Inslee’s final spending proposal: Tax the rich to close budget gap

Early next year, Washington lawmakers and the state’s next governor will consider whether to impose a new wealth tax. It’s part of a spending plan that outgoing Gov. Jay Inslee (D) unveiled Tuesday.

The state is on track to spend money faster than it can bring it in through tax revenue over the next several years, as costs for services go up and demand for state programs continues to rise.

Officials expect a $10 to $12 billion gap over the next four years in state spending, and to close it, Inslee says he wants to see a 1% wealth tax on the state’s richest residents — those who are worth more than $100 million. Officials estimate the wealth tax would affect about 3,400 people.

Inslee is also proposing an increase to the state’s tax on businesses.

The tax proposals would bring in enough money to cover the bulk of the shortfall and maintain funding for critical state services and programs, according to Inslee and his budget team.

“Over four years under this proposal, the wealth tax would generate about $10.3 billion,” he said.

But Inslee’s plan is just the start of a process that will unfold over the next several months — and he won’t have any control over it after Governor-elect Bob Ferguson (D) takes office Jan. 15.

Ferguson recently told the Seattle Times he would search for savings before considering new taxes.

Lawmakers in Olympia have tossed around the idea of a wealth tax for several years as they seek ways to make the state’s tax code more equitable. Washington has the second-most regressive tax code in the country, according to the Institute on Taxation and Economic Policy. Put in other words: Lower-income people feel the state’s tax demands more acutely than wealthier residents.

Even if lawmakers approve a new wealth tax, it could be a challenge to implement, given the state’s long history of legal constraints on taxing income and property.

The outgoing governor’s spending plan also includes some cuts, delays, and reductions in services — about $2 billion-worth over the next four years, according to Inslee's office.

The proposal would delay a planned expansion of eligibility for child care and early learning funding promised by the state’s Fair Start for Kids Act.

Inslee also wants to close some residential facilities for people with intellectual and developmental disabilities, the Mission Creek Corrections Center for Women and three Department of Corrections reentry centers. His proposal would pause pay bonuses for teachers who receive their National Board Certification and eliminate or reduce some education grant funding that officials say is “underutilized” — including a program for training paraeducators.

According to the state’s budget office, the proposed cuts would eliminate roughly 924 full-time positions for state employees.

Still, there is a smattering of new spending laid out in Inslee’s budget proposal as well, including for teacher pay increases, crime victim services, and legal aid for low-income immigrants.

The state’s overall budget would increase by about $7 billion under Inslee’s plan.

The reaction so far

Education and child care advocates were quick to criticize any suggestions that would delay or reduce spending on early learning or in K-12 education. Larry Delaney, president of the Washington Education Association, said in a statement that Inslee’s plan “misses the mark.”

“Schools and colleges are already on a path of shortfalls and cuts and this budget fails to make the investments needed to fill the widening funding gaps,” he said. “Students’ unmet needs are more urgent than ever and it takes significantly more resources to support their learning.”

Lawmakers and Governor-elect Ferguson will be the ones to strike a budget deal during the upcoming session that starts in January.

Sen. June Robinson (Everett), the lead Democrat in that chamber’s budget committee, called Inslee’s proposal “a strong starting point.”

Republicans, meanwhile, are already slamming Inslee’s plan as “out of touch,” for proposing tax increases on businesses instead of focusing on reducing state spending.

“Let’s be clear: There is a deficit ahead, but it’s caused by overspending, not by a recession or a drop in revenue,” said Sen. Chris Gildon (R-Puyallup). “[Inslee’s] budget would make living in Washington even less affordable.”

According to Inslee, Ferguson’s staff have been made aware of the outgoing governor’s proposal. A spokesperson for the governor-elect says Ferguson has not yet reviewed the proposal in full, and that his spending priorities will be shared at a later time.