Estate tax plan moves forward in state Senate

OLYMPIA – Gov. Jay Inslee, clearly frustrated over a lack of progress in budget negotiations and a plan to fix a problem with the estate tax, accused the Senate on Tuesday of hurting schoolchildren to help multimillionaires.

Inslee criticized a bill approved last week by the Senate Ways and Means Committee that would make changes to the state’s estate tax in the wake of a Supreme Court ruling that it was being improperly applied to the estates of some married couples.

Along with making changes to close what some call a tax loophole for estates in which one spouse died before 2005, Senate Republicans also propose increasing the size of the estate before the tax kicks in, from $2 million to $5 million. Such a move would eliminate about $500 million from the education legacy trust fund – where estate tax receipts are deposited – over the next 10 years, Inslee said.

“The Senate’s priority is to multimillion-dollar estates,” he said. This at a time when the state is trying to find billions more to put into public schools to satisfy another Supreme Court ruling that the Legislature is falling down on its obligation to pay for basic education. “The Senate majority wants to knock another hole in the ship and take on more water.”

Although the proposal came from the top two Republicans on the Ways and Means Committee, it passed the panel Friday with yes votes from members of both parties and was sent to the Senate for possible debate. But the Senate hasn’t debated any bills since the special session began May 13. 

Senate Republican leader Mark Schoesler, R-Ritzville, said the proposal is an attempt to make the threshold for the state sales tax line up with the federal threshold. There are also concerns about efforts to make the estate tax retroactive as part of the “fix” for the court decision.

Sen. Rodney Tom of Medina, one of two Democrats who joined Republicans to form a majority coalition, which he leads, said all sides have agreed to put at least $1 billion extra into schools in the coming biennium, and the real hang-up in reaching a budget deal is the inability of other Democrats to agree to reforms in education and business regulations.

“It is not over the estate tax, it is over fundamental reforms,” Tom said.

The Legislature has one week left in the special session that was called in part to reach agreement on the 2013-15 general operating budget.

“I am concerned about the lack of substantial progress in budget negotiations,” Inslee said.

The governor said his belief in “the power of hope and reliance” leads him to be optimistic the Legislature can finish its work without another special session.

Republicans, too, would like to have seen faster progress, Schoesler said, but Inslee shouldn’t have given the Legislature a two-week break after the regular session ended. “People don’t function as well without a timeline.”

If legislators don’t reach a budget agreement by Tuesday, Inslee said, he would likely call them into a second special session to start the next day.

Another looming deadline is the start of the state’s fiscal year on July 1. Without a budget, “there is a chance” some state services would have to be shut down, Inslee said, “but I prefer not to focus on that.”