Washington Business Fall 2015 | Legislative Review | Page 33

issue area reports | taxation

Taxation
Amber Carter: Tax and Fiscal Policy

Going into the 2015 session, AWB knew lawmakers would consider taxes as a way to solve their budget challenges resulting
from the McCleary decision on K-12 education funding. Our goal was to end the session with a balanced budget that funded
education while also promoting and protecting economic development opportunities and our state’s competitiveness. Early on,
the governor and House Democrats advocated for tax increases while Senate Republicans offered solutions that used the $3.2
billion in additional revenue to balance the budget without raising taxes. A compromise was ultimately reached in order to avoid
a government shutdown. The deal funded K-12 education at historic levels, though it also included some taxes. In order for the
agreement among lawmakers to work, several steps became necessary, including lifting the Initiative 601 spending limit, transferring funds from the extraordinary revenue account and addressing the classroom size requirements called for under Initiative 1351.

HB 1106/SB 5077

operating budget
Passed/AWB Supported

The budget was a complicated mess this
session largely due to the requirements for
ongoing funding for K-12 education called
for in the 2012 McCleary state Supreme
Court ruling. Both the House and Senate
provided $1.3 billion in new funding in

their original budgets — although they had
dramatically different approaches to their
balance sheet when it came to taxes. The
Senate relied on a no-new-tax plan and the
influx of $3.2 billion in new revenue from
growing tax projections, while the House
relied on $1.5 billion in new taxes, including a capital gains tax, sales tax on bottled
water and business taxes. AWB testified in
opposition to House Bill 1106, the House

Tom Pucci of Expedia, the secretary/treasurer of the AWB Board, testifies before the House
Finance Committee.

Bill considered as part of
AWB’s voting record

Favorable outcome for
Washington businesses

budget, asking for their support of SB 5077,
the Senate approach. The House budget
passed 51-47 in the regular session and was
opposed by AWB. The bill was revised in
the second special session and reduced the
tax request to roughly $500 million. Meanwhile, the Senate passed their budget in
the regular session by a vote of 26-23. The
differences in approaches led to a third
special session where a final budget was
ultimately adopted. Senators proposed SB
6051 as a temporary budget in the event
that lawmakers could not reach an agreement by June 30. The final budget, SB
6052, provides an additional $2.7 billion
investment in K-12 and brings overall education spending to $18.2 billion — more
than 47 percent of the state’s budget, a
level that hasn’t been reached in 30 years.
The budget also reduces tuition at state
colleges and universities, helping 200,000
students and their families. Funding was
also provided for an AWB priority to continue the upgrade to the legacy computer
system used by the Department of Revenue. AWB supports many aspects of the
final budget though we are disappointed
that it relied on tax increases found in SB
6138, an unnecessary component to the
final agreement.

Missed Opportunities

special edition 2015

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