Schmudget Blog

Lack of a State Capital Gains Tax Means Wealthiest 1 Percent Get a Huge Tax Break in Washington State

Posted by Kelli Smith at Apr 19, 2017 05:45 PM |
By Andy Nicholas, associate director of fiscal policy

Currently, our state tax code caters to the wealthiest Washingtonians by giving them generous tax breaks on their capital gains – which are the profits they make from the sale of corporate stocks, bonds, gold bars, and other high-end financial assets. Such financial assets are exempt not only from state and local sales taxes, but also from property taxes, and most business & occupation (B&O) taxes. The simplest and most equitable way to effectively close these state tax breaks is to enact a state excise tax on high-end capital gains. Doing so would generate substantial new resources for Washington state’s schools and other investments that foster thriving communities. Eliminating the tax breaks on profits from capital assets in this way would represent a significant step toward turning Washington’s inequitable, upside-down tax code – in which people with low incomes pay seven times as much in state and local taxes as a share of income as the wealthiest 1 percent – right-side-up.


Click on graphic to enlarge.


Democratic leaders in the state House of Representatives have sensibly proposed to close the loopholes on most profits from capital assets in Washington state’s tax code with a new 7 percent excise tax on capital gains above $25,000 ($50,000 for a married couple). As the chart above shows, 92 percent of capital gains taxes would be paid by the wealthiest 1 percent of Washington’s families – those with incomes above $600,000 per year. By contrast, virtually none of the additional tax revenue would come from families with incomes below $119,000 per year. Only 0.03 percent of households in that group would pay any additional taxes.

Closing the capital gains tax break would generate more than $700 million per year in new resources for schools, child care, environmental protection, and other priorities that serve Washingtonians. And the additional payments from the few households that would be impacted would be relatively small. As the chart below shows, on average, taxes would increase by only 1.5 percent as a share of annual incomes among the richest 1 percent of households in Washington state. This is a small price to pay for the people who have benefited most from our economy to ensure that all kids have access to great schools and all Washingtonians can have thriving communities.

Click on graphic to enlarge.


The excise tax on capital gains proposed by House Democrats is the most sensible way to address the numerous tax breaks for capital assets on the books in Washington state, which include exemptions and exclusions from the sales tax, property tax, and B&O tax (Washington's three major revenue sources). When it comes to the sales tax, for example, people don't have to pay it when they buy or sell stocks, bonds, and other high-end financial assets (or intangible goods). But Washingtonians do pay sales tax when they buy tangible goods, like cars, appliances, soap, and toothpaste. Because stocks and other financial assets are heavily concentrated among the wealthiest households, their exclusion from taxes gives a huge advantage to wealthy Washingtonians.

The capital gains proposal in Washington state would be simple for taxpayers and cost-effective for the state to administer because it would be based on the federal capital gains tax. Further, it would be almost impossible for the few wealthy households subject to the tax to evade it. That’s because liability for the tax would be based on where the taxpayer lives, not where their stock trades occur.

As the regular legislative session comes to an end, the budget writers in Olympia who are seeking to fund schools and other key priorities need to close the capital gains tax break.

The House Revenue Plan Shows How to Make Smart, Long-term Investments in Communities

Posted by Kelli Smith at Apr 14, 2017 03:15 PM |
Filed under: State Budget, State Revenue
By Andy Nicholas, associate director of fiscal policy, and Kelli Smith, policy analyst

The package of tax reforms included with the budget proposal from Democratic leaders in the Washington state House of Representatives would provide nearly $3 billion in the coming 2017-19 budget cycle in equitable, ongoing resources for schools and the other foundations that foster thriving communities. Because of these important reforms, the budget proposal from House Democratic leaders is the only sustainable two-year investment plan currently under consideration in Olympia. The House’s plan would also begin to take important steps toward flipping Washington’s inequitable, upside-down tax code right-side up.

While Republican leaders in the state Senate also have a budget plan, it does not take meaningful steps toward cleaning up the state’s flawed tax code, and it pencils out only with the help of unsustainable accounting tricks, harsh cuts to critical state programs, and empty promises to our kids.

Washington state has the most upside-down tax code in the nation. Families with middle and low incomes pay up to seven times more in state and local taxes as a share of their incomes than the wealthiest 1 percent. The House Democrats’ proposal shows that it doesn’t have to be this way. The revenue package they propose would raise resources to invest in the foundations that let us all thrive, and it would do so equitably and sustainably by beginning to clean up the tax code so that everybody pays their share. Here’s how they would do it.

Closing the tax break on profits from the sale of high-end capital gains ($715 million in 2017-19). Every year, Washington leaves hundreds of millions of dollars on the table by giving a tax break to those who profit when they sell their corporate stocks and bonds. House Democratic leaders propose to eliminate this tax break by enacting a new tax on capital gains – profits on the sale of corporate stocks, bonds, and other financial assets – above $25,000 ($50,000 for married couples) at a rate of 7 percent. If our state joined the 42 other states that tax capital gains, as the House proposes, we could instead put those resources into the foundations that help our communities flourish, such as recruiting the best educators to teach Washington’s kids and maintaining the beautiful state parks we all enjoy. The tax would not be levied on common middle-class investments. Capital gains within retirement and college savings accounts would be exempt, along with those from the sale of family homes, timberland and farmland, timber, livestock, and small business assets. 

