State Rep. Laurie Jinkins of Tacoma has introduced a capital-gains tax proposal to help fix a state budget problem now measuring about $1.5 billion.
Jinkins, a Democrat, says a 5 percent tax on realized capital gains could raise anywhere from $215 million to $650 million a year for education, health care and universities. The tax would piggyback on federal returns, and its amount would vary with the economy’s health.
“Right now the bill doesn’t earmark” where the revenue would go, Jinkins said Tuesday. “Over the course of the hearings this bill has, that may happen. … But right now we’re in such a challenging fiscal situation with underfunding of K-12, the safety net and higher ed – those are all places where it is going to go.’’
Jinkins expects House Bill 2486 to get a hearing in the House Ways and Means Committee. It is one of a growing number of tax bills that majority Democrats are dropping into the hopper as they look for ways to blunt cuts.
Just last week, Rep. Chris Reykdal, D-Tumwater, proposed a 1 percent income tax on businesses and individuals that would replace the business and occupations tax. Reykdal and Sen. David Frockt of Seattle also want tax-code changes that lower the state’s sales tax rate to 5 percent while levying sales taxes on professional services such as legal and accounting work.
Other Democrats have introduced bills to sunset exemptions in the hated business and occupations tax code, and Gov. Chris Gregoire is proposing a spring referendum on a half-penny sales tax increase.
The tax proposals do not surprise Rep. Gary Alexander, the top House Republican on the budget.
“I think you are going to see everybody in the majority party come out with their tax package, to say basically, ‘Here’s mine,’” Alexander said.
Alexander said his priority is to write a budget that relies on cuts and reforms but not new taxes. To that end, Alexander said he plans to sit down with House Ways and Means Committee Chairman Ross Hunter, D-Medina, today to go over their alternative proposals to cut spending.
If Democrats and Republicans are able to work together on an all-cuts and reforms budget, and Democrats still “want to pick some things on that (cuts) list and buy them back with some kind of tax package, so be it. The first step is to put together a budget the state can live with within existing revenue,’’ Alexander said.
Democrats also want reforms but are skeptical they can add up to much savings in the short term.
Jinkins is of the school that says the cuts have been draconian enough, and she wants to provide revenue options. If Republicans don’t join in to give the needed two-thirds votes, she said her proposal could go to the ballot in the spring or November – and in any case she does not believe it could take effect before 2013.
“There’s a lot of discussion to be had about it. Part of it is for people to understand the fluctuating nature of this” capital gains tax as a fund source, Jinkins said.
Jinkins said her proposal fits with those of other lawmakers in seeking to make the tax system less regressive.
Brad Shannon: 360-753-1688 email@example.com www.theolympian.com/politicsblog