The state House and Senate have introduced separate versions of a new state budget that both include a controversial capital gains tax proposal and enough spending to significantly reduce the state savings account.
Both houses must pass their budget versions and then agree on a compromise document by a scheduled April 25 adjournment before passing it on to Governor Inslee for approval or possible vetoes. The proposals are House bill 1094 and Senate bill 5092.
Both documents approach $60 billion in spending. They include a proposed 7% tax on capital gains over $250,000, which has been opposed by Republican minorities in the Legislature. The tax is intended to fund a tax credit for low-income families as well as childcare.
If approved, a court challenge to the capital gains tax as an unconstitutional income tax is expected. Such a tax would be attached to the sale of personal assets including businesses.
State revenues have been coming in above expectations. Washington Retail opposes a host of proposed new taxes under consideration by the Legislature including the capital gains tax and has urged state lawmakers to instead demonstrate better management of existing revenues. WR expects the capital gains tax to narrowly win Legislature approval and be signed into law by the Governor.
While other states across the country face budget deficits due to decreased revenues, Washington is expected to receive a $3.5 billion surplus.
According to a Washington Research Council review of the budget documents, some major spending items include:
- $278.1 million for an additional five days of K–12 instruction in school year 2021–22
- $90.7 million in 2019–21 and $147.4 million in 2021–23 for long-term care COVID temporary rate increases
- $146.5 million for home and community-based services enhancements
- $100.0 million for foundational public health
- $142.2 million for the working families tax credit
- $144.0 million for local government assistance
- $99.6 million to cancel state employee furloughs
The House budget version would leave a $199 million fund balance while the Senate document leaves $170 million in state financial reserves. These balances are important in future years as unanticipated expenses come up and determine the state’s ability to meet them.