The push to close tax breaks for special interests - such as jet owners, home-mortgage lenders and out-of-state shoppers - picked up speed Monday at the Capitol.
Freshmen Democrats in the House introduced a bill that targets favorable tax treatment for large home lenders and out-of-state shoppers. They say it would raise $170 million for K-3 programs in public schools.
But Republicans were not impressed, and the state teachers union called it a “feel good fantasy” that won’t get enough votes to pass.
Rep. Chris Reykdal of Tumwater was among 11 freshmen – including Democratic Rep. Laurie Jinkins of Tacoma, the lead sponsor – who signed on to House Bill 2078. They said it would restore much of the $191.5 million in cuts to early public-school grades in a Democratic budget that passed the House on a 53-43 vote Saturday.
“More individualized attention for kids and roughly 3,000 teachers statewide could be saved,” Reykdal said Monday. “We heard a lot of debate on both sides that K-12 is a priority. We want to give both sides a shot at filling up critical functions in education. If you can’t read by the third grade, the long-term prospect of success is much less. We want to give everyone a shot and fund that.’’
Republicans also cut those funds in a rival budget plan that the majority rejected, and the GOP has sworn off tax increases.
“I certainly can’t speak for everyone. But I would not be interested in signing on to that. I believe right now that is counter-productive when our economy is struggling and the number of people on unemployment and the job losses we have,” Rep. Gary Alexander of Thurston County said.
“Those banks and those shoppers come and shop in Washington and spend their money in retail stores here,” Alexander added. “Let’s do some prioritization. The voters have already indicated they don’t want another tax increase.”
Also on Monday, an Olympia home care worker, Sharon Kitchel Perdue, filed eight versions of initiatives that Service Employees International Union 775 Northwest is considering. The various initiatives would end the tax exemption for out-of-state shoppers from neighboring states, debt collections, lobbying activities and other services, and a tax break for private jet owners.
Any money raised by some of the SEIU proposals is earmarked to restore funding for in-home care services for elderly and disabled residents, which have been cut since 2009. Other measures spread the funding to other health and education programs.
Perdue, who was arrested on suspicion of disorderly conduct last week in a protest against budget cuts outside Gov. Chris Gregoire’s office, referred questions to SEIU 775NW spokesman Adam Glickman. Glickman said it is too early to say what might be pushed to the ballot, or whether SEIU and other groups might act in concert or singly if lawmakers fail to raise revenue to avert some cuts.
“We’re looking at a variety of different options for taking to the voters an initiative or a referendum to close one or more tax breaks in order to restore funding for critical long-term care and services,” Glickman said. “We’re filing a few different versions that have a few different tax breaks. The Legislature isn’t done yet, and we don’t know exactly what they are going to do.”
Passage of Tim Eyman’s Initiative 1053 last November means that a two-thirds majority vote is needed in the House and Senate to pass tax increases or to close or reduce tax exemptions. Without minority Republicans providing votes to reach a two-thirds majority, the tax-exemptions bill would need to be offered as a referendum, which a bare 50 percent majority of Democrats could send to the November ballot, bypassing the governor entirely.
Even without enough votes, House Democrats could bring the measure up for a floor vote to show that Republicans are not willing to raise funds for public education. But Jinkins said 48 Democrats have signed on and that there is interest in a revenue bill.
“Every member of leadership, absent the speaker is signed on right after us. I think that is an incredibly positive sign,” Jinkins said. “I think we’re breaking the ice on this. My guess is there will be other (bills like it). To me, what that’s going to illustrate is there is a group of tax breaks that are really egregious and are really hard to defend.”
HB 2078 specifically targets first-mortgage interest earnings of banks that exceed $100 million a year and would end tax breaks for out-of-state shoppers. It would raise more than $80 million a year from each tax.
The bank-tax proposal mirrors a proposal that passed the House but died in the Senate last year under pressure from the state’s banking lobby.
A spokesman for banking lobbyists said the industry is well aware that labor groups and others could take the same proposal straight to the ballot this year, which the Washington State Labor Council has indicated an interest in doing for a group of tax exemptions.
Dave Fisher, the bank lobbyists’ spokesman, said the industry already took on a $90 million a year tax burden last year in a measure that extended the business-occupations tax to out-of-state banks and financial groups that have a “nexus” of activity inside Washington.
That earlier tax increase is already affecting small community banks that offer credit cards through partnerships with larger out-of-state banks or financial firms, Fisher said. Two in-state banks could be affected by a $100 million limit on the interest exemption, and this would increase costs for home loans, running counter to the exemption’s intent to promote home ownership.
Several other tax-break bills have been in circulation for weeks without receiving action.
But House Majority Leader Pat Sullivan, D-Covington, said Saturday that revenue bills will get more attention now that a first-draft budget is done on the House side. Lawmakers of both parties and chambers are working against an April 24 deadline to finish work, and the Senate’s bipartisan budget is due for release about 5:10 p.m. today.
Democrats are desperate to find money to avert cuts they don’t want to make, and they appear to be trying to cash in on banks’ bad image of recent years.
“When we’re faced with a choice to cut education funding or cut tax breaks for tourists and big Wall Street banks that can afford million-dollar bonuses for their CEOs, it’s an easy choice,” Jinkins said in a statement. “If JPMorgan Chase can afford to give Jamie Dimon a $19 million raise, they can afford to give up this tax break. This is about making banks pay their fair share, just like they have to do in every other state.”
Reykdal said some Democrats voted for the House budget Saturday only because they knew leadership would allow debate on closing tax exemptions and raising revenues. That $32.4 billion budget would spend about $2 billion more than the ongoing two-year budget, but includes $4.4 billion in cuts – about $1.5 billion in K-12 public schools and about $482 million more in universities and colleges that would be offset in part by tuition increases of up to 13 percent a year.
The nine freshman lawmakers besides Jinkins and Reykdal were Andy Billig of Spokane, David Frockt of Seattle, Joe Fitzgibbon of Burien, Connie Ladenburg of Tacoma, Kristine Lytton of Anacortes, Luis Moscoso of Mount Lake Terrace, Cindy Ryu of Shoreline, Derek Stanford of Bothell and Steve Tharinger of Sequim.
The Washington Education Association supports closing tax breaks. But it posted a statement on its web site calling the tax proposal a fantasy that can’t get the two-thirds vote needed at a time Democrats are cutting funds that could pay for smaller classes and more teachers.
It remains to be seen if the Democrats try to back Republicans into a corner – forcing the minority to vote against school funding.
“I’m sure that can happen,” Jinkins said. “But my point in filing this and the point of the freshmen doing this, especially the Wall Street tax break is the most egregious tax break in the state. We can’t find another state that has it.”
Brad Shannon: 360-753-1688