- Associated Press - Thursday, December 18, 2014

OLYMPIA, Wash. (AP) - Facing a more than $2 billion shortfall over the next two-year spending period, Gov. Jay Inslee on Thursday proposed a $39 billion operating budget for 2015-17. Inslee seeks more than $1.4 billion in tax increases and other revenue changes - including a levy on the sale of stocks and bonds.

Here are highlights of the spending plan:

WHY IS THE STATE BUDGET OUT OF WHACK?

A state budget outlook released recently projected a more than $2 billion budget gap, in large part due to a new voter-approved initiative to shrink class sizes. That projected shortfall does not include half of the expected financial obligation needed to increase funding for education as directed by the state Supreme Court, nor does it count the additional amount needed if collective bargaining agreements with state workers are approved.

WHERE WOULD THE MONEY GO?



The bulk of the funds in Inslee’s proposed spending plan would go to schools. Inslee wants to spend $18.2 billion on K-12 education. Washington is under court order to increase the amount of money it spends on public school students. Social and Health Services would get $6.4 billion, the Health Care Authority would receive $4.4 billion and the state’s colleges and universities would receive $3.4 billion.

NEW TAXES ON STOCK SALES, CIGARETTES

Inslee would impose a 7 percent capital gains tax on earnings from the sale of stocks, bonds and other assets above $25,000 for individuals and $50,000 for joint filers. The levy would begin in the second year of the biennium. Inslee said this tax would bring in almost $800 million. He also says a proposed levy on carbon polluters would raise $380 million and a 50-cent per pack cigarette tax as well as a levy on e-cigarettes and vapor product would raise $56 million.

Inslee’s plan would also repeal tax breaks on royalties and for oil refineries, limit sales tax exemption to $10,000 on trade-in value of used cars, and impose a tax on the sale of bottled water to consumers.

WHAT ARE PEOPLE SAYING?

Rep. Bruce Chandler, R-Granger: “The governor has unveiled some controversial proposals that have given state lawmakers some ideas to think about. It’s now time to hold them up to the bipartisan scrutiny of the legislative process.”

Rep. Reuven Carlyle, D-Seattle: “Washington’s tax structure is a Ford Pinto in a Tesla world. It’s economically inefficient for business and painfully unfair to the middle class.”

WHAT’S NEXT?

The Legislature convenes in January. Inslee and his fellow Democrats control the state House, but Republicans who run the Senate will sharply scrutinize the spending plan - especially the new taxes. Inslee said Monday he is open to hearing other ideas - “we should work together.”

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