You wouldn't know it from his usual deadpan demeanor, but Governor Jay Inslee says he is "shocked"—shocked—to find Senate Republicans "focusing on 210 multimillion dollar estates ... instead of focusing on a million children."
Inslee's shock stems from the Senate majority's refusal to fix a "technical glitch" in Washington's voter-approved estate tax law, in order to address the recent Bracken decision, which invalidated the tax on (non-farm) estates of married couples in excess of $2 million. At stake is $160 million in revenue through 2015, all of it dedicated to the state's Education Legacy Trust Fund.
Speaking at press availability in the state Capitol today, Inslee says that he is "extremely concerned and disappointed" that "the Senate majority has voted to eliminate taxes on about 210 multimillion estates a year rather than to fund education." Also, says Inslee, he is "surprised and disappointed."
"That position is a huge impediment to being able to reach a fruitful resolution to this budget," Inslee warned. "Both sides need to compromise ... but we cannot move forward in this effort while reducing revenue."
And time is running out. This week the Department of Revenue started processing about 70 refund requests, and will begin mailing $40 million to $50 million worth of checks starting next week. "Once we issue refunds, the state will not be able to recover that money even if the Legislature passes an estate tax fix and makes it retroactive," DOR spokesman Mike Gowrylow explains via email:
The Department has not been processing refund requests so far in deference to the Legislature, which could act to fix the loophole created by the Bracken decision in which married couple using QTIPS could avoid paying estate tax on the death of the second spouse while the estates of single or divorced individuals would be taxable. However, several recent Superior Court judges have ordered the Department to make refunds and our legal advice is that we can no longer postpone processing these requests.
So that's the choice. Fix the loophole now—like, this week—or kiss goodbye to $50 million at a time when the state is already falling billions short of funding its constitutional "paramount duty" to educate our children. Even if they manage to fix the loophole in a budget agreement at the close of the special session next week, it'll be too late. That money will be gone.
And that's just plain stupid. There's absolutely no rational reason to exempt heirs of married couples from a tax that heirs of single or divorced individuals have to pay. This is just anti-tax, anti-child, pro-wealthy Republican ideology at its worst.
"This one issue is most telling to me," says the shocked, surprised, concerned, disappointed, and blindsided Inslee. And it should be. The Rodney Tom-led "Majority Coalition Caucus" loves to talk about "bipartisanship" and "compromise," but their refusal to preserve this voter-approved tax—a tax solely dedicated to K-12 education—tells you everything you need to know both about their priorities, and about their willingness to negotiate in good faith. Not a good sign that a budget deal is in the works.
"I assume if we are not done by the 11th, we would just go straight into another session the next morning," says Inslee. But that would leave little time to strike a deal before current two-year budget expires at the end of the month, potentially forcing a government shutdown. No, far from compromise, Tom and his caucus appear intent on steering us toward this fiscal cliff on the gamble that Democrats—who actually care about a functioning government—will blink first.
"By necessity," says Inslee, "I have made some inquiries about the potential decisions that will have to made" should the current budget end June 30 without a new budget in place. "There is a chance," admits Inslee, of a government shutdown. "But I prefer not to focus on that."
Given the Republicans' focus on protecting the interests of multimillionaire heirs at the expense of all else, Inslee may soon have no choice.