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Murray proposes capital gains tax to pay for education

Post by Melissa Santos / The Olympian on Jan. 25, 2013 at 12:17 pm |
January 28, 2013 6:26 pm

Should 3 percent of Washington state residents have their investments taxed to pay for a public education system that serves everyone? Senate Democratic Leader Ed Murray of Seattle announced Friday that he thinks they should.

Murray is proposing a 5 percent tax on capital gains to start in 2015, which he said would raise between roughly $600 and $700 million per year to help fund basic education and higher education. He would want to send the tax proposal to voters as a referendum so they could decide whether or not it should go into effect, he said.

The proposal is probably a non-starter, given that a Republican-dominated majority coalition in the Senate has denounced the idea of tax increases, and even Democratic Gov. Jay Inslee has pledged not to raise taxes to solve the state’s budget problems.

But Murray says that the state can’t meet its obligation to fully fund education solely by making cuts and reforming the system. Last January, the State Supreme Court ruled in the McCleary vs. State case that Washington was not meeting its constitutional duty to fund basic education.

Murray outlined his tax proposal Friday in his first press conference as Senate Minority Leader. He said Republicans can’t fix the education system through reforms alone, nor can they find funding for education just by cutting other programs.

“They can’t cut deep enough to take care of the issue we have to take care of,” Murray told reporters Friday. “There are not billions and billions of dollars to be cut in state government.”

According to Murray’s estimates, a 5 percent tax on capital gains would affect only 3 percent of Washingtonians who have investments in assets such as stocks, bonds and multiple real estate properties. In a one-page summary of his plan, he projected the tax would bring in $633 million in fiscal year 2015, $688.2 million in fiscal year 2016 and $709 million in fiscal year 2017.

Murray is also advocating continuing the state’s beer tax and business and occupation tax surcharge through 2016 to help bring in revenue while the capital gains tax collection system gets off the ground.  In the 2013-2015 biennium, Murray estimates that the combination of these taxes could allow the Legislature to funnel an additional $89 million into all-day Kindergarten, $220 million into reducing class sizes for elementary school students, and another $175 million into the higher education system. He plans to introduce a formal piece of legislation next week, he said.

UPDATE 1:03 p.m.: It didn’t take long for Republicans to respond as expected. “Here they go again,” the Senate Republican Caucus tweeted within 40 minutes of the end of Murray’s press conference, calling Murray “Seattle-Centric.”

Yet Murray is still saying there’s hope for a compromise that could get his tax proposal moving.

“Do I have the votes today? No, because I don’t have 25 votes,” Murray said. “This is only going to work if there’s some grand bargain.”

UPDATE 3:18 p.m.: Senate Republican Leader Mark Schoesler said that he doesn’t see his caucus or the public supporting a capital gains tax.

“There’s not much difference between a capital gains tax and an income tax,” the Republican from Ritzville said Friday afternoon. He said voters clearly showed in 2010 that they don’t support an income tax when they shot down Initiative 1098, which would have raised taxes on the top 1 percent of earners.

Schoesler also said that there’s no guarantee that the monies raised by the tax would be set aside for education rather than being raided for other purposes.

He added that only voters in Seattle, where Murray lives and is running for mayor this year, might approve of such a proposal.

“It might play well for his constituency there, but I think there are 44 other legislative districts where  this might not play very well,” Schoesler said.

 

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