Curtailing or eliminating wasteful tax breaks ($144 million in 2017-19). Washington’s tax code is riddled with tax breaks, some of which are outdated, and others of which only benefit the powerful few who have manipulated the tax code in their favor. Limiting or closing some of the most wasteful tax breaks would begin to clean up our tax code and turn it right-side up. The House Democrats’ plan would allow our state to put resources to good use in our communities instead of providing giveaways to special interests. The plan proposes to close the following breaks: 

    • Sales tax break on bottled water. The negative impacts of bottled water on our environment are well documented, so there’s no good policy rationale to incentivize the purchase of bottled water by providing a tax break for it. Under this proposal, the tax break on bottled water would remain in place for those who don’t have access to potable water. 
    • Sales tax exemption claimed by oil refineries on fuel used to power their operations. This exemption was originally enacted to help the timber industry when companies used their own “hog fuel” in their operations, but now this break goes almost exclusively to the big oil industry.
    • Preferential business tax break for international investment management companies. Financial firms in the business of managing international investments receive a preferential business tax rate which is less than one-fifth the general rate paid by other service businesses, such as janitors, dentists, mediators, and optometrists. 
    • Preferential business tax breaks for prescription drug wholesalers. The tax break for prescription drug wholesalers was originally put in place to lure businesses to Washington state. But because the exemption is available even to companies that aren’t located in our state, it provides no competitive advantage for our state.
    • Real estate tax exemption claimed by banks on sales of foreclosed homes. When Washingtonians buy a home, they pay a real estate excise tax (REET). But when a piece of property is sold as part of a debt proceeding, such as a foreclosure, the REET is not applied. Closing this break would put investors and banks that buy up foreclosed homes on equal footing with everyday homebuyers.
    • Sales tax giveaway for out-of-state shoppers. Our state currently allows shoppers who come from no- or low-sales-tax states to shop in Washington without paying our sales tax. The original purpose was to encourage shoppers in border counties to choose to shop in Washington instead of going across the border to avoid sales tax. But the data shows that this break is claimed most often in King County, which isn’t a border county – strong evidence that the break is being wasted on tourists who would shop in Seattle anyway. The plan from House Democrats would convert this to a rebate program, under which qualifying shoppers could apply once a year to have their sales tax reimbursed. This change from an automatic break to an application process would shrink the sales tax giveaway significantly.

Reforming business taxes ($1.2 billion in 2017-19). The House proposal would eliminate business & occupation (B&O) taxes for about 260,000 small businesses in Washington state with annual gross business incomes below $250,000. Another 33,000 small businesses with between $250,000 and $500,000 of gross income would be able to reduce their tax bills by exempting their first $100,000 in income from the B&O tax. In addition, a 20 percent B&O tax surcharge would be applied to a broad range of businesses categories, mostly impacting larger businesses. This reform would not only help small businesses by providing a targeted B&O deduction, but it would generate over $1 billion per budget cycle in new resources for schools and other priorities.

Reforming the 1 percent property tax levy growth limit ($128 million in 2017-19). As we’ve written about in the past, the 1 percent levy growth limit artificially holds down state and local property tax revenues. The cap starves communities across our state of the resources they need to maintain basic services, like providing 24-hour police and fire services. Lifting this limit would allow towns and cities, especially those in small and rural communities, to raise resources in a way that allows them to meet essential community needs.

Creating a more equitable Real Estate Excise Tax ($435 million in 2017-19). Under current law, a flat, 1.28 percent REET is applied to the total selling price of most real estate sold in Washington state. This proposal would change the tax from a flat rate to a progressive rate, resulting in a higher rate for the very highest-valued properties, and a lower rate for the lowest-valued properties. This would help create a more equitable tax code by requiring those who can afford to buy properties worth more than $1 million to pay a little more to support schools and other important community investments. 

    • For properties selling for less than $250,000, the rate would be reduced to 0.75 percent. 
    • For properties selling for between $250,000 and $1 million, the rate would remain at 1.28 percent. 
    • For properties selling for between $1 million and $5 million, the rate would be increased to 2 percent. 
    • For the most expensive properties – those selling for more than $5 million – the rate would be increased to 2.5 percent.

Creating a more level playing field between in-state and out-of-state retailers ($330 million in 2017-19). Because of a United States Supreme Court decision, many out-of-state internet retailers are not required to collect sales taxes on purchases made to Washington state residents. While these retailers can voluntarily collect sales taxes, few have chosen to do so. As a result, Washington communities lose out on hundreds of millions of dollars in resources, because our state doesn’t receive sales tax revenue on a significant portion of purchases made by Washingtonians. House Democrats propose to follow actions taken by Colorado and other states that would encourage these businesses to change their ways and start collecting sales taxes on goods sold to Washingtonians. Under their plan, out-of-state businesses that choose not to collect sales taxes would be required to send information on each taxable sale to their customers (and the state Department of Revenue). Then the onus would be on the customers themselves to pay the sales taxes not collected by the company. If enacted, many businesses would choose to simply start collecting the taxes rather than placing that responsibility on their customers. 

