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House Democrats are touting their proposed operating budget as one that not only fully funds basic education, but is also one that’s progressive and fixes Washington’s “regressive” taxing system.

“We looked at making sure we did not hit working families and the middle class disproportionately, and did not have a strong impact on people in poverty, low-income people,” said a state Rep. Kris Lytton, Chairwoman of the House Finance committee. “We focused on trying to make our regressive tax code a little more progressive.”

Lytton spoke to The Daily News about the budget proposal during a conference call Wednesday morning. Local legislators Dean Takko, D-Longview, and Brian Blake, D-Aberdeen, also participated.

The Democrat-controlled House last week released its proposed 2017-19 state budget, which includes about $1.9 billion in additional K-12 spending. The Senate GOP unveiled its proposal a week earlier. It would invest a similar amount into basic K-12 education.

The two couldn’t be more different: the main mechanism that drives the Senate’s plan is a “levy reform” plan which would equalize school levy rates in every district across the state.

The House plan includes an estimated $2.8 billion revenue package with a suite of new taxes, including a capital gains tax, a 20 percent business and operations tax increase for the state’s highest grossing businesses (those that gross more than $500,000) and an increase to the real estate excise tax for homes valued above $1 million. Businesses grossing less than $250,000 would pay no B&O and those grossing under $500,000 would get a B&O tax reduction.

Negotiators from the Senate and the House must now meet to craft some kind of compromise.

Lytton challenged both the claim that the Republican plan doesn’t include “new taxes” and the estimated decreases in local levies that Republicans claim their plan provides.

“The Republican budget has a massive property tax increase and I don’t think you can get away with saying there are no new taxes,” Lytton said.

Communities like Longview and Kelso pay well over the proposed $1.55 per $1,000 of assessed value in the Senate plan and would likely see their property taxes decrease. But homeowners in the Puget Sound region, who pay lower property taxes, could see their annual payments double.

“It disproportionately hits the Puget Sound area,” Lytton said, a Democrat from the Anacortes area of Northwest Washington.

Some have criticized the House’s proposed funding, including a 7 percent capital gains tax on the sale of corporate stocks, bonds and investment property. Republican opponents have called it an “income tax,” though Lytton challenges that claim.

“Capital gains is not an income tax, it’s an excise tax,” Lytton said. Single filers would only would pay the tax on capital gains exceeding $25,000, while joint filers would pay on gains greater than $50,000. Only 1.5 percent of the population — 48,000 people — would pay the tax, Lytton said.

“I’m not going to try to defend everything that they did, but I think the House made a better face effort that actually balances,” Takko said.

State Sen. Takko said he can’t defend the Senate budget at all.

“The numbers are really soft, but they aren’t raising the money that they claim they’re going to need for McCleary,” Takko said, referring to the state Supreme Court ruling mandating that the state fully fund basic education.

A nonpartisan analysis found that the Senate GOP budget overestimates its revenue by about $1 billion.

“I will tell you that levy reform is attractive to me, and I think as we move through negotiations, there may be elements of what the Senate proposes that get included in the end,” said state Rep. Blake. “I think the initial sheet that was sent around showing the lower property taxes in rural Washington is not accurate and we need accurate, real numbers to budget up here.”

Contact Daily News reporter Madelyn Reese at 360-577-2523

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