Category: Taxes

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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We know there are a lot of publications competing for your dollars and attention, but PubliCola truly is different. We cover Seattle and King County on a budget that is funded entirely by reader contributions—no ads, no paywalls, ever.

Being fully independent means that we cover the stories we consider most interesting and newsworthy, based on our own news judgment and feedback from readers about what matters to them, not what advertisers or corporate funders want us to write about. It also means that we need your support. So if you get something out of this site, consider giving something back by kicking in a few dollars a month, or making a one-time contribution, to help us keep doing this work. If you prefer to Venmo or write a check, our Support page includes information about those options. Thank you for your ongoing readership and support.

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”

Morning Fizz: OPA Clears Officer in Fuhr Shooting, Dual Campaigns Create Conundrum, and Republican Uses Callous Slur

1. In a report released on Thursday afternoon, Seattle’s Office of Police Accountability (OPA) ruled that Seattle Police Department SWAT officer Noah Zech acted within policy when he shot and killed 24-year-old Shaun Fuhr in South Seattle last April.

On the afternoon of April 29, a woman called 911 to report that Fuhr, while drunk, had violated a protection order, beaten her, and abducted their 1-year-old daughter at gunpoint from Rainier Playfield in Columbia City. When police arrived on the scene, the woman told the officers that her daughter’s life was in danger.

A SWAT team and patrol officers from the South Precinct mounted a search for Fuhr in the nearby Mount Baker neighborhood, following civilian tips and Fuhr’s cell phone location. After a brief chase, during which Fuhr ran with his daughter tucked under his arm, the officers cornered him in a fenced backyard, still carrying his daughter.

Within seconds, Zech shot Fuhr in the head; he collapsed and dropped his daughter, who was uninjured. According to the OPA report, the officers then discovered that Fuhr had abandoned his gun during the pursuit; he was unarmed when Zehr shot and killed him.

Based on body-worn video footage of the incident, the OPA’s investigators concluded that Zech could not see Fuhr’s right hand and believed he was still carrying a gun. For that reason, and because of Fuhr’s “prior violence, repeated non-compliance, and dangerous physical handling of the child,” SPD investigators and OPA director Andrew Myerberg decided that “no further de-escalation was safe or feasible.”

SPD leadership has since maintained that Zech acted primarily out of concern for the child’s safety. Brandy Grant, the executive director of Seattle’s Community Police Commission, argued otherwise on Thursday afternoon, writing in a press release that “in no world should it be acceptable to shoot someone when they have their baby in their arms.”

According to the OPA’s report, when an SPD detective contacted Fuhr’s former partner about the shooting, she, too, expressed anger that an officer fired at Fuhr while he held their child. She also asserted that Zech, who is white, shot Fuhr because he was Black.

Additionally, the woman—who remains anonymous—alleged that SPD’s victim support advocate offered her a $100 gift card and “advised her to stay out of Seattle” to avoid retaliation from Fuhr’s family, who she said were harassing her. PubliCola has contacted SPD to confirm the details of that interaction.

While she declined to give a formal statement to the OPA, Fuhr’s former partner told the OPA that she intended to file a lawsuit against SPD. Though “she did not believe the officers were completely at fault,” she told OPA investigators that she “wanted the police to help [Fuhr], not kill him.”

2. Kate Martin, a neighborhood activist who is well on her way to perennial-candidate status, could fall afoul of Seattle’s rules for collecting democracy vouchers if she continues to pursue separate campaigns for mayor and City Council Position 8. (PubliCola first reported on Martin’s dual-campaign strategy—she actually filed to run for Position 8 twice—a couple of weeks ago). On her campaign page (“Mandate tidiness”; “Prosecute radical rioters”), Martin encourages supporters to donate to one or both of her campaigns, and says she’ll decide which one to move forward with before the filing deadline of May 21.

No one has attempted to run for more than one office in the same election cycle under Seattle’s public campaign-finance rules, which allow voters to allocate public campaign funds to candidates who collect a qualifying number of contributions, with signatures, from Seattle residents. (For mayoral candidates, the qualifying number is 600; for at-large races, it’s 400).

But a similar hypothetical did come before the Seattle Ethics and Elections Commission last year, when SEEC director Wayne Barnett wrote a memo titled “Musical Chairs” posing the question: What would happen if a city council member collected contributions for a reelection bid, then decided at the last minute she wanted to run for mayor?

