UPDATE: Gov. Jay Inslee‘s office says estate tax refund checks won’t actually go into the mail until Friday morning, which is when the Revenue Department is back in court on another lawsuit seeking a refund under the Supreme Court’s 2012 ruling. Meantime, Senate and House lawmakers are in talks to seek if they can get a deal done by midnight Thursday.
ORIGINAL POST: With no legal fix immediately in the offing for Washington state’s estate tax, the Department of Revenue is moving ahead and issuing $13 million worth of refunds – plus interest – starting Thursday. The refunds are necessary under a 2012 Supreme Court ruling that in effect left an exemption for certain married couples’ estates. The agency had been waiting for the Legislature to plug the loophole but can wait no longer, and additional refunds are expected in the coming weeks while waiting for lawmakers to act.
Revenue spokesman Mike Gowrylow says the agency has 10 refunds ready to issue under the court’s ruling in the so-called Bracken case. Under current law, any money collected from estates is supposed to go to into K-12 and higher education accounts, which is an earmark the Republican-dominated Majority Coalition Caucus has refused to continue.
If no legislation closing that loophole is passed this year, Revenue has said the state could ultimately lose $160 million in the two-year budget cycle that begins July 1. That is because other couples who were not party to the Bracken estate lawsuit settled by the court could file under the same legal door opened by the court’s ruling – which in effect lets certain estates for married couples avoid the estate tax if they created certain trusts.
But as the House and Senate have locked up over how to put new tax money into public schools, the estate tax has become a policy football – with Republicans in the Senate wanting first to create a larger exemption for wealthy persons’ estates and Democrats such as Gov. Jay Inslee wanting the money raised by the tax to keep going into a public education legacy fund.
Republicans changed their tune on Saturday, saying they have a new estate tax plan that would not create a new $5 million exemption – up from the $2 million exemption on the books today. But they say they want to exempt the share of an estate wrapped up in a family-owned business.
Republican Sen. John Braun of Chehalis says the new goal was a revenue-neutral bill that would also raise the top tax rate from 19 percent to 20 percent. As outlined in legislative documents, Senate Bill 5872 would not longer feed the estate tax revenues into public schools.
Instead it would put the money into social programs – which the Republican-dominated Senate Majority Coalition Caucus is refusing to fund in its base budget.
Among the programs the Senate proposal would fund is: $11.8 million for a judicial information system; money for a Medicare subsidy for certain retired state workers; $10.1 million for a vendor rate increase for child-care providers; nearly $10.3 million for a program providing housing and other “essential needs” for homeless or near homeless populations, money for a computer project related to in-home care providers and to restore about $79 million in administrative cuts the Senate originally thought it could take from state agency budgets; and $3 million for civil legal-aid services that would have been cut.
Gov. Inslee laid into the Senate for seeking to divert the money, and you can watch him talk to reporters here:
After getting a hearing Monday, the Senate’s estate tax proposal died in committee on Tuesday – for a lack of votes to pass it on to the full Senate.