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Press Release

Tuesday, February 20

AWB Statement on House and Senate Budget Proposals

Senate relies on extraordinary growth of tax revenue from robust economy, but misses chance to help manufacturers; House would impose unnecessary and unreliable capital gains tax, and limit effectiveness of B&O tax relief

OLYMPIA — The Association of Washington Business, Washington state’s oldest and largest business association representing small, medium and large employers, issued the following statement Tuesday from President Kris Johnson regarding the proposed House and Senate budgets:

“The House budget proposal relies on a new capital gains tax that’s not only unnecessary and unreliable but is also constitutionally questionable. With state tax revenue soaring by more $1.3 billion above previous estimates, there is no reason to impose a new tax on Washingtonians that is certain to be challenged in court as an illegal income tax.

“Even if the court allowed it, we know from other states that revenue collected from capital gains taxes goes up and down like a roller coaster with the economy, making it an unreliable source of funding for schools and other important services. And despite claims that it targets the so-called wealthy, a capital gains tax could harm small-business owners who are relying on the sale of their business to fund their retirement.

“One area where the House budget seeks to help employers — by lowering the business and occupation (B&O) tax for manufacturers — unfortunately limits support to manufacturers in parts of the state deemed ‘rural’ by the budget writers. It leaves out nine counties, including many that consist largely of rural areas, such as Kitsap and Benton.

“Manufacturers in every part of the state need support. Manufacturing employment is down 14.2 percent statewide since 2000, with manufacturing jobs in urban areas declining more than manufacturing jobs in rural areas.

“The Senate’s proposed budget, by comparison, relies on the extraordinary surge in tax revenues, rather than new taxes, to speed up implementation of the school funding plan lawmakers approved last year, and to provide property tax relief. The Senate proposal also preserves the four-year balanced budget requirement, which has brought needed discipline to the budget process.

“The Senate proposal fails to lower the B&O tax rate for manufacturers, however, which is a missed opportunity and something we believe could be addressed during the final weeks of the session.

“With the release of the House and Senate budget proposals this week, and Gov. Jay Inslee’s proposed budget in December, we have seen three very different approaches to taxing and spending. We look forward to working with lawmakers to ensure the final budget is one that fosters growth and opportunity for everyone — in urban and rural areas alike.”

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