Category: Taxes

Advocates Say It’s Time to Ditch the Old Transportation Funding Process

Anna Zivarts, Disability Rights Washington

by Leo Brine

Transportation advocates were actually pleased when lawmakers ended the most recent legislative session without passing a new transportation package.

After the transportation committees released their proposed revenue packages late in the session, transportation accessibility groups and environmentalists were disappointed by the outdated investment priorities. Wanting a more equitable transportation package, advocates repeated a line of critique they’ve been making for years: The state needs to find new transportation revenue sources and free up revenue that is otherwise restricted to highway spending.

However, and perhaps because their recommendations have gone unheeded for a decade, a new, more sweeping critique emerged in 2021: It’s time to dump the whole politicized “transportation package” model and create a new framework that assesses and prioritizes the state’s actual transportation needs.

Anna Zivarts, Director of the Disability Mobility Initiative for Disability Rights Washington, said the current system is a “pork model,” where legislators pick projects for their districts rather than investing in projects that make the whole state transportation system function better.

“A transportation system has to work across the state,” she said. “If you have everyone competing, that’s not going to create the best system overall.”

Advocates say lawmakers have too much power over which projects get funded and have political incentivizes to fund major highway expansion projects rather than expand transit services or improve pedestrian infrastructure. Featuring friction over projects, funding, regionalism, mode split, and maintenance versus new construction, the legislative ritual, akin to passing a kidney stone, played out in 2003, 2005, and 2015.

A new, more sweeping critique emerged in 2021: It’s time to dump the whole politicized “transportation package” model and create a new framework that assesses and prioritizes the state’s actual transportation needs.

In April, during the last weeks of the session, the House and Senate transportation committee chairs, Rep. Jake Fey (D-27, Tacoma) and Sen. Steve Hobbs (D-44, Lake Stevens), shared their transportation revenue proposals. The House proposal would have spent $22 billion over 16 years, earmarking the majority of the dollars for highway projects, with about 20 percent going to multimodal projects. The Senate’s proposal would have spent $18 billion over the same period, with less than 10 percent going to multimodal projects.

Leah Missik, transportation policy manager for Climate Solutions, said lawmakers’ proposed investments in multimodal projects were a major step up from previous packages, but “continuously investing in road expansions is certainly not the way we want to go.”

In order to fix the state’s transportation system, Paulo Nunes-Ueno of Front and Centered, a BIPOC environmental group, said, “this package process needs to go.”  Transportation packages never meet people’s needs and are a hodgepodge of project ideas from legislators, he said. Instead, Nunes-Ueno says lawmakers should establish climate, infrastructure, and safety goals, and allocate funding to state and local agencies that would decide how to allocate funding on projects.

Hester Serebrin, policy director for the Transportation Choices Coalition, said politics play too great a role when lawmakers craft transportation packages. She said lawmakers are more likely to invest in large projects, like highway expansions or major road repairs, because they garner more attention than smaller multimodal projects. “This process doesn’t incentivize … projects that help people travel between places,” Serebrin said. “Instead it incentivizes larger, geographically isolated projects.”

Other advocates agree that politics should play less of a role in the state’s transportation system. Vlad Gutman, Climate Solutions’ Washington director, like Nunes-Ueno, wants legislators to devise a set of goals and values for Washington’s transportation infrastructure and allocate funding to state agencies who can come up with projects and programs to accomplish the goals.

In order to fix the state’s transportation system, Paulo Nunes-Ueno said, “this package process needs to go.”  Instead, Nunes-Ueno wants lawmakers to set climate, infrastructure, and safety goals and allocate funding to state and local agencies.

“We need to be selecting projects and investing and designing our transportation system in a sort of objective, metric-based way that also recognizes and inputs the needs of communities and people who are impacted and stakeholders of transportation,” he said.

To do so, he argued, the Washington State Department of Transportation (WSDOT) should study the needs of the state and select projects based on those needs, “instead of [lawmakers] sort of piecemealing it by selecting projects one at a time,” Gutman said.

This participatory approach to transportation planning doesn’t make sense to Senate Transportation Chair Hobbs. “We’re in a democracy and legislators have a right to say how their districts should be supported by government,” he said.

