Imagine if you will that the government decides to add a new tax on you today. Let's say it's a “wake-up” tax. Every day since 1983 when you wake up after a night's sleep, you owe this tax. It didn't exist back then, but the government says you owe it now and you must pay it. How unfair is that?
Fortunately, there is no such thing as a retroactive wake-up tax. However, the state House of Representatives approved a bill today that would impose a retroactive death tax going back to the 1980s. House Bill 2075 would allow the state to retroactively collect the death tax from the estates of married couples who used a certain type of trust (known as a “qualified terminable interest property” or QTIP trust) to transfer assets from one spouse to the surviving spouse without paying the state estate tax. This measure would allow the state to reach back some 30 years to collect on a tax that didn't exist in the 1980s. That is not only unconstitutional, it is WRONG!
First, the money does not belong to the government. Second, it is against our state and federal constitutions to enact laws that would hold people accountable for something they never knew they would be accountable for.
Democrats say they need this money – about $160 million – for education. However, the Senate Majority Coalition Caucus has passed a budget that contains an additional $1.5 billion for education without tax increases.
If this retroactive death tax is signed into law, it would put Washington state squarely in the target of a massive lawsuit. As an attorney versed on our constitutional rights, I firmly believe the state would lose this suit. We would not only have to pay the entire amount, but also attorney fees and interest. Where is that money going to come from? Our children, our disabled and our future.
This whole dilemma could be solved very simply by funding education with our first dollar, not our last dubious penny.
And if we start this precedent, where will it end? Will the state be able to go back into your past and collect other taxes you didn't owe? That's why I've added House Bill 2075 to this week's “Bad Bill List.” Read more about it below – and why the Legislature is talking about a death tax now.
Also, please read further about the latest on the Legislature's inability to come to an agreement on a state operating budget because Democrats want higher taxes. We need LOWER taxes, LESS government and MORE freedom. That's what The Freedom Agenda is about. And that's why I'm standing firm against the Democrats' plan to hold kids hostage and force you to empty your wallet.
I encourage you to stay in contact with me. You will see my contact information at the bottom of this e-mail.
Democrats' insistence on tax increases forces second special session
A lot of people are asking: Why is the Legislature now in a SECOND special session? Why didn't it finish its business in the allotted 105-days? Why didn't it come to a budget agreement within the 30-days of the first special session, which finished June 11?
The Senate Majority Coalition Caucus has passed a state operating budget that would increase funding to K-12 education by $1.5 billion. It funds education first, provides for our state's most vulnerable citizens, and ensures funding for public safety – and it does all this without general tax increases.
Near the end of the regular session in April, House Democrats passed their version of a state operating budget that also put additional money for K-12 education – but to fund this increase, they proposed nearly $900 million in tax increases. In other words, they funded other non-essential programs in the state budget first and then held kids hostage by saying taxpayers needed to cough up more money before the Democrat budget pays for education.
Included in their tax proposal was to permanently extend a 0.3 percent business and occupation (B&O) tax surcharge on service businesses. Democrats downplayed who would be affected, saying it would affect “doctors, lawyers, architects and others.” However, House Republicans researched this tax further and obtained an 11-page list of mostly small, Main Street businesses and people who would have to pay this tax. We publicized the list, asking the question: “Are you on the list?” Tens of thousands of small businesses in Washington would have been affected. Click here to view the list.
When we put the spotlight on this tax list, House Democrats quickly abandoned it, coming out last week with a new budget that did not contain the B&O tax surcharge on Main Street businesses. However, they still insisted on at least nine new tax increases totaling nearly $600 million, including:
- A B&O tax increase on travel agents and tour operators. (In Washington, the travel agency industry consists of 335 retail locations that contribute 2,204 full-time jobs and $111 million in direct economic impact to the state. The vast majority of Washington travel agencies are small businesses – 73 percent of them employ fewer than five people and 90 percent employ fewer than 10.)
- A B&O tax increase on resellers of prescription drugs. (This would especially hurt our senior citizens.)
- A sales tax increase on bottled water. (Voters repealed this tax in November 2010.)
- Eliminating the sales tax exemption for non-residents. (This would discourage people from shopping in our border counties.)
- Repealing an extracted fuel tax. (This would especially hit our state's refineries that employ people in Whatcom and Skagit counties.)
- Tax increases on research and development.
- Residential telephone tax increase..
- Retroactive death tax
Interestingly enough, the latest House Democrat plan that includes these tax increases would provide LESS money for K-12 education than the Senate Majority Coalition Caucus budget.
There are two paths to the finish line of this year's legislative sessions:
1. Adopt a sustainable budget that puts more than $1 billion in additional funding for K-12 education, provides for our most vulnerable citizens, and ensures sufficient funding for public safety without general tax increases. (Senate proposal)
2. Adopt a budget that would unnecessarily increase taxes by more than a half-billion dollars, pays for larger government (“bucks for bureaucrats”), and spends less money on education than the first option. (House Democrat proposal)
I think the choice is clear.
Unfortunately, Democrats – with the support of Gov. Jay Inslee – are threatening a government shutdown if they don't get the tax increases they want. This is Washington state, not Washington, D.C. We will not be moved by these threats. Instead, my Republican colleagues and I are determined to pass a budget before the end of the fiscal year that will fully fund education without relying on job-killing tax increases.
This is a bill that could put Washington state into deep liability and future financial difficulty because of its unconstitutional retroactive collection of taxes that didn't exist 30 years ago. To help you understand why the Legislature is talking about the death tax in this second special session, some background is in order.
This centers around a complicated issue known as the “Bracken Decision,” in which the state was sued by the estates of two deceased couples, contending they did not owe the state portion of the estate tax. The Washington State Supreme Court upheld the suit, which allows married couples using a certain type of trust to transfer assets from one spouse to the surviving spouse without paying the state estate tax. The ruling meant that the estate tax did not apply to married couples who used a certain estate planning tool prior to 2005. The state also interpreted the high court ruling to apply to estates that used the planning tool after 2005.
During the regular session, House Democrats passed House Bill 1920, which would reinstate the estate tax for those married couples retroactively. The bill died in the Senate.
The Department of Revenue has been preparing to send out refund checks of about $50 million beginning tomorrow to estates that had paid the taxes prior to the court ruling. So to head off those refunds, House Democrats introduced House Bill 2075, which is nearly identical measure to the earlier bill, with the exception that the new legislation contains an emergency clause to allow it to become effective immediately upon the governor's signature.
If this bill becomes law, the state could go back some 30 years to collect death taxes that didn't exist then. I believe the bill is unconstitutional and that it will be challenged in court. If the state loses the lawsuit, it will have to pay out millions of dollars, not only in refunds, but in interest and attorney fees.
We should not put the funding of education in the line of fire of such an unstable revenue source. I voted NO, because I'm concerned this measure not only would unfairly and unconstitutionally raise people's taxes retroactively, it also creates a huge liability for the state of Washington. Therefore, House Bill 2075 is an extremely BAD BILL!