A Q&A with Our 2016-2017 Narver Policy Fellow

Posted by Melinda Young-Flynn at Apr 13, 2017 03:18 PM |

Asha Bellduboset just completed her Betty Jane Narver Policy Fellowship with the Budget & Policy Center. She will receive her master’s degree from the Daniel J. Evans School of Public Policy and Governance at the University of Washington this June – with a capstone project focused on assessing the economic impact of the Woodland Park Zoo’s educational, community outreach, and conservation programs and operations in the greater Seattle region. We checked in with her to hear more about her time with us and what her hopes are for the future.

Asha Bellduboset headshotWhat made you decide to apply for the Narver Fellowship with us?

I became aware of the Budget & Policy Center early into my master’s program at the Evans School through some of the organization’s tax policy analyses and social program advocacy efforts. When I found out there was a fellowship where I could learn from some of Washington’s top researchers and advocates who write and research reports and policies that I avidly support, I knew I had to apply. I really value the policy work that comes out of the Budget & Policy Center, and I wanted to gain a better understanding of what goes into high-level policy analysis and how to effectively impact changes in state level policies. I am very interested in the gambit of topics and policy areas that the Budget and Policy Center works on, so being able to work with everyone has been such a meaningful experience. 

What are some highlights of what you’ve learned?

I was lucky to work closely with the center’s senior policy analyst, Jennifer Tran. Working with her provided me with the opportunity to learn strategies for analyzing large data sets, incorporating equity and social justice into these analyses when they are buried in the details, and highlighting the key findings in an informative but not overwhelming way. Gaining real-world and relevant experience in performing this kind of analysis was invaluable to me.  

I also learned how the legislative process works in Washington state, who key legislators are, and how to advocate for policies during session. At the same time, the Budget & Policy Center’s collaborative efforts with statewide community advocacy organizations introduced me to a network of regional decision makers and activist organizations. All of which was completely new to me. I now feel comfortable navigating the legislative environment, and I have learned so much about how different institutions throughout the state interact and what the impact on the public can be. The fellowship really impressed upon me the importance of staying informed and working to advocate for all of Washington’s communities. 

What were some of your favorite experiences during your fellowship? 

I’ve had many wonderful experiences as a Narver Fellow. From the informative panel discussions and networking opportunities at the Budget Matters conference to my experience shadowing Senator Rebecca Saldaña, I gained access and insight to areas of the policymaking and advocacy world that I would not have had without this fellowship. 

The mentorship I received on a regular basis helped me understand many aspects of the policy world on a new level, and of course, working with the talented employees at the Budget & Policy Center has been enlightening and impactful. Truly, being able to see how to plan, facilitate, and advocate for a legislative agenda that supports the best interests of all Washingtonians was so valuable.   

I also really enjoyed learning how to work with public officials. On one of my most memorable days, I got to learn from Senator Saldaña about what happens on a day-to-day basis at the state capitol and gain first-hand perspective on what it takes to be a devoted public servant at the state level.   

Did anything surprise you from your time with us?

I was surprised by how everyone can be working on so many different projects and yet still provide help and insight to other members of the team. The level of camaraderie and professionalism I experienced while working here was such a pleasant surprise. The way everyone works to share important information and pushes for developing policies and analyses that support Washingtonians from many different backgrounds is noble. 

A lot of work goes into making sure complex ideas and policies are digestible for a wide segment of the population. And it was great to see how the staff makes sure that anyone seeking to understand tax policy or social program policy can read a schmudget blog post and be informed enough to have a meaningful dialogue with their public officials or colleagues. I was especially impressed with how the policy team organized community meetings to get feedback from different stakeholder groups on some of their research. 

What do you hope to do in your career? 

I hope to create more space for equity and diversity in the policy arena through policy advocacy, analysis, and education. I want to use the tools I’ve gained through the Narver Fellowship to work on policy in a manner that reflects the community, is useful to community members, and advances social justice and equity. Getting exposure to so many paths toward impacting state policies has invigorated me in my goal of doing policy analyses using a social equity lens. 

 All of us at the Budget & Policy Center wish Asha the best of luck in the future!  


New Research Brief: Early Learning Improves Kindergarten Readiness and Reduces Disparities for Kids of Color

Posted by Jennifer Tran at Apr 04, 2017 01:00 PM |
Filed under: Kids Count, Education, Equity

We all have a stake in making sure that from the day they’re born, kids can have the enriching experiences they need to get off to a great start in life. Quality early learning can give children the tools they need to thrive academically and emotionally throughout their entire lives. 