Continue reading “Advocates Say It’s Time to Ditch the Old Transportation Funding Process”

After Supposedly Historic Session, Progressive Tax Reform Advocates Say Democrats Need to Do Much More

Washington State Capitol (Creative Commons)

by Leo Brine

After a year of dire revenue predictions and a pandemic that exposed class fault lines, 2021 looked like the year for tax reform. Firmly in control of both houses, Democratic lawmakers proposed multiple tax bills to reverse Washington’s regressive tax structure. However, at the end of the 105-day session, lawmakers only passed two new progressive taxes: the capital gains tax (SB 5096) and the working families tax exemption (HB 1297).

The capital gains bill imposes a 7 percent tax on profits, or capital gains, of more than $250,000 on the sale of intangible financial assets, like stocks and bonds; about 7,000 taxpayers are expected to pay the tax. The revenue will fund childcare and public schools. The Working Families Tax Exemption will give low-income residents and families in Washington a tax rebate of up to $1,200 a year.

Both of the bills had been in the works for more than a decade, and tax reform advocates say they’re a good start, but that the state needs to do much more done. According to a 2018 study from the Institute of Taxation and Economic Policy, sales and property taxes siphon away roughly 18 percent of low-income residents’ annual incomes, and this year’s tax reform bills did little to improve that statistic.

The state’s sales tax, which is regressive because it costs lower-income people far more as a percentage of their income than higher-income residents, supplies more than half of the state’s general fund—roughly $22.5 billion during the 2017-2019 biennium. Because it’s such a major contributor to state revenues, cutting it would lead to a major deficit and the state would need to pass additional taxes to neutralize the revenue loss. “It would be logistically difficult to pull off in Washington state,” Andy Nicholas, policy director for the progressive Washington State Budget and Policy Center, said. Nicholas has suggested imposing higher sales taxes on luxury goods than on basic necessities.

Nicholas says broader reforms are likely to come “in a couple years.” In the meantime, he hopes legislators pass more rebates to ease the impact the current tax system has on the state’s lowest-earning residents. He says a tax rebate for renters could offset the cost renters pay for property taxes, which landlords generally pass along to tenants as part of their rent. Nicholas said Rep. Kristen Harris-Talley (D-37, Seattle) could attach the rebate to her anti-displacement property tax exemption (HB, 1494) which she proposed earlier this year. The House Finance Committee passed her bill, but it died in the Appropriations Committee.

Because of some of these policies, she says, “BIPOC communities and low-income communities haven’t been able to have the same benefits.” —Treasure Mackley, Executive Director Invest in Washington Now

Discriminatory private- and public-sector policies have prevented BIPOC communities from gaining social mobility, Treasure Mackey, Executive Director of Invest in Washington Now, told PubliCola. For example, Washington state allows judges to issue fines against criminal defendants, and they charge higher fines, on average, to people of color. In the private sector, discriminatory hiring practices kept workers of color out of high paying jobs and redlining confined people of color, particularly Black home buyers, to certain parts of cities like Seattle. Without the ability to generate lasting wealth, communities are stuck in a position where they have to spend a fifth of their income on regressive taxes.

“We need to not only modernize our tax systems to catch up with the economy that we have, but we also need to rebalance our tax code in a way that is fairer and more just and creates a level playing field for everybody,” Mackley said.

Democrats discussed a number of potential new taxes this year, including the wealth tax (HB 1406), which would have imposed a 1 percent tax on the worldwide wealth of the wealthiest Washingtonians. They also discussed a payroll tax similar to one Seattle implemented in 2020. The city imposes a tax of 0.7 to 2.4 percent on the payroll expenses of its largest employers; the larger the employer and the higher an employee’s pay, the higher the tax.

In future sessions, lawmakers will likely craft new tax policy based on the findings of the Tax Structure Work Group, which includes legislators from both parties, officials from the governor’s office and Department of Revenue and members of the Washington Associations of Counties and Cities. The legislature formed the group in 2019 to research replacements for Washington’s most regressive taxes, including like the sales tax and the business and occupation tax; however, legislation is still years away.

The group’s 2020 report recommends a value added tax (VAT) and a corporate income/net receipts tax to replace the B&O tax. VAT taxes a product at every stage of production, but consumers ultimately pay the final cost of the tax, whereas businesses that pay VAT can receive tax rebates. The corporate income tax would be levied on businesses that pay the federal corporate income tax, with exemptions for the smallest businesses. Unlike the B&O tax, the corporate income tax would allow companies to file for deductions on most of their operating expenses.

