Gov. Jay Inslee gives his State of the State address to a joint session of the Legislature on Jan. 15 in Olympia. Inslee has called for creation of a new tax on capital gains, an increase in the business tax rate paid by professional services and changing the state’s share of the real estate excise tax from a flat rate to a graduated rate. (AP Photo/Elaine Thompson)

Gov. Jay Inslee gives his State of the State address to a joint session of the Legislature on Jan. 15 in Olympia. Inslee has called for creation of a new tax on capital gains, an increase in the business tax rate paid by professional services and changing the state’s share of the real estate excise tax from a flat rate to a graduated rate. (AP Photo/Elaine Thompson)

What a surprise: Democrats eye the need for higher taxes

Even with a robust economy, the majority party might seek more revenue to carry out its wish list.

OLYMPIA — Democratic legislative leaders are gearing up for one of the most challenging conversations this session: taxes.

With control of the state House and Senate, their members are bent on using the next state budget to make a dent in curing social ills, correcting economic wrongs and combating climate change.

They desire to transform the state’s mental health system, end homelessness, build housing, expand preschool education, make college tuition free, boost special education funding, broaden access to health care, provide pay raises for state workers, clear every blocked fish passage and save the Southern Resident orcas.

This is an expensive list, far more expensive than can be afforded with the amount of revenues expected to flow into state coffers.

Democratic leaders of the two chambers aren’t ready to come right out and say they intend to raise taxes. On Tuesday, they did provide reporters with a chart showing why they think there might be no other choice.

It shows that revenues are expected to reach $50 billion for the two-year budget that begins July 1 but the cost of continuing current state programs as-is, plus the tab for McCleary school funding commitments, adds up to $51.1 billion.

Theoretically, the gap can be covered with existing reserves, they said.

Not part of the equation are all those investments — code for new spending — their members want to do. They cost a couple of more billion dollars.

As party leaders try to keep a lid on members’ expectations, they seem to be constructing a case for a spend-and-tax approach in budgets to be released next month.

“Nobody wants to raise taxes for the sake of raising taxes,” Senate Majority Leader Andy Billig, D-Spokane, said Tuesday.

Gov. Jay Inslee, also a Democrat, reached the taxes-are-necessary line a couple of months ago.

As part of his proposed budget, Inslee called for creation of a new tax on capital gains, an increase in the business tax rate paid by professional services and changing the state’s share of the real estate excise tax from a flat rate to a graduated rate. In all, these would bring in roughly $3.7 billion.

The governor said earlier this week he has not delved deeply on the topic of taxes with lawmakers as he figured they need time to get a better handle on the situation.

“I think legislators are just now coming to grips with the financial challenges we have,” he said.

Thus far, lawmakers haven’t expended much energy on a capital gains tax or hiking the business and occupation tax rate. But they are looking at reworking the state’s share of the real estate excise tax, or REET. The idea is replace the flat rate of 1.28 percent imposed on each sale of property with a four-tier graduated rate.

And right now some Democrats disagree with the governor’s approach.

Inslee suggests setting rates of 0.75 percent on sales of property valued at less than $250,000, 1.28 percent for properties worth between $250,000 and $999,999, 2 percent rate on those valued between $1 million and $5 million, and 2.5 percent on properties valued at more than $5 million. And he wants the resulting $400 million steered into the state transportation budget to remove barriers to fish passage.

Rep. Noel Frame, D-Seattle, authored House Bill 1921, which would impose the lower rate of 0.75 percent on sales of properties up to $500,000. It would apply the 1.28 percent rate on sales between $500,000 and $1.5 million, 2 percent on those between $1.5 million and $7 million and 3 percent if the selling price is greater than $7 million.

And her bill keeps the money in the operating budget and directs a portion into development of affordable housing. It received a hearing this week.

That doesn’t mean it’s a done deal. It is a signal the conversation on taxes is going to get serious, soon.

Jerry Cornfield: 360-352-8623; jcornfield@herald net.com. Twitter: @dospueblos.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

Customers enter and exit the Costco on Dec. 2, 2022, in Lake Stevens. (Olivia Vanni / The Herald)
Costco stores could be impacted by looming truck driver strike threat

Truck drivers who deliver groceries and produce to Costco warehouses… Continue reading

Two Washington State ferries pass along the route between Mukilteo and Clinton as scuba divers swim near the shore Sunday, Oct. 22, 2023, in Mukilteo, Washington. (Ryan Berry / The Herald)
Ferry system increases ridership by a half million in 2024

Edmonds-Kingston route remains second-busiest route in the system.

An American Robin picks a berry from a holly tree on Thursday, Feb. 13, 2025 in Edmonds, Washington. (Olivia Vanni / The Herald)
Calling all birders for the annual Great Backyard Bird Count

The Audubon Society will hold its 28th annual Great Backyard… Continue reading

Robin Cain with 50 of her marathon medals hanging on a display board she made with her father on Thursday, Jan. 2, 2025 in Lake Stevens, Washington. (Olivia Vanni / The Herald)
Running a marathon is hard. She ran one in every state.

Robin Cain, of Lake Stevens, is one of only a few thousand people to ever achieve the feat.

People line up to grab food at the Everett Recovery Cafe on Wednesday, Dec. 4, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Coffee, meals and compassion are free at the Everett Recovery Cafe

The free, membership-based day center offers free coffee and meals and more importantly, camaraderie and recovery support.

A view of one of the potential locations of the new Aquasox stadium on Monday, Feb. 26, 2024 in Everett, Washington. The site sits between Hewitt Avenue, Broadway, Pacific Avenue and the railroad. (Olivia Vanni / The Herald)
Initial prep work for AquaSox stadium to start, with $200k price tag

The temporary agreement allows some surveying and design work as the city negotiates contracts with designers and builders.

The Everett Wastewater Treatment Plant along the Snohomish River on Thursday, June 16, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Everett water, sewer rates could jump 43% by 2028

The rate hikes would pay for improvements to the city’s sewer infrastructure.

The bond funded new track and field at Northshore Middle School on Thursday, Oct. 24, 2024 in Bothell, Washington. (Courtesy of Northshore School District)
Northshore School District bond improvements underway

The $425 million bond is funding new track and field complexes, playgrounds and phase one of two school replacements.

Aaron Kennedy / The Herald
The Joann Fabric and Crafts store at 7601 Evergreen Way, Everett, is one of three stores in Snohomish County that will close as part of the retailer’s larger plan to shutter more than half of its stores nationwide.
Joann store closure plan includes Everett, Arlington, Lynnwood locations

The retail giant filed a motion in court to close approximately 500 stores in the U.S.

Lynnwood
Lynnwood police: 1 suspect in custody, 1 at large after attempted carjacking

Beverly Elementary School went into a precautionary lockdown Thursday afternoon. Numerous officers continue to search for the second suspect.

Candidates announce campaigns for Everett city council seat

Ryan Crowther, founder of the Everett Music Initiative, will challenge incumbent Paula Rhyne for the District 2 seat.

Lynnwood City Council Vice President Julieta Crosby speaks during a Lynnwood City Council meeting on Wednesday, Nov. 20, 2024. (Olivia Vanni / The Herald)
Lynnwood picks top eight candidates to replace former council VP

The City Council will make its final decision Feb. 20 after interview process.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.