OLYMPIA — Democrats pushed their $3 billion tax package through a House committee Tuesday and declared themselves ready to sit down with their Republican counterparts in the Senate to negotiate a new two-year state budget.
The House Finance Committee approved the bill imposing a collection of new and higher taxes on a party line vote after Democrats and Republicans debated its necessity in assuring ample funding for public schools and social services.
Democrats decried the unfairness of the existing tax system and the need to provide a level of funding support for children in public schools required by the state’s Constitution.
“With this package we begin to make the tax system more fair while attempting to provide for the first time a significant, big step forward in meeting our obligations to them,” said Rep. Gerry Pollet, D-Seattle.
Republican members said the large tax package is unnecessary because the surging economy will produce billions of additional dollars for state coffers on its own.
“This hits everything. It is almost beyond belief,” said Rep. Cary Condotta, R-Wenatchee. “We have more than enough revenue this year to complete this budget without a single new tax. I think the people have to be startled when they look at this slate. I am shocked.”
The bill calls for a new 7 percent excise tax on capital gains to be paid by individuals with annual investment earnings of more than $25,000 or couples with more than $50,000. It would exempt gains on the sale of residential property, timber lands and investments in retirement accounts, but not on the sale of commercial property.
There’s also a 20 percent increase in the tax rates paid by professional services and businesses grossing more than $250,000 a year; a graduated real estate excise tax that would lower the rate levied on homes under $250,000 and raise it on those valued above $1 million; require online retailers to collect and remit sales tax; impose sales tax on bottled water and closure of several tax breaks.
The legislation, House Bill 2186, will now be sent to the Rules Committee. It is expected to be parked there as budget writers in the two chambers seek to reconcile differences in their competing spending plans before April 23 when the regular session is scheduled to end.
Rep. Larry Springer, D-Kirkland, acknowledging concern of opponents, said the content of the final budget agreement “will dictate what the final version of this tax package looks like.”
“This is the starting point,” he said. “This is the point at which we now begin the real discussions.”
Not so fast, Republicans said. Talks can’t get serious until the House acts on the tax bill. GOP leaders contend the budget passed by House Democrats last month assumes an infusion of $3 billion from new taxes yet without a vote it’s unclear if there is political support for all the tax changes.
“If you can’t prove you have the resources to pay for your budget, it’s a pretend budget,” House Minority Leader Dan Kristiansen said Tuesday.
Democratic leaders counter it’s pointless. The House budget, which calls for $44.9 billion in spending, is dead on arrival in the Senate, just as the Senate plan, which spends $43.3 billion and contains a new statewide property tax, never got a vote in the House. It won’t be any different with the tax bill.
“A vote on the revenue bill is a political red herring that distracts from the votes that fundamentally matter: Can the Senate budget as it stands now pass in the House, and can the House proposal pass in the Senate? The answer is ‘no’ to both,” said House Majority Leader Pat Sullivan, D-Covington.
“With that dynamic, we should be negotiating a budget right now that in the end will be significantly different than either proposal on the table today in order to reach a bipartisan vote,” he said.
Republican senators note that they did take the politically difficult tax vote and continue to question whether Democrats can pass their own bill. Democrats hold a 50-48 margin in the House and need support from every one to approve the tax bill.
Meanwhile, Sen. Dino Rossi, R-Sammamish, a member of the Senate Ways and Means Committee, said if the tax bill reaches the Senate it will get a hearing and “we will bring it to the floor.”
Senate Majority Leader Mark Schoesler, R-Ritzville, has told reporters no one in his caucus is prepared to vote for the bill now sitting in the House.
The current version won’t get support from some Democrats in the Senate either.
“I wouldn’t vote for it as it is,” said Sen. Steve Hobbs, D-Lake Stevens. “I could only vote for pieces.”