This new KIDS COUNT in Washington research brief demonstrates why legislators need to make greater investments in the Early Childhood Education and Assistance Program (ECEAP) – our state’s preschool program that serves children from families living in poverty. Expanding this program to ensure all eligible kids can participate could help more of Washington’s kids show up to kindergarten ready to learn. It could especially help many children of color who haven’t had equal access to opportunities that promote kindergarten readiness.

ECEAP, which serves families with incomes below 110 percent of the federal poverty line ($26,730 for a family of four in 2017), offers many of our state’s most vulnerable children quality early-childhood learning experiences. It has a proven record of improving kindergarten readiness and impacting their long-term academic success. Yet because of inadequate state investments in this program, there are currently about 23,000 unserved children eligible for ECEAP in Washington, 62 percent of whom we estimate are children of color.

KIDS COUNT in Washington, which is a partnership between the Budget & Policy Center and the Children’s Alliance, examined how expanding ECEAP to serve the 23,000 unserved eligible children could impact readiness for kindergarten across the state and help bridge disparities in access to opportunities that promote kindergarten readiness. Our analysis concluded:

  • Kindergarten readiness in Washington overall could increase by 20 percent (to 56 percent from 47 percent);
  • 7,900 more children could be ready for kindergarten on all six indicators of readiness (1) by the end of their year in ECEAP; and
  • The share of Latino, American Indian, and Black children ready for kindergarten could have the largest increases (See chart for more details).

(Click on graphic for enlarged image)

ECEAP K-Readiness

The Washington State Department of Early Learning has set a goal of ensuring that, by 2020, 90 percent of Washington children enter kindergarten prepared to learn, with race and family income no longer a predictor of kindergarten readiness. A key to delivering on that promise is to make sure all eligible children have access to ECEAP. 

See our full research brief for more information on how expanding ECEAP could improve kindergarten readiness for all kids in Washington state and help bridge disparities for kids of color.

For more detailed technical information on our analysis, please contact for a copy of our Data and Methods document.

1. The six indicators of readiness refer to an assessment by educators and teachers to measure kindergarten readiness on six developmental domains: social-emotional, physical, language, cognitive, literacy, and mathematics. See the full brief for more information on how the indicators are measured.

New Fact Sheet: Advancing Racial Equity through the Working Families Tax Rebate

Posted by Melinda Young-Flynn at Apr 03, 2017 02:50 PM |
By Asha Bellduboset, Narver fellow
It’s time for Washington state to have an equitable tax code. Currently, it disproportionately relies on people with low incomes while giving the wealthiest people tax breaks. That’s just upside down. What’s more, those most heavily burdened by our upside-down tax code are people with low incomes, many of whom are people of color. The Working Families Tax Rebate (WFTR) is an important tool to help turn our tax code right-side up and to help undo the systemic inequities that have created an uneven playing field for people of color.

The Washington state legislature enacted the WFTR in 2008, but it was never funded. It is one of the most effective ways Washington can work to correct our state’s reliance on regressive sales taxes that overburden lower-income families. The rebate uses the federal Earned Income Tax Credit (EITC) program, a powerful anti-poverty tool, as a basis for eligibility. The WFTR would provide qualifying low-wage workers with an annual boost to their income in the form of a tax credit.

Funding the WFTR would advance racial equity by supporting the economic security of Washingtonians of color who are working in low-wage jobs. Our new WFTR fact sheet shows how the WFTR would benefit families in all of Washington’s 39 counties from all racial backgrounds. For example, our analysis shows that, if the WFTR were funded:

Recipients would invest $98.5 million back into local economies throughout Washington state, nearly half (49 percent) of which would go to communities of color

The rebate would improve the lives of many children of color, given that 51 percent of qualifying children in EITC-eligible households are children of color

Approximately 498,000 Washingtonians in all 39 counties of the state would be eligible for the WFTR, which means residents in all counties would see some economic gain. 

[Click on image to see full PDF that includes this graphic] 

WFTR Advances Equity One-Pager

Take a look at our fact sheet for more information on how the Working Families Tax Rebate would advance equity for our state and its people. 

House Democrats’ Budget Shows What Our State Can Achieve by Cleaning Up the Tax Code

Posted by Kelli Smith at Mar 30, 2017 12:30 PM |
Filed under: State Budget, State Revenue
By Kelli Smith, policy analyst, and Andy Nicholas, associate director of fiscal policy

The budget recently proposed by House Democrats is evidence that our state and its people can make real progress when lawmakers clean up the tax code. By taking steps to ensure the tax code is equitable and that it’s set up to invest in the foundations of a strong economy – like great schools and programs that lift up working families – our communities can thrive.

The House Democrats rightly propose to clear out wasteful tax breaks, including the break on high-end capital gains given to the wealthiest individuals in our state. As such, the House's two-year spending plan prioritizes the needs of our communities over powerful special interests and the profits of the ultra-wealthy. And most important, the plan would begin to turn our upside-down tax code – in which people with the lowest incomes pay seven times more in state and local taxes as a share of income than the wealthiest 1 percent – right-side up. When lawmakers make our tax code one in which everybody pays their share, our communities flourish, and we all do better.