Asked about the potential conundrum Martin’s run poses, Barnett said only, “I suspect this will end up before the full Commission.” And while Martin’s race(s) present mostly a theoretical dilemma (she has raised no money so far, and raised less than $10,000 in her last race for mayor, in 2013), her decision to seek two races at once raises questions the ethics commission will need to resolve.

3. One quote raised the hopes of progressives Thursday and one raised their ire.

Senator June Robinson told reporters Thursday she would pass whatever amended version of the capital gains tax (SB 5096) the House sends back to the Senate—a possible message to House Democrats that she was open to restoring the emergency clause.

As we’ve reported, the emergency clause would make the legislation invulnerable to a voter referendum, although it could still be canceled by initiative.

“We will pass whatever the house sends back to us,” Sen. Robinson, the bill’s original sponsor, said during a press conference. Continue reading “Morning Fizz: OPA Clears Officer in Fuhr Shooting, Dual Campaigns Create Conundrum, and Republican Uses Callous Slur”

Democrats in Olympia Pursue Sweeping Agenda to Reverse Regressive Tax Structure

On the docket this year: A carbon tax, plus a wealth tax, changes to the estate tax, and a sweetened beverage tax.

by Leo Brine

Progressive legislators have been unleashing a slew of tax legislation this session, with bills like the capital gains tax (SB 5096) and the working families tax exemption (HB 1297) grabbing headlines after historic floor votes on both earlier month.

And they have more cued up. Legislators typically pass tax and revenue bills late in the session as a means of funding the budget, but this year Democrats have a much bigger agenda: They want to pass tax legislation that reforms how the budget is actually funded. They plan to create new taxes on carbon-dioxide emissions, extreme wealth, data collection, and more this year.

Ingeniously flipping the script on Republicans who say that sudden rosy revenue forecasts prove our tax system doesn’t need reform, progressives say the latest revenue forecast actually highlights the volatility of Washington’s current tax structure. In June, the state forecast a nearly $9 billion revenue shortfall. However, a sequence of higher forecasts based on an uptick in retail sales tax revenue between September and March nearly re-balanced the budget.

Ingeniously flipping the script on Republicans who say sudden rosy revenue forecasts prove our tax system doesn’t need reform, progressives say the budget turnaround is being funded on the backs of low-income residents who pay a disproportionate amount of their incomes in regressive sales taxes.

Seizing on the volatility argument, and noting that the turnaround is being funded largely on the backs of low-income residents who pay a disproportionate amount of their incomes in regressive sales taxes, Democrats are pushing a sweeping tax reform agenda.

At the March 17 revenue forecast meeting, House Appropriations Committee chair Rep. Timm Ormsby (D-3, Spokane) said the revenue increase was not a reason to change course on new progressive tax legislation. “I think we have to be quite concerned about ongoing stability of our revenue system. I think that today’s forecast and other economic news will affect our discussion, but I don’t see a wholesale change in discussion [around tax legislation] in the legislature,” he said.

Wealth Tax

One of the most daring pieces of progressive legislation is the wealth tax bill (HB 1406). Sponsored by House Finance Committee chair Rep. Noel Frame (D-36, Seattle), the bill proposes a 1 percent tax on worldwide “intangible financial assets of more than $1 billion.” Intangible assets include cash, stocks, bonds, pension funds and ownership in revenue-generating partnerships such as businesses. (In contrast, tangible and intangible personal property includes things like as homes, farm equipment and federal and state bonds.) The bill is currently in the house finance committee, where it is awaiting an executive session.

The Department of Revenue estimates the tax will generate an additional $2.5 billion in annual revenue for the state.

Rep. Frame surmises Bezos is already claiming residency in a different state.

One of the main critiques of the bill, along with other bills aimed at taxing the rich, is that people like Jeff Bezos or Bill Gates  could just leave the state and live elsewhere. Rep. Frame said she is not worried about this. Frame told GeekWire in February that based on the DOR revenue predictions, she believes Bezos is already claiming residency in a different state. As for Gates, whose father campaigned for an income tax a decade ago, Frame believes he is too invested in his home state to leave.

Carbon Tax

The legislature is working on several environmental bills this session, including two bills aimed at curbing carbon emissions and greenhouse gases. The Senate Ways and Means committee currently has SB 5126 scheduled for executive committee hearings, while SB 5373 remains in the Environment, Energy & Technology committee waiting for an executive session.