The work group also suggested instituting a progressive income tax to offset cuts to the sales tax. The obvious problem with this is that, according to a 1933 state supreme court ruling, income is property subject to a constitutional prohibition on graduated taxes. Passing an income tax would mean defending the tax in court and hoping the modern supreme court overturns the nearly 80-year-old decision.

Ostrom said if the court decides they want to protect the most regressive tax structure in the country, “that’s egg on the supreme court’s face.”

In fact, Democrats have set up this very possibility. The benefit (and possibly the purpose) of passing the capital gains tax may have been to force a court showdown; Sen. Jamie Pedersen told PubliCola last week he was excited that conservatives immediately sued. By getting the court to hear a legal challenge to the Democrats’ capital gains tax (which opponents argue is an income tax), the court will have the opportunity to overturn their previous ruling, opening the door to a progressive income tax. Alternately, the court could interpret the bill as an excise tax, which Democrats argue it is, without completely overturning their previous decision. Or the court could simply find that capital gains are also property and strike down the bill.

Aaron Ostrom, the executive director of the progressive statewide organization Fuse Washington, thinks it’s unlikely the court will rule against the tax, but if they did ,Democrats “would probably have to go back to the drawing board.” Ostrom said if the court decides they want to protect the most regressive tax structure in the country, “that’s egg on the supreme court’s face.”

A court ruling will surely influence the next moves for tax reform advocates and lawmakers, Ostrom said. But they will still have the same goal: “We’re all pretty committed to not having Washington have the most regressive tax code in country. It’s not good for the people of Washington, it’s not good for the economy,” he said. “We have to go back and find some strategies that work to shift the tax load off of the folks making the least.”

Olympia Fizz: More Calls for Inslee to Reject Weakened ADU Bill; State Rejects Eyman’s Anti-Capital Gains Tax Efforts

1. A pro-renter outcry against watered-down state legislation emerged this week when two dozen organizations and businesses signed on to a letter, originally drafted by the progressive Sightline think tank; the Sightline letter, which we reported on last week, asks Gov. Jay Inslee to issue a partial veto of accessory dwelling unit legislation that state representatives amended with anti-renter provisions.

Joining Sightline in a mini-rebellion against the House Democrats’ changes? The AARP of Washington, Climate Solutions, 350 Seattle, Amazon, the Washington State Labor Council, SEIU 775, and the Sierra Club, among others.

As we reported, the initial proposal, by state Sen. Marko Liias (D-21, Edmonds), would have banned owner-occupancy for secondary units, such as backyard cottages, allowing renters to live in both single-family houses and their accessory units—opening up exclusive single-family neighborhoods to more people. However, state Rep. Gerry Pollet (D-46, North Seattle) kicked off a House process that led to a radical rewrite, allowing owner occupancy mandates and imposing new restrictions designed to prevent homeowners from renting out their secondary units as Airbnbs.

Joining Sightline in a mini-rebellion against the House Democrats’ changes? 350 Seattle, AARP Washington, Climate Solutions, the Washington State Labor Council, and the Sierra Club, among many others.

“ADUs alone will not solve the state’s housing shortage,” the letter says. “But they are the gentlest way communities can add relatively affordable homes that offer lower income families more choices and allow seniors to age in place.”

2. Coming off yet another major legal loss, anti-tax activist Tim Eyman has stumbled again. The Republican Washington Secretary of State’s office threw out all four of Eyman’s anti-capital gains tax (SB 5096) referendum proposals.

The capital gains tax bill, which passed this year, would impose a 7 percent tax on capital gains of $250,000 or more, but conservatives are already champing at the bit to stop it from taking effect. Earlier this week, two conservative groups filed lawsuits against the bill, arguing that it constitutes an unconstitutional income tax.

Rejecting the measures, Washington State Director of Elections Lori Augino cited the bill’s necessity clause, an amendment added by Rep. Noel Frame (D-36, Seattle), which says that the tax is “is necessary for the support of the state government and its existing public institutions.” This places it outside the scope of citizens’ referendum power, Augino wrote.

Eyman’s referendum method would have been the safest option for conservatives to stop the bill. The other options are a lawsuit or a voter initiative, which requires twice as many signatures—about 325,000, or 8 percent of the votes cast in the last gubernatorial election.

