House budget cuts property taxes, addresses state’s regressive tax system


The 2018 legislative session is winding down in Olympia. By the time this column goes to print, there will only be about a week left to go. But with final budget negotiations happening between the House and Senate, it feels like things are ramping up.

Both chambers have to agree on and pass the budget before the clock runs out on this 60-day session. In even-numbered years, legislators pass a supplemental budget, which makes corrections and technical fixes to the two-year budgets passed in odd-numbered years. The House passed its budget this week; the Senate last week.

There’s a lot in the House budget I’m excited about: the increased funding for our public schools, the investments in our mental health system, and the strengthening of our state’s safety net.

I also love the Tacoma-specific provisos in this budget, which would improve health and quality of life for residents of Tacoma and Pierce County. Transit centers across Tacoma and Pierce County would get digital signs providing real-time updates of bus arrivals and departures. An air quality study at the Port of Tacoma would distinguish the emission sources of a toxic air pollutant. A program to increase immunization rates and implement more health screenings, interventions and referrals by providers would address preventable hospitalizations (Pierce County has the highest preventable hospitalization rate in the state). A pilot program to identify and support families at risk would aim to decrease the number of children in Pierce County removed from their homes due to abuse or neglect. And UW-Tacoma would begin a pre-law program for South Sounders who are interested in pursuing a legal career.

What I love most about this budget, though, is something that will help working families not just in Tacoma, but across the entire state. The House budget provides both short- and long-term property tax relief while also addressing our state’s regressive tax code.

Last year, in order to generate the necessary revenue to fully fund our public schools, legislators passed a budget that included a property tax increase. Like many of my Democratic colleagues, I wasn’t a big fan of this option, but it was the only one Republicans, who controlled the state Senate, would agree to. Many of you have noticed that increase in your property tax bills this year.

Higher property taxes hurt working families and those on fixed incomes the most. At the same time, our state already has the most regressive tax system in the entire nation. The bottom fifth of Washington’s income earners pay nearly 17 percent of their income in taxes, while those at the very top pay only around 2 percent.

Since coming to the Legislature in 2012, I’ve been pushing to do what 42 other states already do: institute a capital gains excise tax. That way, everyone pays their fair share for our schools. This year, with Democrats controlling both chambers of the Legislature, there’s an opportunity to both lower property taxes and address our upside-down tax system.

The short-term solution in the House budget is a $1 billion property tax reduction thanks to extra revenue that has come to the state in this past year. But it’s not a sustainable, long-term solution.

That’s why the budget also includes an excise tax on capital gains, which would affect only the wealthiest individuals in our state.

Here’s how it would work: If someone sells corporate stocks or bonds and reports that sale to the federal government, they will also owe the state a 7 percent tax on those gains. The revenue the state takes in from this excise tax would go directly into reducing future property taxes, lowering increased property taxes by about half.

Here’s what is exempt from this capital gains tax: retirement accounts (including IRAs and 401ks), single-family residences, condominiums, and duplexes/triplexes, ranching livestock, and the sale of agricultural lands or timber. It also exempts the sale of a qualifying family-owned small business if the business grosses less than $20 million in the previous year.

Bottom line: if you’ve never paid a federal capital gains tax, you’re probably never going to pay the state capital gains tax.

To put it in perspective, an estimated 48,000 Washington tax filers would pay the capital gains, versus the 2.3 million Washington households looking at increased property tax bills this year.

After eight years in Olympia, this could finally be the year I see a capital gains tax make it all the way through the Legislature. I’m proudly supporting this long-term property tax relief that also makes our tax code a little more fair for working families in Tacoma and across the state.

Laurie Jinkins is a public health official from Tacoma who serves as a member of the Washington House of Representatives from the 27th district.

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