Paul Allen’s estate taxes are likely responsible for Washington’s $300 million budget windfall
RIP my man. Mark Wilson / GETTY IMAGES
Olympia lawmakers have been lucky this session.
At the start of the year, everyone was worried about how to pay for the catastrophic cocktail of crises facing the state, but no one could decide on a plan.
There was little interest in Governor Inslee’s proposal to use budgetary reserves to bring half of our homeless population back inside, less interest in cutting funding for other programs to meet this need, let alone interest than you might imagine in passing new taxes on the rich. On top of it all was the $500 million hole that Tim Eyman’s silly car tab initiative threatened to blow in the transportation budget.
But fast-forward a month and, thanks to one of the state’s few decent progressive taxes, it looks like lawmakers can partly deal with these crises without raising new taxes.
To fix the car-tab hole until next year, according to the Seattle Timesthe transport budget writers used “underspend”, that is, money they thought they had already spent but ultimately did not spend for various reasons.
Meanwhile, last week the Economic Review Forecast Council (ERFC) announced that lawmakers have an additional $606 million to make changes to the current budget and an additional $536 million to spend or save the year. next.
Much of this transport is likely related to Paul Allen.
Allen died in October 2018. Inheritance tax is due nine months after the date of death, but people can request a six-month extension. If Allen’s estate filed for an extension, returns would hit mid-March 2020, just as Olympia closes for the year.
Secrecy laws protecting taxpayer information from the public prevent the Department of Revenue from confirming this with certainty, but, as Protocol (I think) first reported, last week the ERFC revealed a $310 million increase in the Education Legacy Trust Account (ELTA) “primarily due to higher than expected estate tax revenue.”
While I haven’t really scanned the obituaries in depth, I don’t recall hearing of any other billionaire who died in Washington in the fall of 2018, so it’s pretty safe to bet Allen was responsible for the death. 57% increase in succession forecasts. -tax revenue this spring.
The DOR and ERFC foresee this influx of revenue as “a one-time event”, but there is a chance that more money will arrive. In some cases, dependents can pay inheritance tax in equal installments over a period of up to 10 years.
In order to know how much of Allen’s estate was captured by Washington’s 20% estate tax on multi-millionaires, we would need to know how much of that estate was taxable. The Microsoft co-founder amassed a fortune of $20 billion, and he probably left half of that to his charitable foundation, which would be 100% deductible. If there were no other deductions, which is highly unlikely, this would leave a taxable estate of $10 billion, resulting in a $2 billion increase in total state revenue, which is far more than the $310 million uptick we saw in this year’s forecast. . But, again, due to disclosure laws, the public won’t really know if Allen’s estate is paying in installments until next February, and everyone at Olympia is treating this as a one-time deal.
If you’re sitting there thinking it would be nice for the public to know the difference between a billionaire’s gross estate and his taxable estate, John Burbank of the Economic Opportunity Institute thinks it might be possible to write a law to do just that. “We know exactly what tax exemptions Boeing and Microsoft receive based on state policy through the annual survey. We may eventually develop similar reports for estates. Estates are no longer people – they come from of people, but they’re not the people, so the privacy factor is a bit of a stretch,” he said over the phone.
Burbank also notes that Washington’s estate tax “provides one of the few progressive revenue tools for raising funds to invest in public assets,” and says reforms could make the tax even more progressive. A Senate bill, sponsored by Senator Liz Lovelett, would eliminate the tax for 25% of currently taxed estates, lower the tax for an additional 53% of multi-millionaire estates that pay the tax, increase the rate on estates valued at more than $10 million and ultimately increase state revenues for housing and child care by $35 million a year. Rather fun! The bill died in committee this year, but, you know, it’s a ~short session~.
Either way, the question of where the $310 million will go is still up in the air. Although estate tax money goes directly into the Education Legacy Trust Account, this account is a “quasi-general fund account,” which the legislature can use to balance the budget. Translation: they can do with it what they want.
The Senate proposes to allocate the “$315 million in one-time revenue projected in the February forecast” as follows:
$115 million to address homelessness by increasing shelter capacity and keeping vulnerable families housed.
$100 million to address the climate crisis by investing in communities and projects to improve mitigation and resilience.
$100 million for a new UW behavioral health hospital, which lawmakers approved in 2019 to address a labor shortage and lack of adequate patient beds.
The House is proposing $100 million for affordable housing and homelessness, $56 million for child care, and investments in Medicaid reimbursements, among others.
On Wednesday, Washington Treasurer Duane Davidson, who is a Republican, argued that we should save the money for later.
Burbank says saving money “is a way to starve public services that we should fully fund.” He argues that we already have $2.9 billion in reserves and that investing in utilities will ultimately save more money in the long run.