While the lawsuits could also upend the Democrats’ plans, they may also backfire on the conservatives. The Washington State Supreme Court could uphold the tax by ruling that it’s an excise tax, not an income tax. Or they could overturn a 1933 decision that defined income as property, which, under the state constitution, must be taxed at a 1 percent uniform tax rate. If the court overturns that ruling, Democratic lawmakers would finally have the opportunity to pass a graduated income tax in the state.

Tax Opponents File Lawsuit Against Capital Gains Tax. Democratic State Senator Says Bring it On

Youtube screenshot.

by Leo Brine

On Wednesday, a conservative think tank, the Freedom Foundation, filed a lawsuit against the hot-off-the-presses capital gains tax (SB 5096) and another conservative group announced they plan to do so as well.

In response, Democratic state Sen. Jamie Pedersen (D-43, Seattle) told PubliCola later Wednesday evening: Bring it on. Lawsuits are “great,” said Pedersen, who chairs the Law and Justice committee, because he sees them as a way to challenge old, anti-tax state supreme court rulings.

During this year’s legislative session, as the Democrats moved the capital gains tax bill through the legislature, Republicans decried it as an unconstitutional income tax. This is now the legal argument against the bill, which Governor Jay Inslee has not yet signed into law.

If the modern-day supreme court was to determine that income is not property, Sen. Pedersen said, it “would change the world for us in Olympia about what’s possible.”

The capital gains tax, which Democrats passed on the last day of this year’s legislative session on a 25-24 vote, with three moderate Democrats and every Republican voting no, imposes a 7 percent tax on financial gains from the sale of intangible financial assets, such as stocks and bonds, above $250,000. About 7,000 Washington taxpayers would pay the tax beginning in 2023.

The Freedom Foundation filed its lawsuit in Douglas County on behalf of seven state residents who would pay the tax. The group claims that capital gains constitute income, making the tax an income tax. In 1933, the state supreme court ruled that income is property subject to the uniformity clause in the state constitution, which says that different types of property—such as income below and above a certain threshold—can’t be taxed at different rates. This ruling has been the basis of claims that an income tax is unconstitutional for nearly a century.

Democrats say the capital gains tax is an excise tax because it’s the sale of assets that triggers the tax rather than the income that the sale generates.

Conservatives don’t buy it. “Capital gains are clearly income. And when you tax them, it’s an income tax — no matter what you choose to call it,” Freedom Foundation CEO Aaron With said in a press release. Continue reading “Tax Opponents File Lawsuit Against Capital Gains Tax. Democratic State Senator Says Bring it On”

City Says It’s Too Risky to Turn On Drinking Fountains, First-Time Candidate Sees Fundraising Surge, Capital Gains Tax Passes

Freeway Park water fountains. Photo by Joe Mabel via Wikimedia Commons.

1. Seattle Public Utilities confirmed that the city has only turned on 10 public water fountains downtown (and is working to repair a handful of others in the area), leaving the rest of the city’s public drinking fountains out of service during a pandemic that has greatly reduced access to clean drinking water for people experiencing homelessness.

According to a joint response to questions provided by the Parks Department and SPU, King County Public Health only asked the city to turn on its downtown fountains and “did not recommend turning on the rest of the city’s drinking fountains. Currently they are providing additional guidance about the rest of the city’s drinking fountains, and we will continue to follow their guidance.”

A spokesperson for King County Public Health said that in fact, the health department did ask the city to turn on drinking fountains citywide in response to an outbreak of shigella in late 2020 (which we covered here.) However, the spokesperson said, “When we talked to SPU and SPR about turning on the drinking fountains, they expressed concerns as to how many drinking fountains were fully functioning and the logistics involved in providing routine maintenance and cleaning.”

“Therefore,” the spokesperson said, “we recommended they use a phased approach to turning on the drinking fountains, starting with the drinking fountains in downtown Seattle.

“We’ve seen success in the downtown drinking fountains having been turned on and are now exploring with SPU/SPR having them turn on drinking fountains in additional parts of the city.”

The CDC guidelines the city provided do not appear to contain any recommendation that cities turn off public drinking fountains if they can’t clean them after each use. Instead, they note that there is no evidence COVID-19 can spread through drinking water and suggest cleaning frequently touched surfaces such as drinking fountains once a day.

Public Health director Patty Hayes told the Seattle/King County Board of Health earlier this month that providing access to potable water was one of the health department’s “top priorities,” along with providing access to soap and running water for people to wash their hands, water bottles, and other items. Thirst leads people with no other options to drink water from unsanitary sources, which leads to outbreaks of communicable diseases.

