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Capital gains tax would fund school reform

Sat., Jan. 26, 2013

OLYMPIA – The Senate’s top Democrat will propose asking Washington voters to approve a capital gains tax on the wealthy to help pay for better schools and more affordable college tuition.

Senate Minority Leader Ed Murray, of Seattle, said Friday he will introduce a bill next week for a 5 percent excise tax on capital gains that would hit an estimated 3 percent of the state’s population. It’s an attempt to get what he called a “grand bargain” on education that would link school reforms to the money to pay for it.

But the Republican-dominated coalition that controls the Senate has denounced Democrats for the range of tax proposals already introduced, including an income tax, which has been rejected repeatedly by voters.

“There’s a steady flow of tax ideas coming out,” said Senate Republican Leader Mark Schoesler, of Ritzville. This despite the fact that Gov. Jay Inslee, a Democrat, has said he would veto new taxes if they come to him, Schoesler said. 

Murray said his proposal wouldn’t need Inslee’s support. Instead it would go to voters in November as part of a package that would guarantee the money raised would pay for all-day kindergarten, smaller class sizes for grades 3 and under, and restored funding to public universities that has been cut in recent years, forcing tuition to go up.

The Legislature faces orders from the state Supreme Court to do a better job of meeting its constitutional responsibility for education. While the court didn’t put a dollar amount on that order, the estimated cost of meeting that mandate over the next two years is more than $1 billion.

Republicans are stressing reforms to public school programs that the state controls and using the estimated increase in state revenues from existing taxes. Senate Majority Leader Rodney Tom, of Medina, a Democrat who joined with the chamber’s Republicans to form the ruling coalition, said their goal is to “fundamentally change the system.”

Murray said the Legislature has approved reforms in recent years but not paid for them because its budget was squeezed by the recession. Now it should couple reforms with newly dedicated revenue, he said.

The Legislature needs to find a “sweet spot” where reforms and revenue come together, Murray said, and if Republicans have a better proposal, “I’m not wedded to this idea.”

The proposed tax would not apply to capital gains on the sale of a primary residence, and would exclude the first $10,000 an individual earns in capital gains, or the first $20,000 for a couple. Other exclusions would include money from retirement savings and timber sales.

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