State Wealth Tax Proposal Derailed in Olympia

State Rep. Noel Frame
State Rep. Noel Frame

by Leo Brine

With Democrats firmly in control of all three branches of state government, lefty tax reform advocates hoped for bold legislation this year. Indeed, with newly-elected President Joe Biden—and the crushing COVID-19 recession—making old-fashioned liberal tax policy viable for the first time in a generation, progressive taxation is in vogue in the state legislature.

Kinda. While both the House and Senate included the capital gains tax (SB 5096), a longstanding progressive goal, in their operating budget proposals, a proposed wealth tax (HB 1406), the first of its kind in the nation, is not on track to pass this session.

The wealth tax would require any state resident with more than $1 billion in intangible financial assets, such as stocks and bonds, to pay a one percent tax on their worldwide wealth. The Department of Revenue estimates only 100 Washington taxpayers would pay the tax, which would generate $5 billion annually.

Rep. Noel Frame (D-36, Seattle), the wealth tax’s prime sponsor and chair of the house finance committee, said if Republicans don’t agree to move the bill, she doesn’t want to waste the committee’s time with political theater on a bill that still has a long way to go. 

House Democrats passed the bill out of the Finance Committee on March 31 and sent it to the Appropriations Committee.

Republicans have made it clear they do not support the tax and some Democrats have shown opposition to the bill –two Democratic representatives voted against the bill in House Finance Committee on March 31. While Democrats may still have the votes to move the bill out of Appropriations committee, they’re not sure they’ve got the time, given that it’s this far behind in the process and the committee has Senate bills to consider.

Rep. Noel Frame (D-36, Seattle), the wealth tax’s prime sponsor and chair of the house finance committee, said if Republicans don’t agree to move the bill, she doesn’t want to waste the committee’s time with political theater on a bill that still has a long way to go.  “We’ve asked a lot of our staff, and I’m not inclined to ask them to do more in service of a bill that I don’t, at this moment in time, with 13 days left, see getting across the finish line this session,” Rep. Frame said.

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Rep. Timm Ormsby (D-3, Spokane), the chair of the House Appropriations Committee, said that at this point, bills “are going to need to be agreed to by both sides in order to make it through the process, so we don’t have a show hearing, as opposed to using our time most efficiently for bills that will pass.”

Misha Werschkul, the executive director of the Washington State Budget and Policy Center, said the legislature likely prioritized the capital gains tax because the bill was “developed over several years to have that strong support to move forward.”

The Senate passed the capital gains tax early in March and sent the bill to the House. The House Finance Committee held a public hearing for the bill on March 15.

They haven’t taken action on it yet, but it’s apparently a priority now. Senate majority leader Andy Billig (D-3, Spokane) said in a press conference Tuesday that the “[capital gains tax is] booked in both the House and Senate budgets so the expectation is that it will pass.”

If the House does not pass the bill, both chambers would need to rewrite their operating budget proposals and come up with a new revenue for projects.

Frame told PubliCola she plans to hold a special hearing for the capital gains tax on April 16, with a new amendment she says fixes some of its technical issues. Frame’s amendment also re-introduces  language that was removed in the Senate that said the bill was necessary to implement the budget.

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