The Community Advisory Group of Seattle/King County Healthcare for the Homeless has been beating the drum about drinking water since the beginning of the pandemic, when they noted in a letter to Mayor Jenny Durkan that “[w]ithout access to clean drinking water, many of our unhoused population are drinking non-potable water which can lead to other public health crises such as the proliferation of Hepatitis A and giardia.” Since then, those concerns have been borne out over and over again.

Asked why the city hasn’t turned on its public drinking fountains outside downtown, Parks and SPU wrote, “SPU and SPR have been following the CDC guidance for drinking fountains safety during the pandemic that recommends cleaning them between uses, and turning them off if this is not possible.”

The CDC guidelines at the link the city provided do not appear to contain any recommendation that cities turn off public drinking fountains if they can’t clean them after each use. Instead, they note that there is no evidence COVID-19 can spread through drinking water and suggest cleaning frequently touched surfaces such as drinking fountains once a day.

The only reference the CDC guidelines make to shutting down drinking fountains comes in a section about large public events. That section says that event planners should “[c]lean and disinfect frequently touched surfaces within the venue at least daily or between uses as much as possible—for example, door handles, sink handles, drinking fountains, grab bars, hand railings, and cash registers.” If drinking fountains, “cannot be adequately cleaned and disinfected during an event,” the guidance continues, event planners should “consider closing” them.

2. Andrew Grant Houston, a first-time candidate who wants to defund the Seattle Police Department, build 2,500 “tiny houses” for people experiencing homelessness, and institute rent control, is currently in second place in the mayoral fundraising race, after a $129,050 contribution drop last week brought the campaign’s total fundraising to $266,758, according to the state Public Disclosure Commission. The vast majority of that—$214,050, according to the city—came in the form of democracy vouchers, a form of public campaign finance in which voters receive $100 to spend on the candidate or candidates of their choice.

Financial momentum like that is unusual for a little-known candidate without connections to the city’s political establishment; it’s also exactly what the democracy voucher program was designed to promote. PubliCola asked Houston why he thought so many people were giving to his campaign. Houston told us he credits his consultant, Prism West, and a strategic plan that places the campaign on track to max out its primary-election vouchers by the end of this week. Under the city’s election law, mayoral candidates can redeem a total of $800,000 in democracy vouchers—half in the primary, half in the general.

Houston said he wasn’t surprised by the haul. “I knew it was going to happen at some point,” he said. “I am someone who is focused on not just hiring the best people, but also really being committed to understanding how we meet our goals.”

That strategy, Houston continued, has included a lot of (masked, socially distant) in-person canvassing, with a focus on several key issues. Police defunding, for example, is a polarizing issue but one that Houston says galvanizes people to give. “Being very clear about defunding the police to invest in community really resonates with people—either you’re for it or against it, and people who are in the affirmative [tend to give],” he said.

According to the PDC, Chief Seattle Club director Colleen Echohawk is the only mayoral candidate who has raised more than Houston; her latest total, according to the PDC, is $297,072.

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3. Senators passed the the state’s first-ever capital gains tax (SB 5096) on Sunday, the last day of the session, after rejecting the bill the previous Thursday. The bill would impose a 7 percent tax on capital gains above $250,000, subject to some exemptions, raising more than $400 million in its first year. The bill passed on the same narrow margin as the initial vote in March, 25-24.

Before the state can begin collecting the tax, it will have to face a near-certain legal challenge from business groups. (Republicans have said they will not file the lawsuit themselves but expect an outside organization to do so._ While Republicans want the tax stopped, they fear that if the state supreme court rules that the capital gains tax is constitutional, it will open the door for a state income tax.

Weekend Fizz: Capital Gains Tax Moves Forward, Council Staffers Unionize, and Echohawk Challenged on Initiative Support

1. The Senate Democrats weren’t ready to sign off on the version of the historic capital gains tax legislation (SB 5096) that House Democrats passed earlier this week. So the bill’s prime sponsor, Sen. June Robinson (D-38, Everett) and Sen. Jamie Pedersen (D-43, Seattle) met with House Finance Committee Chair Rep. Noel Frame (D-36, Seattle) and House Majority Leader Pat Sullivan (D-47, Covington) to hammer out a compromise version.