This proposal is starkly different from the Senate proposal released last week. The Senate Republicans’ plan relies on fiscal gimmicks to pay for schools and balance the budget, and it also includes a host of harmful cuts to essential programs that support hardworking, low-wage Washingtonians. The House Democrats’ plan, in comparison, responsibly raises new revenue – in an equitable and sustainable way – to account for additional investments necessary to pay for schools, parks, public safety, and other key priorities. The revenue plan in the House's proposed budget would make crucial investments in K-12 schools, front-line workers, and behavioral health services by generating nearly $3 billion in resources in the 2017-19 biennium and $4.8 billion in the 2019-21 biennium.

The House's proposed actions for cleaning up the tax code – and the amount of revenue these actions would generate in 2017-19 – include:

  • Curtailing or eliminating five wasteful business and sales tax breaks ($137 million);
  • Modifying the 1 percent levy growth limit to allow property tax revenues to keep better pace with economic drivers ($128 million);
  • Closing the tax break on profits from high-end capital gains ($715 million);
  • Reforming business taxes to strengthen small businesses ($1.2 billion);
  • Rebalancing the Real Estate Excise Tax to make it more progressive ($420 million); and
  • Creating a more level playing field between in-state and out-of-state retailers ($340 million).

These proposals are a direct response to the reality that the resources our state currently brings in through our regressive sales tax and other sources of revenue cannot keep up with the demands of our growing economy. Closing tax breaks and joining the 42 other states that have a tax on capital gains will help ensure Washington state has the resources necessary to take care of its communities.

One area that could be improved relates to the House Democrats’ use of budget reserves. Their plan to drain more than $1 billion from the state budget stabilization account, or rainy day fund, is risky. Budget reserves (including the rainy day fund) help maintain critical investments when the economy falters or when a natural disaster strikes. Yes, tapping budget reserves now would help lawmakers begin to fund important investments at the outset of the 2017-19 budget cycle, before many of the new resources from their proposed tax reforms would be available. But doing so now would also put those investments at risk of damaging cuts if the funds aren’t replenished before the next recession strikes.

As shown in the chart below, the House Democrats would boost state funding for education, healthy people and environment, and community development and trust. The small reduction in funding for investments in economic security is mostly the result of a proposed transfer of funds out of the general fund, rather than an actual service cut.

(Click on graphic to see enlarged version.) 


The proposed changes to funding, according to the major value areas laid out in the Budget & Policy Center’s Progress Index framework, are detailed in the sections that follow.


The House Democrats’ proposal reflects the considerable role K-12 schools have played in the discourse around the state budget this legislative session. It would make its most significant investments in education – an important area of the budget made even more urgent as lawmakers face a state Supreme Court mandate to fully fund K-12 schools per the McCleary decision. The House’s proposed budget would invest an additional $1.9 billion in early learning, K-12 schools, and higher education – a 7.9 percent increase from maintenance levels. The proposals include:

  • Making major investments in K-12 schools. In order to ensure we can attract and retain top-notch educators for Washington’s 1.1 million school kids, the House Democrats’ budget makes its largest investments in boosting pay and professional development opportunities for teachers and other school employees. The House budget would also invest in students in the most under-resourced school districts by increasing funds for districts that are unable to raise substantial local resources, due to low property values. Their plan would also create a ‘breakfast after the bell’ program to ensure that students in the schools with the most low-income students can eat a nutritious breakfast each day.
  • Enacting key enhancements to early education to prepare Washington’s kids for lifelong success. The plan would give more kids the opportunity for a bright future by expanding the Early Childhood Education and Assistance Program – our state’s preschool program that serves families living in poverty – by increasing slots to serve more 3 and 4 year olds and increasing the reimbursement rate so providers can serve more kids and families. But the House’s budget also makes cuts to Early Achievers, which could further limit a key resource for early learning professionals to access tools to provide the highest-quality early care.
  • Providing financial relief for college students and their families. The House Democrats’ budget proposal would build on historic investments in higher education in recent years by expanding our state’s largest financial aid program and freezing tuition at all public colleges and universities.


Every Washingtonian should have what they need to meet basic needs, like safe and stable housing and food on the table. They also should have the opportunity to get ahead financially. The House Democrats’ budget would reduce investments in economic security from the general fund by $12.1 million, a 1.2 percent decrease in funding from the general fund. Although our analysis shows a small overall decrease in funding, much of this cut is, as mentioned previously, the result of a proposed funding transfer outside of the general fund, rather than an actual cut to services. Proposed changes include:

  • Providing paid time off for family leave. The proposed insurance program would provide workers with help to keep their heads above water when they or a family member is seriously ill, or when they are welcoming a new child. This budget provides startup costs for the program, and ongoing costs of the insurance premiums would be split equally between employees and employers.
  • Investing in early education for kids from families with lower incomes. By increasing subsidy rates for child care providers who serve kids in Working Connections Child Care – Washington’s largest child care subsidy program for families with low incomes –  this budget would help high-quality providers keep their doors open to serve low-income kids. The budget would also fully fund the collective bargaining agreement for in-home family child care providers.
  • Increasing support for working families in poverty. The House Democrats’ budget would provide an 8 percent increase in resources to help families who participate in WorkFirst – Washington’s job assistance and training program for those striving to move out of poverty – meet basic needs. The boost would give them a little more money for essentials like shoes and diapers for their kids. The House plan would also update “asset cap” policies that force families to give up a car or spend all of their savings down before they can access WorkFirst benefits.
  • Increasing resources to prevent homelessness. The House budget proposal would boost basic supports for people unable to work because of a mental illness or physical disability. People who are waiting for federal disability benefits to come through (which can take several years) would get up to $30 a month more through the Aged, Blind, and Disabled program.  People receiving Housing and Essential Needs, which provides housing-related assistance for people unable to work because of disabilities, would be able to get $10 a month in transportation assistance.
  • Taking steps to alleviate intergenerational poverty. The House budget proposal would use an intergenerational approach to addressing poverty by funding a task force whose goal would be to cut poverty by half in Washington by 2025. It would also include a provision requiring several state agencies to report data on Washingtonians participating in federal nutrition assistance programs. This data will provide important information for policymakers to make informed decisions and develop targeted policies to address hunger and food insecurity throughout the state.


Washington state is one of the best places in the nation to call home, in part because we live in a beautiful corner of the country where we can enjoy clean air and water and access to stunning outdoor recreation. We are also a state that values supporting the physical and mental wellbeing of all of our state’s residents, so that we can all have opportunities to enjoy a high quality of life. The House Democrats’ budget would increase funding in this area by $660 million, an increase of 6.3 percent. The proposals include:

  • Making improvements to Western State Hospital and enhancing community behavioral health supports. The budget would make important investments in improving safety at Western State Hospital. It would also boost funding for critical supports like mobile crisis teams, housing, and related services – that reduce the need for in-patient treatment at state mental hospitals.
  • Dedicating $40 million in new funding for foundational public health investments. This funding would enable the state Department of Health and local public health agencies to better monitor and prevent communicable diseases and address health inequities among state residents.
  • Moving forward on Washington's Medicaid Transformation Project. House Democrats’ budget would bring in $1.5 billion in federal funding to improve health care delivery and lower costs for Medicaid. It would also offer cost-effective support for family caregivers and help individuals find housing and employment.
  • Strong investment in environmental protection. The proposal provides some much-needed resources to move forward in reducing air and climate pollution, clean up Puget Sound, and protect and restore habitat needed for salmon recovery. The House budget also provides funding for the public to have a voice in cleaning up toxic sites.


For communities in our state to prosper, residents should feel safe in their homes and neighborhoods, be able to enjoy well-kept parks and historical spaces, and feel confident that government is transparent, fair, and efficient. This budget would increase funding to these programs by $673 million, an increase of 11.2 percent. The major changes include:

  • Supporting the recruitment and retention of Washington's front-line workforce. The budget proposed by House Democrats would provide funding to support adequate pay and benefits for thousands of nurses, public safety workers, home care and child care workers, and other public employees that serve communities throughout our state. It also includes funding to preserve health benefits for state employees. This is an acknowledgement of the important role these workers play in helping our state run smoothly by ratifying the contracts negotiated between the state and its public employees.
  • Reducing barriers to re-entry for people who have been incarcerated. Many Washingtonians – particularly men of color – are saddled by the debt of legal financial obligations (LFOs) after prison release. In their plan, the House Democrats would reform LFOs to make it easier for people who have been incarcerated to get back on their feet and rejoin their communities in a meaningful way.
  • Increasing access to civil legal assistance. Seven in ten low-income households in Washington have at least one civil (non-criminal) legal issue a year, like housing or job discrimination, consumer finance problems, or medical debt. Race and ethnicity also play a role in the number and type of civil legal problems Washingtonians face, especially when it comes to discrimination and unfair treatment. But low-income residents are less likely to have the resources to pay a lawyer to represent them in these matters. The House budget would provide $5.2 million in funds to expand civil legal services in Washington and ensure that more low-income people have access to a lawyer in civil legal matters.
  • Enhanced efforts to reduce homelessness. The budget proposal from House Democrats would provide funding to increase temporary rental assistance and related services for those at risk of falling into homelessness. Their budget would also provide resources to help youth exiting state facilities, such as a juvenile detention center, find safe and stable housing. 

The House Democrats’ budget proposal is a strong effort to move Washington forward. It shows how cleaning up the tax code produces the resources our state needs to make investments that help families, kids, individuals, and communities thrive. With this plan, House Democrats would trade wasteful tax breaks that benefit special interests for concrete investments in communities that help us all do better. That’s a set of priorities we can get behind.

