Budget time in Olympia

Budget time -- here’s an overview of what’s happening.
Less than four months into office, the campaign promises by Gov. Jay Inslee that he wouldn’t raise taxes have already been broken. He recently came out with a budget outline that would raise about $1.2 billion in taxes to pay for more government spending. His plan would roll back a series of tax breaks for businesses and individuals, and would make permanent tax increases that were supposed to be temporary and set to expire this year on June 30, 2013.

The temporary taxes were part of an $890 million tax package passed by the Legislature in 2010. Included in that tax package in 2010 were increased business and occupation (B&O) taxes, an increased tax on beer, soda, bottled water and many others. This would effectively repeal the People's initiative Initiative 1107.

The breakdown on taxes:
Temporary taxes which would become permanent

• 50-cent beer tax, and expanding it to microbreweries ($127 million)

• 0.3 percent B&O tax on service businesses ($534 million), including:
• architects
• attorneys
• barbers and beauty shop owners
• chiropractors
• dentists
• funeral directors
• janitors
• music teachers
• physicians
• real estate agents
• school bus operators
• veterinarians

Tax Incentives which would end (which equals tax increases)

• vehicle trade-ins when purchasing a new car: $94.8 million
• local residential phone service: $83.2 million
• computer software: $78.5 million
• most state businesses that were given lower rates in order to locate or expand in Washington: $66.2 million
• non-residents who shop in Washington stores: $63.7 million
• bottled water: $51.5 million
• recycled fuel environmental programs at Washington’s oil refineries: $40.8 million
• resellers of prescription drugs: $29 million
• long-term rental of commercial land/buildings: $27.8 million
• import commerce: $24.1 million
• farm equipment: $5.6 million

The governor explained that allowing temporary tax increases to continue is not breaking his no-tax campaign promise because it is not an actual tax increase. I tend to disagree and when you repeal exemptions and extend temporary taxes, you are raising taxes. The media seems to agree as well and you can read more here, here, and here.

Campaign promises and semantics aside, we do not need to raise taxes. Washington state is expected to take in $2 billion more in the coming budget cycle. We should be able to prioritize spending in the budget – fund education first, protect our most vulnerable citizens and keep our communities safe by funding public safety with the 6.6 percent increase in tax collections. I am guessing many employers and families trying to make ends meet would love to see that kind of increase in their income. Unfortunately, the governor is proposing more ways to take money out of the pockets of employers and taxpayers.

The governor wants to raise taxes on the very people our own State Treasurer Jim McIntire is saying we tax too much. "You don’t often hear a Democrat say we over-tax business, but we do," McIntire said. "I want to be really clear that it’s a problem in the state."

While the governor’s plan is simply a proposal, it sends the wrong message. We have an increase in tax revenue, even though our economy is still limping along, but he wants to ask citizens for another $1.2 billion to increase spending. Maybe he should take a look at the Senate.

Senate budget proposal
The Majority Coalition Caucus in the Senate passed a bipartisan budget proposal last week by a vote of 30-18. It does NOT raises taxes, yet increases funding for education by $1 billion to address the McCleary decision. It is about priorities. The governor feels taxes are needed to fund education, whereas the Senate is showing what House Republicans have been saying all along: If you prioritize you can fund the core functions of your government and adequately fund education as required by the McCleary decision and our state Supreme Court without asking for more taxpayer dollars. While the Senate budget may not be exactly what House Republicans would draft, it does approach our principles and priorities.

House Democrat budget proposal
On Wednesday, House Democrats introduced a budget similar to Gov. Inslee’s. It would:

• increase taxes by $1.3 billion;

• spend $13 million less on higher education than the Senate budget, and permit tuition increases of 10 percent at UW/WSU and 6 percent at other two and four-year institutions (the Senate budget lowers tuition).
• make $757 million in one-time fund transfers, including tapping ALL of the state’s rainy-day fund ($575 million, of which $238 million would be spent and $337 million would be left to comprise an unrestricted ending fund balance).
• raise state spending to an unsustainable level of $34.51 billion, which is a $3.3 billion increase from current appropriations and equates to a 10.4 percent increase from the 2011-13 budget cycle. This is approximately $1.95 billion more than the $32.56 billion the state expects to bring in. It is also spends $75 million more than Gov. Jay Inslee proposed and nearly $1.2 billion more than the bipartisan, no-new-taxes Senate operating budget approved last week.

	Governor	House Democrats	Senate Coalition
Make “temporary” taxes permanent?	yes	yes	no
B&O tax increases	yes	yes	no
McCleary education funding	$1.2 billion	$1.2 billion (House Republicans: $903 million, but directly to classroom)	$1.0 billion
Higher education tuition (four-year)	5% increase	5% increase	3% decrease
Reserves or ending balance	$532 million	$337 million	$611 million
Total budget (not including rainy day fund)	$34.4 billion	$34.5 billion	$33.3 billion

For more on the Senate plan you can click Senate Operating Budget. For more on the governor’s plan you can click Inslee’s Budget and Tax Plan. Finally, click House Democrat Plan for more information on their proposal.

Cary Condotta