On Friday evening, Democrats sent the revised version to the Senate. Both of the House’s referendum protections remain intact in this new version: The Democrats preserved language that says the tax is “necessary” for the government to function and dedicated the first $500 million in revenues from the tax to fund the Education Legacy Trust Account, which locks in the “necessity” clause (under the state constitution, education is the “paramount duty” of the state). Any excess revenue from the tax will be dedicated to an account that funds public school construction.

The new tax is expected to bring in about $445 million during the 2021-23 biennium, $981 million in the 2023-25 biennium, and $1.06 billion between 2025 and 2027.

The bill now includes a new tax deduction for people who donate to charity—a GOP idea that had not made it into any version of the bill until now.

After the meeting, Pedersen told PubliCola his Democratic colleagues added the deduction to get enough votes to pass the bill, saying, “Now it looks like we will be able to get it through both chambers.”

2. After more than a year of negotiations, the Seattle City Council’s central staff—a group of about 30 legal, economic, and policy wonks who draft and analyze legislation for the council—have joined the city’s PROTEC17 union.

Among other guarantees, their new contract increases their pay retroactively for 2019, 2020, and 2021 by 4 percent, 3.6 percent, and 2.9 percent, respectively, and bumps up the minimum maximum pay for their positions by the same percentage. Going forward, the minimum pay for a central staffer will be $42.20 an hour, or $87,776, and salaries will max out at $157,060.

3. Last week, mayoral candidate Andrew Grant Houston subtly tweaked one of his competitors, Chief Seattle Club director Colleen Echohawk, for supporting a proposed charter amendment on homelessness sponsored by a group started by former council member Tim Burgess, Compassion Seattle.

“A few people have asked, so we wanted to clarify that, no, Ace has never been formally or informally involved with the organization Compassion Seattle. We cannot speak for other candidates,” Houston tweeted. In response, a Houston supporter pointed out that the Echohawk campaign had apparently taken down a blog post supporting the initiative.

Asked why they took down the blog post, an Echohawk campaign spokesperson responded that the statement featured in the blog post is “all over social media and we’re hosting it on our Adobe Document cloud.” (True.) “So yes, the answer is we had it up on the blog, but took it down because we decided as a campaign to focus communications on social media as it is much more accessible and more people engage with the campaigns social accounts.”

The Chief Seattle Club works to shelter and house homeless Native people in Seattle. Echohawk’s campaign tweeted and did a Facebook post linking the full statement on April 3.

House Passes Capital Gains Tax with Rep. Frame’s Key Amendment

by Leo Brine

After a month of deliberations, the House finally passed capital gains tax legislation (SB 5096), including a pivotal amendment proposed by Finance Committee Chair Rep. Noel Frame (D-36, Seattle) that restored protections against a referendum—a public vote to invalidate a bill before it takes effect. Senators removed those provisions when they voted on the original bill in March. The bill now includes two sections that protect it from voter referendum; however, it no longer contains an emergency clause that would have caused the bill to go into effect right away.

Republicans say the capital gains tax is unconstitutional and want to make sure it stays vulnerable to a referendum, which is their safest option for defeating the tax. But the new language puts their hopes in jeopardy. Republicans proposed 19 amendments attempting to remove the protections, dragging the debate from Tuesday evening to Wednesday afternoon.

Even with the protections against referendum in the bill, the tax could still be vulnerable to a voter initiative—which Frame noted are a far more common way to challenge tax policy than referenda. An initiative is a way to repeal legislation, whereas a referendum cancels the legislation before it becomes law. For someone to propose an initiative, they would need to gather a number of signatures equal to 8 percent of the votes cast in the last gubernatorial election. That’s about 324,516 signatures. A referendum only requires half that number.

The capital gains tax imposes a 7 percent tax on financial gains from intangible financial assets, such as stocks and bonds, above $250,000. Frame said the bill will fix Washington’s upside-down tax code by making wealthy residents pay their fair share. Roughly 7,000 Washington taxpayers would pay the tax beginning in 2023.

Frame’s revised version of the bill says the tax “is necessary for the support of the state government and its existing institutions.” Under Article 2 of the state Constitution, this language protects the bill from a voter referendum.

House Finance Committee chair Rep. Frame’s revised version of the bill says the tax “is necessary for the support of the state government and its existing institutions.”

Frame said she added the section clarifying the necessity of the tax because “this is an important function of government that needs to be paid for. I think we’re pointing out that’s what we believe this is.”