Don’t Let the Talking Points Fool You: Senate Republicans’ Budget Proposal Is a House of Cards

By Andy Nicholas, associate director of fiscal policy, and Kelli Smith, policy analyst

The state budget is not just a statement of our values. It is also a foundation and framework for delivering the everyday services that benefit us all – like ensuring everyone has the opportunity to thrive, making sure we have clean water to drink and air to breathe, and keeping school buses and fire trucks running each day. Republican leaders in the state Senate have proposed a two-year spending plan that would profoundly weaken that framework by slashing vital investments that help Washington’s communities and people prosper – and by failing to come up with the revenue needed to fund schools and other key priorities. Their plan would turn the state budget into a house of cards, at risk of collapsing at the first sign of a slowdown in the economy. And the human cost in terms of the well-being of Washingtonians would be staggering.

Building a responsible and sustainable budget requires lawmakers to take steps toward fixing Washington’s upside-down tax code, which taxes middle- and lower-income households at significantly higher rates than those at the very top of the income scale. Yet the proposal from Republican leaders in the state Senate offers no meaningful reforms to the state’s flawed tax code.

Far from raising the substantial new revenue needed to fully fund education and protect the programs that help Washingtonians who are struggling to make ends meet, their “levy swap” proposal would actually reduce overall property tax resources for schools in our state. It would also be deeply inequitable, raising taxes on millions of lower- and middle-income homeowners and renters in the Puget Sound region.

What’s more, Senate Republicans actually propose creating or extending nine tax breaks, totaling $13.5 million in giveaways in the 2017-2019 budget cycle.

Rather than working to flip our tax code right-side up and improve our quality of life, Senate Republican leaders propose a state budget that nominally balances, but only with the help of unsustainable gimmicks, such as:

  • Forcing future lawmakers to make deep cuts to non-K-12 investments – such as health care, child care, job training, safe communities, and other important investments – by dedicating all future revenue growth to maintaining K-12 spending and property tax cuts.
  • Draining $700 million in reserve savings from our state’s rainy day fund, the budget stabilization account, which is an essential backstop that prevents severe disruptions in funding for our most important services during recessions and other state emergencies. And Senate Republican leaders offer no plan to replenish it.
  • Sweeping $63 million from Temporary Assistance for Needy Families (TANF) to pay for other unrelated budget items. TANF is an essential resource for families trying to get back on their feet. This proposal would take much-needed resources out of programs that help the people who have the hardest time making ends meet and dole those resources out for other investments. 

As shown in the chart below, the budget proposal from Senate Republicans would boost state funding for education, but at the expense of essential investments in Washingtonians’ economic security and in community development and trust. Within those categories are programs that are essential to many Washingtonians – programs like TANF, Housing and Essential Needs, state retirement contributions for first responders, and the programs we all count on to protect our legal rights. Thousands of Washingtonians’ lives would be severely and negatively affected by these cuts – and in many cases, they are the people who are already struggling just to get by every day.

(Click on graphic to see enlarged version.)

Senate budget 2017 graphic













The proposed changes to funding, according to the major value areas laid out in the Budget & Policy Center’s Progress Index framework, are detailed in the sections that follow.


The McCleary Supreme Court case’s school funding mandate has been the most prominent issue in the legislative session so far – and for good reason. Excellent schools are one of the foundations of a thriving economy, and the legislature is facing a deadline for fully funding those schools. While the Senate’s proposed budget increases K-12 education funding by $1.8 billion, or by 7 percent, it makes huge cuts to early learning – slashing $36 million from child care programs. This is because the Senate doesn’t actually raise the necessary new revenue to fund K-12 education, despite the speaking points that make it sound otherwise. The proposals include:

  • Undermining the foundations for high-quality early learning, especially for low-income children and families. The Senate plan would limit access to Washington’s Early Childhood Education and Assistance Program – our state’s preschool program that serves families living in poverty – by eliminating 3 year olds from the program and not adding any new slots over the next two years despite 23,000 unserved eligible children in the state. It also guts Early Achievers, our state’s key resource for early learning professionals to access coaching and tools to provide high-quality early care.
  • Repealing voter-approved education initiatives. The budget would repeal initiatives 1351 and 732, measures passed by Washington voters to reduce class sizes and fund teacher cost-of-living raises. Refusing to implement voter-approved teacher cost-of-living raises is out of step with the goal of fully funding K-12 education.
  • Overhauling the current school funding formula to change the way state disburses money to schools throughout the state. Even though the plan would require sizeable and commendable new investments in K-12 schools, the Senate has proposed to pay for its plan with a levy swap proposal that would actually reduce property tax resources for schools compared to the current system.
  • Prioritizing STEM and medical education over the needs of struggling working families. The Senate’s budget provides some increases in the higher education budget. But these investments would come at the expense of the lowest-income working families: $47 million is ransacked from WorkFirst – Washington’s job training and assistance program for families with young children who are trying to get back on their feet – to pay for them. Lawmakers should not be pitting working the needs of families against those of people seeking higher education opportunities.


