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Dear Friends and Neighbors,

I returned to Dayton last night after spending the day in Olympia where we voted on – get this – one bill!

Earlier this week, majority House Democrats notified lawmakers in the House of Representatives that they needed to be in Olympia Thursday to vote on legislation. It’s the first time since the special session began May 13 in which all lawmakers in the House have been called back to the state Capitol to take a vote.

I was hoping maybe a breakthrough happened in the logjam over the operating budget. Instead, we were told only two bills were scheduled for a vote: NealeyBrackenDecision

  • House Bill 1971, which would repeal a sales tax exemption for residential landline service and require prepaid wireless retailers to collect a 9-1-1 tax; and
  • House Bill 2064, which would make changes to the state’s estate tax for married couples.

After yesterday’s opening ceremonies, in which we also had a moment of silence in honor of Sen. Mike Carrell, R-Lakewood, who passed away Wednesday after an illness, we went to caucus to discuss these bills. During that meeting, we were told House Democrats had removed House Bill 1971 from the voting list. So that meant 98 lawmakers were called back to Olympia to vote on one bill – House Bill 2064 – before being sent home.

The Bracken Decision bill

As ranking Republican on the House Finance Committee, I was involved in the issue of the estate tax during the regular session. It’s 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 next week to estates that had paid the taxes prior to the court ruling. So to head off those refunds, House Democrats this week introduced House Bill 2064, which is an almost 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 legislative passage. The new bill also contains a provision limiting liability for certain personal representatives.

I took the lead yesterday for House Republicans in speaking against the measure. I am concerned with the state trying to go back many years to retroactively collect a tax that didn’t actually exist for this group of people. I believe that could set up the state for future legal consequences. Democrats also argued the money (about $160 million over the next two years) is needed for education. However, the Senate Majority Coalition Caucus and House Republicans both proposed budgets that would provide at least $1 billion or more in additional funds for education without the Bracken decision money, so we have dispelled that argument. I invite you to listen to the arguments I gave on the House floor by clicking here.

The bill passed the House on a near party line vote, 51-40, with seven members excused. Then, lawmakers were sent home.

Where’s the budget?

So … here’s the question everyone has: WHERE’S THE BUDGET?

It is day 19 of the 30-day special session and, very frustratingly, there is still no operating budget agreement to vote on.

Earlier this month, I co-authored an article with my seatmates, Sen. Mike Hewitt and Rep. Maureen Walsh, describing why the Legislature did not complete its business within the 105-day session and explaining why it was going into a special session.

Here’s what we said in that article:

“Why are we going into a special session? The governor and House Democrats want to spend nearly $1 billion more than the state plans to take in for regular tax collections. To do so, they want to increase taxes on Main Street sectors of our fragile economy. House Republicans and the Senate Majority Coalition Caucus (SMCC) believe the operating budget can be balanced by setting priorities and without raising taxes.”

(Read the article in its entirety.)

We learned yesterday House Democrats are still insisting on raising taxes, even though the state is expected to take in an additional $2 billion in the coming budget cycle – a nearly 7 Are you on the list?percent increase in revenue – without tax increases.

It’s not high-paid Wall Street types they want you to think they’re going after with this extension of the business and occupation tax surcharge. It truly is the Main Street small business people – tens of thousands of employers and self-employed folks who would be impacted.

Are you on the list?

This week, House Republicans finally received a complete list of those service businesses who would be impacted by the House Democrats’ tax measure, House Bill 2038. I strongly urge you to download this list and see if you, your business or your employer are on it. I am very concerned these tax increases could cost jobs just as our fragile economy is beginning to recover.

The bipartisan Senate passed an operating budget April 5 that would increase classroom funding by more than $1 billion — and provide sufficient funding for the state’s other priorities, such as caring for the most vulnerable and public safety needs — all within existing revenue and without tax increases. We know it can be done without destroying jobs and without hurting families and businesses.

The reason there is no operating budget ready for a vote is that one side is insisting on raising your taxes and growing government while the other side is standing up to protect jobs in our state. It is my hope that we can soon reach a budget compromise that protects jobs, avoids tax increases and funds the necessary priorities of government.

I welcome your comments and input.



Terry Nealey

State Representative Terry Nealey, 16th Legislative District
404 John L. O'Brien Building | P.O. Box 40600 | Olympia, WA 98504-0600
(360) 786-7828 | Toll-free: (800) 562-6000