Late last night, legislators came to an eleventh hour agreement to choose Washington kids over multimillionaires. By fixing Washington state’s estate tax, lawmakers have prevented the loss of nearly $160 million in resources that go to educating children.
Closing the estate tax loophole is a good place to start, but much more still has to be done to ensure that adequate resources are included in a final budget agreement. Closing ineffective tax breaks and making additional technical corrections would generate revenue that could be used to invest in creating jobs and growing our economy.
The estate tax fix (House Bill 2075) prevents the loss of roughly $160 million in refunds ($97 million) and lost collections ($63 million) due to last year’s Bracken decision. The agreement goes beyond addressing the court ruling and makes broader changes.
Specifically, HB 2075;
- Allows the exemption (currently for estate’s worth up to $2 million) to increase annually by a measure of inflation;
- Increases the rates for the wealthiest households, making the tax more progressive overall;
- and provides a $2.5 million deduction for small businesses. Estates with larger business interests, defined as those with a total value greater than $6 million, would not be eligible to claim this deduction.
Lawmakers should build on this momentum and look for additional ways to bolster resources such as closing ineffective tax breaks and addressing the way our state taxes telecommunication companies.
The House and Senate budgets take very different approaches to generating additional resources. Overall, the House proposes to raise roughly $255 million in revenue by closing tax loopholes currently on the books. Yet, only $47 million of this revenue is actually included in their budget proposal. The remainder ($208 million) must be approved by the passage of HB 2034, which proposes to close or narrow six additional tax breaks in order to invest more in education.
The Senate’s budget proposal closes zero tax breaks, and moves in wrong direction by creating 14 additional loopholes which would cost just over $11 million in the next budget cycle. Independent of its budget, the Senate proposes to raise $47 million in new revenue by transforming the sales tax exemption for Oregonians into a refund program (SB 5871).
Both the House and the Senate have proposed – the House in its budget and the Senate in SB 5873 – to eliminate the sales tax exemption on residential telephone services thus normalizing tax treatment for traditional, wireless and cable telecommunications companies. The fix protects $110 million dollars in resources in the next biennium while also protecting the state from future lawsuits from telecommunication firms.
Any final budget must include additional revenue to grow our economy and build the middle class. Lawmakers have a choice – working families, seniors and kids, or ineffective and outdated tax breaks.
Originally published at Budget & Policy Center