A community with a thriving economy fosters great jobs and supports working families, ensures stable and healthy housing for everyone, and provides economic opportunity for Washingtonians to meet their basic needs. The Senate Republicans’ proposal eviscerates the parts of our budget that make these values a reality for residents, particularly targeting those programs that relieve hardship among the lowest-income working people. This budget would cut funding for economic security by $132 million, a staggering 13 percent decrease from the amount necessary to maintain current services. Proposed changes include:

  • Cutting assistance for people with disabilities at risk of homelessness. This proposal would do away with the Housing and Essential Needs program that provides housing-related assistance to people unable to work because of disabilities. It replaces it with a new program that would only be available to people with dependent children, essentially eliminating services for seniors and single adults and all but guaranteeing an increase in homelessness. It also cuts another crucial program for people with disabilities – the Aged, Blind, and Disabled program – by limiting the time people can be on it to 36 months.
  • Ransacking resources from job training programs to plug holes in other parts of the budget. The proposal moves $63 million out of the WorkFirst program and uses the money for other unrelated purposes, such as replacing funding cuts to colleges and universities.
  • Pushing people off basic assistance and making it harder for new people to get on. TANF provides basic supports to families with children who are financially struggling. The Senate Republican budget would cut people off the program who have a disability, or people who are needed at home to care for a family member with a disability. It would also require new applicants to prove that they have been unable to find a job before applying for benefits, but it fails to provide necessary help to applicants in their efforts, such as providing for child care while parents are job-hunting. When other states have implemented similar procedural hurdles for families, they saw increases in hardship and spikes in homelessness.
  • Limiting options for working families to access child care so parents can go to work. The plan makes Working Connections Child Care, Washington’s largest child care subsidy program for families with low incomes, more difficult to access by changing eligibility requirements, capping enrollment, and creating more red tape for participants.


Washingtonians enjoy clean air and water and an excellent health care system that supports the wellbeing of a vast majority of Washington’s residents. The state budget provides for those benefits by investing in public health clinics, climate protection measures, and mental health services. The proposal would increase funding in this area by only $75 million, a less-than-1-percent boost. The proposals include:

  • Failing to provide adequate investments in mental health services. Compared to the budget proposed by Governor Inslee, this budget falls short on the immediate investments to address safety and staffing issues at Western State Hospital – in fact, this proposal would close down two entire wards – and fails to make the investments needed to build a strong community system into the future.
  • Missing opportunities to invest in public health, and to safeguard against proposed federal cuts. As the federal government considers cutting back federal support for health care, it is alarming to see leaders in our state Senate propose underinvestment in our public health system and health benefits for state workers. The budget also threatens the health insurance coverage for tens of thousands of home care workers who support our vulnerable seniors and people with disabilities.
  • Threatening health care innovation reforms that are part of the Washington State Medicaid Transformation Project. This initiative is designed to help Washingtonians achieve better health outcomes, to reward high-quality care, and to curb health care costs in the state Medicaid program. The Senate’s budget would create a roadblock to continuing this initiative and to receiving the $1.5 billion in federal funds it was slated to receive.
  • Reducing investments in programs that are protecting our state’s air and water. The proposal fails to provide resources to adequately sustain work to clean Puget Sound, a clean-up project that is also facing a federal funding threat from the Trump administration’s proposed budget. And no state funding is provided to implement the Clean Air Rule, an effort by Inslee’s administration to reduce carbon pollution in our state. The proposal would also cut or fail to fund investments in restoring salmon and protecting habitat.


Good quality of life for Washingtonians includes safe communities to live in, access to beautiful parks and historical spaces, an open government that runs smoothly and efficiently, and the assurance of transparent and fair elections. This budget would undermine community development and trust by cutting current programs by $107 million, a 1.8 percent decrease from maintenance levels. The major changes include:

  • Failing to invest in tens of thousands of front-line workers, like nurses, home care workers, child care workers, highway maintenance workers, and other public employees by rejecting collective bargaining agreements already negotiated (with the exception of corrections workers and Washington State Patrol troopers and lieutenants). It also exacerbates ongoing issues with recruitment and retention throughout state government by mandating indiscriminate layoffs at state agencies. This would make it nearly impossible for our state agencies to deliver high-quality, timely services to the public.
  • Reducing resources for those who serve to uphold the law for all Washingtonians. Under this budget, state agencies that work to protect the legal rights of everyday citizens would see huge cuts. The Office of Civil Legal Aid would be cut by $10 million (36 percent) and the Office of the Attorney General, which represents our state in legal matters that benefit us all, such as lawsuits against the federal government, would be cut by $20 million (78 percent). The cuts to the Office of the Attorney General in ongoing funding would be temporarily replaced by shifting one-time resources from a lawsuit.
  • Reducing state contributions to retirement systems for first responders. Contributions to retirement systems are reduced by $159 million (a 74 percent reduction from maintenance levels), largely because of a $109 million cut to retirement contributions for police and firefighters.

The state Senate Republican leaders take a page out of the book of Republicans in the other Washington – making deep cuts to the very investments that people throughout our state rely on, and across every area that we use to measure progress. It would be particularly stark for the people who are struggling to make ends meet. And it also includes a host of irresponsible and unsustainable financial stunts that add up to a budget that would collapse under its own weight.

A solid budget framework is the foundation for a strong economic future for Washington and its people. The Senate Republicans should rework their budget with an eye toward strengthening our state’s communities and the foundations that support them.

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