Senate passes $52.2 billion two-year state budget. Now efforts move to reconcile differences with House before April 28.

The state Senate has adopted its version of the 2019-2021 budget. The Associated Press reports,

The Senate passed its budget on a 31-17 vote, with three Republicans voting with the Democratic majority . Like a plan passed previously by the House on a 56-38 vote, the Senate proposal looks to increase spending on K-12 education, higher education and behavioral health…

The Senate plan seeks more than $500 million in new revenue to fund the underlying $52.2 billion budget, including a change to the state’s real estate excise tax, but specific tax bills aren’t expected to be voted on until a final budget plan is negotiated…

Overall, the Senate budget proposes about $1.6 billion in new spending, while the House budget includes about $2.3 billion, according to nonpartisan budget estimates.

The Washington Research Council provides a good comparison of the two budgets (Senate version as proposed by the chair). The WRC also notes minor changes made in the chair’s proposal in the Ways and Means Committee.

As the AP reports, both budgets require tax increases, on top of the extraordinary revenue growth Washington has experienced in recent years. The Spokesman-Review reports on the Senate proposal, 

The Senate operating budget is the smallest of the three — about $750 million below the House budget passed last Friday and nearly $2.5 billion below the plan announced in December by Gov. Jay Inslee — but like the others, it would spend more than half of the money on public schools.

And points out a prominent Republican critic of the need for new taxes indicates reluctant support.

Sen. John Braun, of Centralia, the top Republican on the committee, said the strong economy puts the state in the best budget position of this century and he hopes some items his party tried to add to the budget will get consideration in the coming discussions. He also said the state should have debated major portions of the budget, such as the raises negotiated for state employees that add $1.5 billion to the budget, rather than just accepting them as is.

But Braun said he would vote for the budget, as did Sen. Randi Becker, R-Eatonville, who said she supported the increases in mental health programs and considered the budget “a work in progress.”

The Senate will also be considering a capital gains tax. Unlike the House capital gains tax, though, the Senate plan is not required to fund the budget. The WRC blogs briefly in the Senate bill, noting it begins by stating a flawed premise.

In discussing the reasons for doing so, the bill notes that Washington’s Legislature has adopted some 700 tax preferences (the state’s terminology for exemptions, exclusions, deductions, deferrals, credits, and preferential tax rates). The bill then states,

According to the 2016 tax exemption study completed by the department or revenue, these tax preferences forego 50.4 billion dollars in revenue per biennium. This means the state foregoes more revenue in tax preferences than it collects from its remaining revenue sources . . . .

This is not true, according to the Department of Revenue (DOR) study itself.

The post explains, then concludes:

There has been a lot of discussion about Washington’s tax preferences lately. This claim of $50 billion in lost revenue is an example of the rhetoric not matching reality.

And The Lens reports on the House hearing on its capital gains tax.

Sponsored by Rep. Laurie Jinkins (D-27), HB 2156 would impose a 9.9 percent income tax on long-term capital gains of more than $100,000 for individuals or $200,000 if jointly filed. The bill includes numerous exemptions, including residential units, retirement assets, livestock, certain types of agricultural lands and timberland.

The legislation would swap the 1.28 percent REET rate with a graduated rate ranging from .9 percent for properties worth $500,000 or less, to three percent for properties $3 million or more. However, the 1.28 percent rate would remain for certain types of lands including agricultural, timberlands and undeveloped lands.

…repeated claims of “tax loopholes” by some testifiers during the public hearing drew a response from Rep. Larry Springer (D-45). “Our tax code is filled with exemptions, preferential rates, and they are there for a reason. They were there because the legislature put them there. They are not loopholes; loopholes imply that somebody is getting away with something they shouldn’t. Anybody taking advantage of a preferential rate or an exemption is doing so because we, the legislature, said they could.”

Right. And more,

Ongoing apprehension regarding both taxes in HB 2186 were raised by business members. Aside from the legality of the capital gains tax, Jan Gee with the Washington Food Industry Association said that with a low profit margin, the “B&O tax has a very significant impact on our industry. Adding another tax on top of that for our grocers, we are very concerned about.” She added that an exemption intended for retirement capital gains “misses the retirement for most of our grocers, because their retirement is in their investment in their business.”

There’s more, of course. It’s going to be a busy few weeks on the way to April 28 adjournment.