Washington Governor Jay Inslee recently released his proposed budget for 2015-17, which includes approximately $1.5 billion of new and increased taxes the Governor is marketing as “improving Washington’s unfair and outdated tax system.”
Capital Gains Tax
The centerpiece of the Governor’s tax increase proposals involves a new 7 percent capital gains tax that would be imposed on individuals. The capital gains tax is estimated to generate nearly $800 million in its first year and represents more than half of the proposed tax increase. Washington does not currently have an income tax or other tax imposed on individuals.
Carbon Pollution Reduction Program
Another large revenue driver would be the Governor’s proposed Carbon Pollution Accountability Act, which he describes as “a new market-based carbon pollution reduction program.” The proposed Act would require certain businesses to purchase carbon emission allowances at public auction. The proposal is expected to raise $379 million in new revenue for the state’s general fund (to be used to fund K-12 education programs), while another $568 million would be dedicated to other purposes (and therefore is not considered part of the $1.5 billion in new general fund revenue), including $400 million toward transportation.
The Governor’s proposed budget seeks another $282 million by repealing five “tax breaks”:
The Governor’s budget would increase the cigarette tax by $0.50 per pack to raise $38 million in revenue, and impose a tax on e-cigarettes and vapor products based on the “other tobacco products” tax for an additional $18 million in revenue.
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