In state budget impasse, lawmakers spar over raising property taxes

OLYMPIA -- Part of the budget impasse in the Legislature is over whether property taxes should go up to fulfill the state Supreme Court mandate to fully fund schools.  But, surprisingly, it’s the GOP pushing this new tax plan.

“What the Senate Republicans are proposing is unfair to Washingtonians,” Gov. Jay Inslee said Thursday.

It’s a new twist in the budget standoff:  The governor attacking the Republicans for wanting to raise taxes, not the other way around.

“It’s unfair in this moment of massive income inequality to create a heavier tax burden for working families in this state and seniors on fixed incomes when we have a better option that’s fairer,” Inslee said.

Here's some background to understand this fight:

One big aspect of the Washington Supreme Court’s decision is that the state is relying too much on local levies to pay for schools.  In some districts, they’re as much as 30% of the budget.

The court says more money has to come from the state to pay for teachers and classrooms and less from locals.

Here are the two leading plans to deal with that mandate:

Republicans:  Reduce Local Levy Tax and Increase State Property Tax

Democrats:  Reduce Local Levy Tax and Create Capital Gains Tax

“You’ve got to lower those local levies," said Sen. Andy Hill, R-Redmond, the GOP’s chief budget writer.  “You need to make it up with an increase in the state property tax.”
The Washington Constitution currently limits the regular (non-voted) combined property tax rate that applies to an individual’s property to 1 percent of market value ($10 per $1,000). Voter-approved special levies, such as special levies for schools, are in addition to this amount.
The GOP argues the overall cost to taxpayers with their levy swap would be zero.  The higher state property taxes would be matched by lower local levies.  But it wouldn’t be zero in all areas.  In some districts, taxes would go up and in other areas it would go down because of the difference in property values.

“It’s very hard to do,” Hill said.  “If it was an easy problem, they would have solved it 10 years ago.”

The governor doesn’t like that some property taxes would go up under the GOP plan, so instead he's pushing a high-earner capital gains tax to take some of the burden off local levies.