Washington state Superintendent Chris Reykdal announced a capital gains tax in his 2019-21 budget Tuesday, which addresses the funding gyrations and looming budget deficits in many districts across the state as a result of the new public school funding model.
His proposal includes additional funding for students with special needs, nurses and dual language programs, which have historically been unfunded by the state, requiring local districts to implement levies.
“Our students deserve an education system that does not allow opportunity gaps to persist,” Reykdal said in a statement. “That can only happen if our system provides equitable opportunities and individual learning pathways for each student.”
Reykdal’s budget proposal is funded by an 8 percent long-term capital gains tax that would raise $1 billion annually. His goal is to reduce the state property tax by 35 cents per $1,000 of assessed valuation. This would affect approximately 53,000 households. Single filers who earn $25,000 from capital gains annually or couples who make more than $50,000 will be taxed.
Would it affect sales of residences? No, said Reykdal.
The objective is to reduce the burden on homeowners so school districts can increase levies as they’ve done in the past.
The state legislature, in their response to the McCleary Supreme Court decision, capped the amount of levy money schools could collect to whichever was less: $2,500 per student or $1.50 per $1,000 of assessed value. This decision reduced Camas School District levy capacity by 50 percent, and is a chief cause of projected CSD deficits. Districts all over the state are dealing with similar issues, which Reykdal readily admits.
“Without critical changes, the reduction in levies will leave some districts in a very tough financial situation,” Reykdal said in a statement.
The rest of the capital gains tax would go towards these public school funding areas:
- $150 million for special education
- $46 million for mentoring and professional learning
- $45 million for career and technical education
- $38 million for institutional education
- $38 million for counselors
- $20 million for dual credit programs
- $14 million for dual language programs
- $13 million for nurses
- $13 million for mental health and school safety
- $10 million for expanded learning opportunities
- $9 million for family and community coordinators
Reykdal’s plans has critics from both Republicans and Democrats.
“The capital gains tax is basically an income tax,” said Clark County Assessor, Peter Van Nortwick. “If we have one Fisher Investments will be gone. You let a new tax in and it expands. The State brings enough in sales and other taxes.”
Retiring State Representative Liz Pike thinks it’s a terrible idea that tries to fix bad legislation with more bad legislation.
”School districts should not have given raises they had no way to pay for,” said Pike. “It was financially irresponsible. I’ve said all along the WEA orchestrated these strikes with Democrat operatives in order to justify a new state income tax. The Capital Gains Tax proposed by OSPI Reykdal is a back door to a new state income tax.”
The capital gains tax was floated by Governor Inslee two years ago, and most recently by House Democrats in this last budget cycle.
“I’m opposed to any new tax structure,” said candidate Larry Hoff, a Republican who is running for the 18th Legislative District, Position 2 seat. “McCleary needs to be fully implemented prior to suggesting that major changes are necessary.”
Hoff’s opponent is also against the capital gains tax.
“I’m disappointed in his proposal,” said Kathy Gillespie, a Democrat who is running for the open 18th, Position 2 Legislative District seat. “It ignores the huge property tax increase passed in 2017 and also ignores the levy swipe contained in that deal. After a summer of strikes and sky-high property tax bills to boot, I don’t think taxpayers will have an appetite for another ‘fix’. The idea has been around for a while. It’s not new, and it’s still a bad idea.”