Governor Inslee Proposes $2.3 Billion in Higher B&O Taxes

Governor Inslee today proposed $3.9 billion in new funding for K-12 schools and he also proposed to pay for the new school funding with $4.4 billion in new revenue over the next two years.  The remainder of the governor’s plans for the operating, transportation and capital budgets will be released later this week.  The highlights of the governor’s proposals for new and increased taxes and revenues are:

• Increasing the business and occupation tax rate for a broad range of personal and professional services from 1.5 to 2.5 percent, generating nearly $2.3 billion in the next two years.

• Imposing a new tax on carbon pollution associated with the production and consumption of fossil fuels that would generate about $1.9 billion in the next biennium. Half the revenue would be reinvested in clean energy and transportation projects to lower consumer fuel bills and cut greenhouse gas emissions. Additional funds would support projects to build water infrastructure and improve forest health. Funds are also used to offset taxes to businesses and low-income households. The remaining revenue would go to the state’s education needs.

• Imposing a 7.9 percent capital gains tax on the sale of stocks, bonds and other assets to increase the share of state taxes paid by a small fraction of the state’s wealthiest taxpayers. It would apply only to the capital gains earnings above $25,000 for individuals and $50,000 for joint filers. Retirement accounts, gains on the sale of residential real property and certain livestock and agricultural land would be exempt. The tax would generate $821 million in fiscal year 2019.

• Closing or changing five tax exemptions to raise about $300 million, including eliminating the sales tax exemption for bottled water, limiting the sales tax exemption for vehicle trade-ins and converting the nonresident sales tax exemption to a refund program.