When the House was debating the bill Tuesday night, Republicans proposed multiple amendments to remove the protective language. Some amendments they proposed struck the “necessary” section altogether. Others added new sections specifying there was no emergency clause in the bill. Rep. Ed Orcutt (R-20, Kalama) even proposed an amendment that would required the Secretary of State to place a referendum on the bill on the next state general election ballot. All of the amendments failed, but it was clear from the final tallies that some Democrats voted for them.

Frame also added a second, subtler protection against referendum to the bill. The revised bill would direct tax revenue into the Education Legacy Trust Account (ELTA) which helps fund public schools and childcare services in the state. Because the State uses the account to fulfill its obligation to fund public schools, the tax would be necessary to support government and its existing institutions, Frame said.

Frame defended the language in her revised bill, saying during the debate Tuesday night, “we have a paramount duty to invest in K-12 education and early learning and childcare, and this capital gains excise tax is intended to pay for that. That’s it.” Frame said the judiciary branch should determine whether or not there is an emergency clause in the bill, not the legislature.

“It’s not the language that matters, it’s where we’re making our investments—that’s what matters,” Frame said after the House passed her revised bill. “We believe the investments made in this bill are for the ongoing function of government. That’s what the lawyers will look at.”

Republicans tried passing amendments to direct the funds into accounts that do not support state institutions, but their efforts failed.

The House passed Frame’s bill 53-45 and sent it to the Senate.

Senate Majority Leader, Andy Billig (D-2, Spokane) said Wednesday that Senate Democrats would caucus to see if they had the votes to pass the House’s updated bill without making any changes. Otherwise, senators could propose amendments to strip the bill of its protective language. Senators from both sides of the aisle voted for Sen. Steve Hobbs’ (D-44, Everett) original amendment that got rid of the original bill’s emergency clause.

If the Senate passes the bill with the protective language intact, Republicans options to block the bill would be narrowed to filing a lawsuit or hoping for a voter initiative. Senate Republican Leader, John Braun (R-20, Centralia) said during a press conference on Wednesday, senate republicans will work to get rid of the protective. language in the bill. “The idea of limiting people’s right to a referendum is wrong,” Braun said.

Oly Fizz: Wealth Tax Dies, State Could Re-Criminalize Drug Possession, Sound Transit Gets Green Light to Fix Fare Enforcement

1. A proposed 1 percent tax on the wealth of 100 or so very rich Washington state residents is dead for this year. The cause of death: The House Appropriations Committee did not include the wealth tax (HB 1406) on this week’s committee agenda, which means the bill will not move forward. The bill had detractors in both parties and never advanced past the House, where it has languished since early April. The session ends next Sunday, April 25.

The chair of the House Appropriations Committee, Rep. Timm Ormsby (D-3, Spokane) said the committee was prioritizing bills that have gone through the legislative process. The committee is hearing only four Senate bills this week, including the cap-and-trade bill (SB 5126) and a bill addressing the State v. Blake decision, which effectively decriminalized simple drug possession in Washington state (SB 5476).

Tax reform bills arguably had a better chance of passing this year than any time in recent memory, with Democrats firmly in control of both houses and the pandemic exposing the economic gulf between the very wealthy and everyone else.

While legislators did pass some progressive legislation that had been in the works for years, including the working families tax exemption (HB 1297), and the capital gains tax (included in the budget), the wealth tax stalled.

Tax reform advocates say because the wealth tax is the first legislation of its kind in the nation, it will take some time before legislators start pushing the policy forward. “I don’t think that’s necessarily the best thing about the legislative process,” Misha Werschkul, executive director of the Washington State Budget and Policy Center, said. “If there’s a good idea, there’s no reason not to pass it the first year it’s introduced.” However, Werschkul and other advocates said they think the wealth tax has enough momentum to move faster than previous tax bills.

2. The House of Representatives is considering a bill that would re-establish a criminal penalty for drug possession in response to the state supreme court’s landmark ruling in February that effectively decriminalized drug possession.

In that decision, State of Washington v. Blake, the court ruled that Washington’s so-called “strict liability” drug possession laws—which made no distinction between intentional and unintentional drug possession—were incompatible with the due process rights enshrined in both the state and federal constitutions. The court’s decision rendered Washington’s existing drug possession laws toothless, sending lawmakers, prosecutors and attorneys statewide scrambling to adjust to the sudden end of decades of harsh drug policies.

