divided government in the Legislature don’t force a choice among the four.
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