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Lawmakers keep estate tax checks from hitting the mail, moving $160 million closer to a budget deal

Post by Jordan Schrader / The News Tribune on June 14, 2013 at 1:57 am |
June 14, 2013 2:01 am

Democrats get a fully restored estate tax, fixing a court-ordered, crater-sized loophole. Republicans get an overhaul of how money is spent cleaning up contaminated sites.

Gov. Jay Inslee, seated, is joined by several lawmakers as he prepares to sign a measure to make a legislative fix to the estate tax law, on Friday, June 14, 2013, in Olympia, Wash. Lawmakers rushed to pass the law to stop the issuance of millions of dollars in refunds.  (AP Photo/Rachel La Corte)
Gov. Jay Inslee, seated, is joined by several lawmakers as he prepares to sign a measure to make a legislative fix to the estate tax law, on Friday, June 14, 2013, in Olympia, Wash. Lawmakers rushed to pass the law to stop the issuance of millions of dollars in refunds. (AP Photo/Rachel La Corte)

That was the trade, and it all came together just before midnight Thursday.

It wasn’t until the wee hours of Friday that Gov. Jay Inslee signed the two bills into law — just hours before his Department of Revenue would have dropped the first batch of checks in the mail refunding millions of dollars to taxpayers. Now that won’t happen.

DOR had projected paying out $160 million in the next budget period in estate taxes because of the court ruling that found married couples using a certain kind of investment strategy shouldn’t have been on the hook for the tax. The tax change made today is retroactive, which is almost sure to spark another legal challenge. Democrats say the state attorney general’s office is confident the law will hold up since lawmakers are just clarifying their original intent. Many Republicans say it’s a stretch to try to hold on to money it wasn’t legally supposed to take in the first place.

But the mostly Republican Senate majority allowed a late-night vote on the latest proposal which devotes the restored money to education. It passed 30-19 — but only after the House approved a deal on environmental cleanup that had been the subject of daylong negotiations.

Here’s the AP story with a full rundown.

Now the question is: How much closer does this move the Legislature to a budget deal to avoid a much more dire deadline: a government shutdown July 1? A few possible signs of progress:

  • First and foremost, the House and Senate have their first big agreement on a budget dispute.
  • Republicans have now accepted something that, legally speaking, is a tax increase, after vowing to hold the line on taxes. That could crack the door open to more revenue.
  • On the other hand, Democrats have now accepted a tax-for-policy trade, after saying they wanted the budget to stand alone with no policy bills hostage to its fate. That could crack the door open for more GOP-backed policy, although Inslee said both sides got things they wanted in the environmental bill. The Senate is still seeking changes on workers’ compensation, teacher assignment and other issues, Senate Republican Leader Mark Schoesler said after the votes.
  • The majority caucus was able to depart from its usual united front without any public blowup. While conservative Republican Sen. Don Benton complained the caucus should have held out for more, and most Republicans opposed the estate tax bill, Democrats were joined in support by Rodney Tom, Steve Litzow, Andy Hill, Joe Fain, John Braun and Bruce Dammeier. (On the environmental bill, it was Democrats who split: 11 of them joined the majority, led by Kevin Ranker.) “One positive thing about tonight in terms of process: people for the first time kind of got used to passing big bills with split votes.” Senate Democratic Caucus Chairwoman Karen Fraser said.

Schoesler said the extra taxes make it easier to come up with the money to comply with the court order in the McCleary case to fully fund schools. “There is no excuse left for not having a billion dollars to fund McCleary,” he said.

Inslee said a deal isn’t in hand yet. “I think this is a very good step but there’s a lot of work to do on the budget. There are still many issues dividing the parties. But I hope that it demonstrates, and I hope some people walk out of here tonight knowing what mutual victory feels like.”

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