Gov. Jay Inslee took big shots today at a Senate Majority Coalition Caucus plan to lower estate-tax rates for wealthy families and also to exempt two-thirds of the 300 estates that now pay the voter-affirmed tax each year. In a news conference just one week before the scheduled end of a 30-day legislative session, Inslee said the Republican-led coalition was moving in the wrong direction by favoring millionaires with a tax cut over the state’s 1 million children enrolled in public schools.
The estate tax, which lawmakers approved in 2005 and voters affirmed in a 2006 initiative challenge, has been earmarked for K-12 schools. But the estate tax has become an issue this year in the Legislature because of a Supreme Court ruling last year that blew a $160 million hole in the tax law and, in effect, exempted married couples using certain kinds of trusts from paying the tax.
In a bid to fix that court ruling in the law, Senate Republicans last week proposed a change that plugged the married-couples exemption retroactively to include trusts created before 2005 and where one spouse had died before the state estate tax took effect. But they also proposed raising the exemption in future years to more than $5 million by 2016 while reducing tax rates.
Senate Republican Leader Mark Schoesler of Ritzville later said in a separate news conference that the Majority Coalition’s goal was to reconcile the federal and state estate taxes so that families dividing up an estate would not have on plan for estates larger than $2 million and another for estates larger than $5 million at the federal level.
Inslee wasn’t so charitable – toward the idea or toward the wealthy. He said the state needs better graduation rates in public schools and better achievement by students limited in opportunity by their income, race and ethnic backgrounds, and wealthy families should go on contributing. UPDATE: Money from the tax goes into the Education Legacy Trust Account, which provides money for higher education and K-12 schools.
“Despite this clear need for a change, the Senate Majority has chosen to eliminate taxes on about 210 multimillion-dollar estates a year rather than to fund the education of our students,” the governor said, sharpening his tone considerably from past criticisms. “We have a stewardship responsibility. We should be focusing on 1 million students, not millionaires. This is a fundamental misreading of our paramount duty in our state.”
Inslee also said the Senate plan, which went to hearing and was passed out of the Senate Ways and Means Committee on Friday, blind-sided him.
“You know, I just have to tell you this has been a shock to me that at a time when we have a $4 billion deficit in our education fund and a time where we have a voter-approved measure that asks the wealthiest amongst us to pay a certain portion of their estates to our schools, at a time we should all be working together to plug that hole, the Senate Majority wants to knock another hole in the ship – and take on more water. Now I have to tell you I have been surprised by that position and disappointed.”
The Senate majority held its own press conference to answer Inslee’s shots. Senate Majority Leader Rodney Tom, a Democrat who lives in the wealthy enclave Medina, insisted the issue was getting reforms in education that ensure better student outcomes – before pouring more new money into the K-12 system. He said the governor is talking about raising new revenues but that the money would go for non-education purposes.
Tom also said the estate tax is not the real holdup in negotiations and that the need for reforms such as changing the workers compensation rules are needed to keep companies like Boeing from shifting work out of state. He suggested that Inslee could be the governor on whose resume the exodus of Boeing jobs would land.
The coalition has argued for changes to workers compensation allowing lump sum settlements for permanently injured workers and letter-grade ratings for public schools.
Schoesler blamed Inslee for procrastinating – by waiting two weeks after the regular 105-day session ended April 24 before bringing lawmakers back for an overtime session. He said “the level of negotiations would have been faster if we had actually been in session.’’
Inslee, for all his hard comments about the estate tax, declined when asked to place blame on Senate Republicans or House Democrats for the slow rate of progress in the budget negotiations that began more than three weeks ago.
Inslee said both share responsibility for getting talks on track and that both need to compromise further to make that happen.
Up to now, the Senate coalition has held firm against any new taxes revenues – including the extension of a business-occupations tax surcharge added temporarily in 2010. They also have resisted calls to close tax exemptions on a host of activities including the tax break enjoyed by oil refineries for waste products they use as fuel.
“I’m going to continue to ask both parties to compromise and continue good faith discussions,” Inslee said.
The 30-day session is scheduled to end June 11.