Category: Taxes

Is It Time for Free Transit?

Image of Metro’s Route 99, a free waterfront bus that ran until 2018, by Atomic Taco

By Katie Wilson

Last week, PubliCola reported a “surprising consensus” among Seattle mayoral candidates on the subject of free public transit. Jessyn Farrell, Lorena González and Andrew Grant Houston have all displayed enthusiasm for pursuing this vision, while Colleen Echohawk and Bruce Harrell have expressed more cautious interest.

During the COVID-19 pandemic, when local transit agencies stopped charging fare and implemented back-door boarding, transit riders who kept on riding got a taste of what a fare-free system might be like. No more fumbling for change, no tapping a card, just hop on the bus or the train. But even before the pandemic, free transit was having a moment.

On January 1, 2020, Intercity Transit, which serves Olympia and the rest of Thurston County, went fare-free. In the first month, ridership jumped up 20 percent. Bobby Karleton, a community organizer and daily bus rider in Olympia, noticed the change: “More people of color, elderly and disabled people and families with small children appear to be using the system,” he said. “For IT’s most impoverished riders—many who are homeless—free service means saving $1.25 every bus ride. That may not sound much, but it adds up.”

But even before the pandemic, free transit was having a moment.

Olympia wasn’t alone. In December 2019, Kansas City, Missouri became the first major U.S. city to dispense with fares. A few months earlier, Lawrence, Massachusetts began a two-year pilot. It was starting to look like a trend, but it wasn’t entirely new—in fact, the Pacific Northwest has long been something of a quiet national leader on free transit. A number of smaller cities and rural areas in Washington, Oregon and Idaho have operated fare-free systems for decades. Visiting Whidbey Island? Put away that wallet. Traveling around Mason County? Welcome aboard.

For Seattle, a city accustomed to being on the leading edge of progressive policy, this is all a little embarrassing. How could we let other parts of our own state—including some that vote Republican!—get so far out ahead? Why are many of us still paying $2.75 to stand, crammed in like sardines, on buses crawling down car-choked streets? Why do we submit to the indignity of fare inspections, with steep fines that punish poverty and disproportionately harm Black riders? In a global climate crisis, why are we still erecting barriers to choosing sustainable transportation? In short, when is fare-free transit coming to Seattle and King County?

Sadly, it’s not quite that simple — but it’s not an impossible dream, either. Let’s take a look.

The transit agencies that have recently hopped on the fare-free bandwagon all have one thing in common: They’re smaller systems, and their revenue from fares is small both absolutely and as a portion of their total budget. Kansas City had to scrape together a modest $9 million per year. In the case of Intercity Transit, fares covered less than 2 percent of operating costs, and the agency was facing an expensive upgrade to the ORCA card system. For some rural systems the calculus is even more extreme: The ancillary costs of collecting fares exceed the fare revenue itself. In both cities, fare-free just makes sense.

The notion that fare-free transit somehow pencils out without a massive infusion of new tax revenue is a pipe dream.

By contrast, in a large, dense urban system like ours, fares bring in real money. Pre-pandemic, farebox revenue covered about a quarter of the operating costs for King County Metro’s bus system. Metro’s annual haul from fares was somewhere in the neighborhood of $175 million. Sound Transit, which operates Link light rail, regional Express buses and the Sounder line, brought in another $100 million. While it’s true that collecting and enforcing fares also costs money—a 2018 audit found that Metro spent $1.7 million per year on fare enforcement, for example—the amounts simply aren’t comparable. The notion that fare-free transit somehow pencils out without a massive infusion of new tax revenue is a pipe dream.

That’s not the only challenge for fare-free transit. While it’s undeniable that the cost of fares is a hardship for many and a disincentive for many more, the bigger problem for most people—including those with low incomes—is the service itself. Public transit doesn’t come frequently enough or get people where they need to go fast enough. Buses and trains are overcrowded and don’t run at all times of the day and night. So even if the transit agencies found a quarter billion dollars on the doorstep every year, eliminating fares might not be the highest and best use of those funds—especially since people would respond to this change by riding still more, further increasing the demand for service.

