More discussion and analysis of House Democrats budget proposal – special session expected

While the majority Democrats’ budget plan will move swiftly through the House, budget progress is expected to slow dramatically thereafter. The differences will be hard to resolve, particularly the tax questions, which may delay even the beginning of negotiations. 

The Spokesman-Review reports,

But Braun and Rossi said negotiations will be difficult if House Democrats can’t prove they can pass their tax increases.

“It’s kind of like fishing, you just got to be patient,” Rossi said. “I’m not sure it can be done in the regular session.”

And the NW News Network reports,

But Senate Republicans quickly pounced. They panned the proposal and warned it may take a special session to get a final budget deal.

“Big picture, very disappointed with their position on taxes,” Senate Ways & Means Committee Chair John Braun said…

Democrats say they won’t bring their tax package to a vote right away because the last few times they voted on taxes the Senate didn’t hear the proposals. That strategy, as we suggested yesterday, runs into some complications, too. The NW News story concludes,

But Braun said until the House does pass its tax plan, negotiations on a final budget can’t truly begin.

“They need to bring a complete proposal,” he said. “I’m certain we will talk to them, but you can have no real negotiations until they show that everything they want to do is more than just a spending list.”

From the Washington Research Council has a post on the House budget.

The House budget proposal, released today, would appropriate $44.862 billion in 2017–19 (NGFS+). This is an increase of $6.408 billion over 2015–17, and it is $1.548 billion more than the Senate-passed budget would spend. The proposal would balance over four years (a welcome development, given that Gov. Inslee’s proposal would have suspended the requirement). This is accomplished through revenue legislation that would increase revenues by $2.995 billion in 2017–19 and $4.784 billion in 2019–21.

…Many of the new revenues assumed in the balance sheet are in HB 2186. Some of the sources of these revenues are a capital gains tax (described by Rep. Lytton as “end[ing] the corporate tax break on capital gains”), a graduated rate for the real estate excise tax, B&O tax increases, economic nexus changes, and ending various tax preferences.

In the Spokesman-Review, Jim Camden highlights some of the tax changes proposed by Democrats.

To pay for some increases, House Democrats propose in separate legislation a capital gains tax on annual investment earnings above $25,000 for an individual or double that for a couple. The proposal also would shift the burden of the state’s business and occupation tax on a company’s gross receipts, providing an exemption for businesses with receipts under $250,000 but a 20 percent increase for some of the state’s highest grossing businesses.

Democrats released an estimate that of the state’s 365,000 businesses, 260,000 would be exempt from the B & O tax, another 33,000 would receive a partial deduction and 72,000 would pay the same amount or more.

They also propose a shift in the real estate excise tax, which currently collects 1.28 percent on every home sale. Under the House Democrats’ plan, the tax rate on homes that sell for less than $250,000 would drop to .75 percent; after that the rate for sales up to $1 million would remain the same, but the rate would climb after that, reaching 2.5 percent for sales above $5 million.

Together, those three tax changes would raise about $2.4 billion. There are also proposals to collect sales tax from online retailers outside the state and close several tax exemptions that have been targeted unsuccessfully in past years.

Carbon taxes are not currently in the Democratic proposal. The News Tribune reports that may change.

Still, Democrats maintain some form of carbon tax could become part of the state’s final two-year budget. State Rep. Joe Fitzgibbon of Burien told reporters Monday he’s still working on a carbon tax that would largely pay for clean energy, water quality, habitat and forest health projects.

And Democratic leaders have been claiming for weeks that a carbon tax is not universally disliked by Republicans in the GOP-led Senate. Senate Republican Floor Leader Joe Fain of Auburn and GOP Sen. Mark Miloscia of Federal Way endorsed last year’s carbon tax Initiative 732 that aimed to balance business concerns by swapping taxes, rather than raising them….

“We know that the governor and many people in our caucus and actually across the aisle are very interested in having a carbon discussion, so I think those will continue,” Lytton said.

Fitzgibbon also mentioned the likelihood of another initiative on the topic, saying it might push Republicans to a legislative compromise to avoid a ballot measure they have no input on.

But Fitzgibbon’s tax — even if tweaked to pay for schools — would likely have to be different from Inslee’s to muster support in the Senate.

There’s a lot more reporting out today, including KING5, more in The News Tribune,  Crosscut, the Business Examiner and The Lens.
As we wrote yesterday, “a $3 billion revenue package will buy a lot of differences” between the House and Senate spending plans. The big question, one likely to linger a while, is whether that $3 billion package has the enough support in the House to make it a factor in the coming negotiations. The related question: Will the negotiations begin without House passage of a revenue plan? 
This may take a while.