Lawmakers in Olympia got lucky this session.
At the beginning of the year, everybody was freaking out about how to pay for the disaster cocktail of crises facing the state, but nobody could decide on a plan.
Paid for by Committee to Reelect Judge North, P.O. Box 27113, Seattle, WA 98165
There was little interest in Gov. Inslee's proposal to use budget reserves to bring half our homeless population inside, less interest in cutting funding from other programs to fulfill that need, and even less interest than you can possibly imagine in passing new taxes on the rich. Looming over it all was the $500 million hole Tim Eyman's idiotic car tab initiative threatened to blow in the transportation budget.
But fast-forward one month, and, thanks to one of the state's few decent progressive taxes, it looks like lawmakers can partly address those crises without raising any new taxes.
To patch the car-tab hole until next year, according to the Seattle Times, transportation budget writers used "underspending," which is money they thought they had already spent but didn't end up spending for various reasons.
Meanwhile, last week the Economic Review Forecast Council (ERFC) announced that lawmakers had an extra $606 million to make tweaks to the current budget and $536 million more to spend or save next year.
A large part of that haul probably has to do with Paul Allen.
Allen died in October of 2018. Estate taxes are due nine months after the death date, but people can file for a six-month extension. If Allen's estate filed an extension, the returns would hit mid-March of 2020, right when Olympia closes up shop for the year.
Confidentiality laws protecting taxpayer information from the public prevent the Department of Revenue from confirming that for certain, but, as Protocol (I think) first reported, last week the ERFC revealed a $310 million dollar bump in the Education Legacy Trust Account (ELTA) "mainly due to higher-than-forecasted estate tax receipts."
Though I haven't really thoroughly scanned the obits, I don't recall hearing of any other billionaire dying in Washington in the fall of 2018, so it's fairly safe to bet that Allen was responsible for the 57 percent increase in the forecast for estate-tax revenues this spring.
The DOR and ERFC are forecasting this influx of revenue as "a one-time occurrence," but there's a chance more money may come. In some cases, dependents can pay estate taxes in equal installments over the course of as many as 10 years.
In order to know how much of Allen's estate was captured by Washington's 20 percent estate tax on multimillionaires, we'd have to know how much of that estate was taxable. The Microsoft co-founder amassed a $20-billion fortune, and he probably left half of that to his charitable foundation, which would be 100 percent deductible. If there were no other deductions, which is highly unlikely, that would leave a taxable estate of $10 billion, resulting in a $2 billion boost in the state's total revenue, which is a lot more than the $310 million bump we saw in this year's forecast. But, again, because of disclosure laws, the public won't really know if Allen's estate is paying in installments until next February, and everyone in Olympia is treating this like a one-time deal.
If you're sitting there thinking it would be nice for the public to know the difference between a billionaire's gross estate and their taxable estate, John Burbank at the Economic Opportunity Institute believes it'd be possible to write a law to do just that. "We know exactly the tax exemptions that Boeing and Microsoft receive on the basis of state policy because of the annual survey. We could conceivably develop similar reporting for estates. Estates are not people anymore—they’re from people, but they’re not people, so the privacy factor is a bit overblown," he said over the phone.
Burbank also notes that Washington's estate tax "provides one of the few progressive revenue tools to raise funds to invest in public goods," and argues reforms could make the tax even more progressive. A bill in the senate, sponsored by Sen. Liz Lovelett, would eliminate the tax for 25 percent of the estates currently being taxed, decrease the tax for another 53 percent of multimillionaire estates that pay the tax, increase the rate on estates valued over $10 million, and ultimately raise state revenues for housing and childcare by $35 million a year. Kinda fun! The bill died in committee this year, but, you know, it's a ~short session~.
In any event, the question of where the $310 million will go is still up in the air. Though estate tax money goes directly into the Education Legacy Trust Account, that account is a "near-general fund account," which the legislature can use to balance the budget. Translation: they can do what they want with it.
The Senate is proposing allocating the "$315 million in one-time revenue projected in the February forecast" thusly:
$115 million to address homelessness by increasing shelter capacity and keeping vulnerable families housed.
$100 million to address the climate crisis by investing in communities and projects to enhance mitigation and resiliency.
$100 million toward a new UW Behavioral Health Hospital, which lawmakers approved in 2019 to address a workforce shortage and a lack of adequate beds for patients.
The House is proposing $100 million for affordable housing and homelessness, $56 million for childcare, and investments in Medicaid reimbursements, among other things.
On Wednesday, Washington Treasurer Duane Davidson, who's a Republican, argued we should save the money for later.
Burbank says saving the money "is a way of starving public services we should be fully funding." He argues we already have $2.9 billion in reserves, and that investments in public services will ultimately save more money in the long run.