Recognizing these realities, over the past decade community organizers, advocates and transit riders have taken a needs-based approach to fare-free transit. Through pressure and work with elected officials and agency staff, they’ve won and expanded a suite of reduced- or no-cost transit programs serving specific populations: the Human Services Ticket program, ORCA LIFT reduced fare program, Seattle Youth ORCA program, and, as of last fall, a no-cost annual transit pass program for people below 80 percent of the federal poverty level. I have been involved in all these efforts through my work with the Transit Riders Union. Continue reading “Is It Time for Free Transit?”

Many Top Mayoral Candidates Support Free Transit. Here’s What Corporations Would Save.

Image by Atomic Taco, via Creative Commons

As the leading mayoral candidates establish (and sometimes alter) their positions on major campaign questions, including homelessness, growth, and transportation, a surprising consensus has emerged around an issue that wasn’t even on the table four years ago: Free public transit.

The city has slowly expanded programs subsidizing transit passes for students and low-income residents, providing free or reduced-cost passes to thousands of riders. But elected officials, as well as the leaders of Sound Transit and King County Metro, have balked at making transit free for everyone, arguing that free transit would punch a huge hole in their agencies’ budgets. About a quarter of both agencies’ budgets come from revenue collected at the farebox.

Current city council president Lorena González and former council member Bruce Harrell both said they support free fares, at least in concept, although González has been more enthusiastic in her support. At a forum sponsored by the MASS Coalition last month, González said she “would be committed to making sure that we initiate every effort we can to accomplish the goal of free public transit,” looking to US cities and cities in Europe that have made transit free, such as Talinn, Estonia, as examples.

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Jessyn Farrell, a former state legislator who directed the Transportation Choices Coalition, was more effusive, saying at the same forum that she “absolutely and with a great amount of enthusiasm” supported eliminating transit fares. “Free transit is a core component to getting us to net zero [carbon emissions],” she said. “And it is a core component to racial equity in our system and access and decriminalizing the use of our transit system.”

People who pay full price for public transit would benefit from fare-free transit, obviously. So would large and small businesses, which provide a substantial chunk of transit agencies’ revenue through free or subsidized transit passes for employees, including highly compensated tech workers who could easily afford to pay full fare. This raises potential equity questions, because free transit would shift the cost burden for these workers’ free transit from corporations like Amazon and Microsoft onto taxpayers. Continue reading “Many Top Mayoral Candidates Support Free Transit. Here’s What Corporations Would Save.”

State Goes on Offensive to Save Capital Gains Tax, Police Oversight Group Considers Candidate Forum, and Compassion Seattle Plays Victim

1. Washington State Attorney General Bob Ferguson filed a motion Tuesday seeking to have a Douglas County judge throw out two lawsuits against the capital gains tax. Ferguson argues in his motion that the plaintiffs filed the suits for political reasons and don’t have grounds to sue because they don’t know yet if they’d be subject to the tax.

The capital gains tax bill (SB 5096) imposes a 7 percent tax on profits of $250,000 or more from the sale of intangible financial assets, such as stocks and bonds. The bill would go into effect in 2022, but the state would not collect taxes until January 2023. Roughly 7,000 Washington taxpayers would be subject to the tax, which would generate $415 million for the state in its first year.

Three days after the legislature passed the bill, the Freedom Foundation, a conservative think tank, challenged the law in court. Less than a month later, former attorney general Rob McKenna, along with the Washington Farm Bureau, filed a second lawsuit against the bill. Both suits were filed in conservative Douglas County.

The lawsuits say taxing capital gains is unconstitutional because capital gains are property, and all property must be taxed at a uniform rate in Washington because of a 1933 state Supreme Court decision.

However, Democrats have argued that the capital gains tax is an excise (sales) tax, not a property tax, because it is triggered by the sale of financial assets.