In the legislature, a group of lawmakers saw an opportunity to cement de-criminalization in Washington law by rewriting the state’s drug possession statutes. Sen. Manka Dhingra (D-45, Bellevue) led the charge in the state senate, drafting a bill that would have removed all criminal penalties for possessing a “personal use amount” of an illegal drug—up to one gram of heroin or two grams of methamphetamine, for example. The bill also proposed a system in which law enforcement could pass the names and contact information of drug users to a “care coordinator,” who would then reach out to the drug user to offer treatment and recovery resources.

As the end of the legislative session approached, senate Democrats rushed to adjust the bill to reach an agreement with some of their Republican counterparts. The resulting amendments, Dhingra wrote in a press release last week, no longer reflected a “treatment-first approach” to drug use. Instead, the revised bill would impose a gross misdemeanor charge for drug possession—making no distinction between a “personal use amount” and larger quantities.

While the re-worked bill would require prosecutors to divert people charged with drug possession to addiction treatment for their first and second violations, it would grant prosecutors leeway to decide whether a person is eligible for treatment after their third violation, re-introducing the possibility of fines or jail time.

Dhingra, still listed as the bill’s sponsor, chose not to vote in support of her bill when it passed the senate last week. “I understand the importance of keeping a statewide policy response moving, and this compromise was the only way to do that,” she wrote in the press release. “Too many lives, especially Black and brown lives, will continue to be shattered by a criminal justice approach to what is fundamentally a public health problem.”

The legislation is now one of two bills written in response to the Blake decision before the House Appropriations Committee. The other, sponsored by Rep. Roger Goodman (D-45, Woodinville) and Rep. Tara Simmons (D-23, Bainbridge Island), would make possession of a “personal use amount” of illegal drugs a civil infraction.

3. Governor Jay Inslee signed legislation last week (HB 1301) that authorizes Sound Transit to create an “alternate fare enforcement system,” removing what the agency called the primary legal obstacle preventing it from decriminalizing fare nonpayment on buses and trains. Unlike King County Metro, Sound Transit has resisted calls to end its punitive approach to fare enforcement, arguing that a more lenient policy would lead to revenue loss as people realize they can get away with riding for free.

Under existing policy (which Sound Transit is not currently enforcing), people who fail to show proof of payment more than once in a year receive a ticket and $124 fine; if they fail to pay the fine, they can face criminal charges.

Advocates for low-income transit riders have long argued that this policy is too punitive and disproportionately impacts low-income people and people of color; in 2019; King County Metro revised its own, similar rules to take fare enforcement out of the courts and give riders multiple alternatives to paying fines. Sound Transit said it would like to consider decriminalizing fare enforcement, but its enabling legislation required the fines.

For the next year, as part of a pilot program aimed at testing out potential long-term changes, Sound Transit isn’t issuing citations and has replaced private security guards with “fare enforcement ambassadors” who work to educate people about how and when to pay their fare and how to access low-income ORCA cards, among other changes.

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.” Continue reading “State Wealth Tax Proposal Derailed in Olympia”

Democrats Include Capital Gains Tax In Budget Proposals

by Leo Brine

Senate and House Democrats unveiled their operating budget proposals for the 2021-23 biennium late last week. Both budgets included the capital gains tax (SB 5096), signaling that Democrats expect the House to pass the dramatic bill and Gov. Inslee to sign it.

Senators passed the capital gains tax on March 6. The House Finance committee has held a public hearing for the bill, but has yet to pass it out of committee and send it to the House floor. The lead budget writer, Senator Christine Rolfes (D-23, Bainbridge Island), said Democrats included the tax in the budget because the bill had, for the first time, passed the Senate, and “it’s the Senate’s practice to book [earmark] revenue that we passed.”

Representative Noel Frame (D-36, Seattle) said she’s confident the House will pass the bill which she said is why it is included in the House’s proposal. “We booked it in the budget in years past,” Rep. Frame said, “we built it into the budget this year and we are confident it will continue to move.”

Legislators in the House and Senate expect the 7 percent tax on capital gains of more than $250,000, which takes effect in July 2022, to generate more than $350 million a year beginning in 2023. Rolfes said the revenue generated from the tax in the senate’s proposal would eventually help fund the Taxpayer Fairness account, which provides funding for the working families tax exemption for low-income Washingtonians (HB 1297).

Continue reading “Democrats Include Capital Gains Tax In Budget Proposals”