Ferguson argued that the plaintiffs have asked the court to settle a political dispute, rather than a legal one, noting that they “are suffering no legal harm from the tax they challenge and ask this Court to issue a purely advisory political opinion.” He also argued that the lawsuits are preemptive and speculative, since the plaintiffs don’t know whether they’ll even have to pay the tax when it goes into effect in 2023.

The state Supreme Court is also hearing arguments for a lawsuit against the state’s 2019 bank business and occupation tax (HB 2167), which was also filed by McKenna. Washington State Solicitor General Noah Purcell argued at the court on May 25 that state law prohibits lawsuits against taxes until they have gone into effect. If the court sides with Purcell, the lawsuits against the capital gains tax might have to wait until state residents actually pay the tax, which wouldn’t be until 2023 at the earliest.

State Sen. Jamie Pedersen (D-43, Seattle) said that if the court dismisses the lawsuits, it will only delay the inevitable: having the state Supreme Court reviewing the law. Democrats want the court to review the tax because they believe the court would overturn the previous ruling declaring income a form of property, which would blow the doors open for an income tax.

The next hearing for the cases is set for July 13 at 10am, with Douglas County Superior Court Judge Brian Huber presiding.

2. The future of the Seattle Police Department is front-and-center in the upcoming elections, but some members of Seattle’s Community Police Commission (CPC)—the branch of the city’s police oversight system tasked with gathering community input on police reforms—are wary of wading into electoral politics.

Reverend Harriet Walden, the commission’s longest-serving member, also opposed the candidate forum. “It’s not part of our mission,” she said.

During the CPC meeting Wednesday, CPC communications director Jesse Franz described plans that are already underway for a general election forum that the CPC plans to co-host alongside a community organization involved in criminal justice reform, such as Choose 180 or Community Passageways.

But some prominent members of the commission pushed back on the plan. Suzette Dickerson, who will represent the CPC during contract negotiations with the Seattle Police Officers Guild next year, argued that hosting a candidate forum was outside the scope of the CPC’s responsibilities. From her perspective, the commission’s role is to be a sounding board for Seattle residents’ opinions on reforms to SPD; “stepping into the political arena,” she argued, would undermine public trust in the commission.

Reverend Harriet Walden, the commission’s longest-serving member, also opposed the candidate forum. “It’s not part of our mission,” she said, adding that she isn’t confident that the CPC would allow community groups opposed to downsizing SPD to have a voice in the forum. “I think that we’re headed down a path to help social engineer the defunding the police department,” she said.

The commission’s current leaders, however, supported the idea. “To me, holding a candidate forum seems within the scope of ensuring that the community is informed about what accountability may or may not look like, in particular candidates minds,” said CPC co-chair LaRond Baker.

Though the CPC can’t endorse candidates, the commission is not a neutral player in the police oversight sphere: It recommends reforms to SPD and Seattle’s police oversight system. Recent CPC recommendations have included a ban on tear gas and removing limits on the number of civilian investigators in the Office of Police Accountability. The success of those recommendations depends on the support of the mayor, the council, and the police chief, which gives the CPC a clear stake in the outcome of the election.

“Opponents have been using increasingly violent tactics against our signature collection teams,” the solicitation for funds claims. “We must persevere, and we need your help to ensure we reach 33,060 signatures by June 25.”

3. In a fundraising email Tuesday, the Compassion Seattle campaign, which is gathering signatures to get its charter amendment on homelessness on the November ballot, claimed that several of its paid signature gatherers have been attacked by people who oppose the initiative.

“Opponents have been using increasingly violent tactics against our signature collection teams,” the solicitation for funds claims. “We must persevere, and we need your help to ensure we reach 33,060 signatures by June 25.” Continue reading “State Goes on Offensive to Save Capital Gains Tax, Police Oversight Group Considers Candidate Forum, and Compassion Seattle Plays Victim”

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.