Continue reading “Democrats in Olympia Pursue Sweeping Agenda to Reverse Regressive Tax Structure”

Ballot Measure Would Reinstate Sweeps, Harrell Joins Mayor’s Race, and Republicans Hedge Bets on Capital Gains

The look on mayoral candidate Bruce Harrell’s face when KOMO TV’s Jonathan Choe asked how he felt about Black-on-Asian crime, given that “you’re biracial, your mother is Japanese American and your dad’s Black”

1. After months of will-he-won’t-he speculation, three-term former city council member Bruce Harrell announced Tuesday that he’s running for mayor. As a well-known political figure who will likely have support from the Seattle business community, Harrell joins the ranks of instant frontrunners in the race, which also includes current city council president Lorena González, Chief Seattle Club director Colleen Echohawk, South East Effective Development director Lance Randall, and city council aide Andrew Grant Houston.

At a press conference outside Garfield High School, his alma mater, Harrell said he would seek public-private partnerships to fund investments in solutions to homelessness, clean up city parks where unsheltered people have taken long-term refuge during the pandemic, and work to “reimagine” the city’s police force rather than defunding it.

In a conversation with Fizz after the announcement, Harrell said the biggest problem at city hall, Harrell said, is a “lack of relationships”—between the mayor and council, the council and departments, and with outside organizations like Seattle Public Schools.

True to his past campaigns (in addition to serving three terms on the council, Harrell ran for mayor in 2013, receiving 15 percent of the primary vote), Harrell focused on style, more than policy, in our conversation. “Quite honestly, I am attracted to a situation that requires rebuilding,” Harrell said. “It’s sort of easy to hop into a leadership position when an organization is going smoothly and is high-performing. It’s a different skill set for someone to consciously jump into a situation that is plagued with dysfunction, and that doesn’t bother me.”

But he did have a few specific policy prescriptions. He said he would work to revitalize neighborhoods including, but not limited to, downtown, by promoting not just brick and mortar businesses but partnerships between small businesses (particularly women- and minority-owned) and larger ones—a kind of “business-to-business on steroids” approach to saving local businesses. “The first thing we must learn how to do is recycle our money within the economy by making sure the relationship between small businesses and big business is intact,” Harrell said.

He also said he would propose divvying up $10 million between the seven council districts so that the council member from each geographic area could determine, through conversations in that community, what local priorities should be funded. Asked how this would differ from the ongoing participatory budgeting process, which is supposed to determine how the city will spend $30 million set aside for alternatives to policing last year, Harrell said, “I think participatory budgeting is a step in the right direction, but what it still doesn’t do, I think, is have each council member directly accountable to their particular constituents in their community.”

Harrell, who grew up in the Central District and often talks about his deep roots in Seattle, provided more details about his platform in an “open letter” Tuesday morning.

2. Another former city council member, Tim Burgess, is preparing to propose a ballot measure that would change Seattle’s constitution (known as the city charter) by directing the city’s Human Services Department to fund mental health and substance abuse disorder treatment, expand access to shelter, and “collaboratively work with other City departments to ensure that City parks, playgrounds, sports fields, public spaces and sidewalks and streets (“public spaces”) remain open and clear of unauthorized encampments.”

The proposal would mandate (but not fund) new shelter and services and reinstate sweeps, including the removal of encampments that pose a “public health or safety risk,” a term that is not defined and would be subject to interpretation.

The proposal does not appear to include a funding plan.

The charter amendment would require HSD to create a plan to provide services to people living unsheltered (along with individual written “service plans” for every person living unsheltered in the city) and would “require the cleaning and removal of unauthorized encampments in public spaces as these services are available.” In addition, any encampment that poses “a public health or safety risk may be immediately removed,” the proposed amendment says.

In plain language, the proposal would mandate (but not fund) new shelter and services and reinstate sweeps, including the removal of encampments that pose a “public health or safety risk,” a term that is not defined and would be subject to interpretation.

It also directs HSD to work with prosecutors, police, and public defenders to create new “diversion” programs for people who commit non-violent offenses; these programs would include unspecificed “treatment programs as an alternative to incarceration.”

Burgess did not respond to a request for comment.

Support PubliCola

If you’re reading this, we know you’re someone who appreciates deeply sourced breaking news, features, and analysis—along with guest columns from local opinion leaders, ongoing coverage of the kind of stories that get short shrift in mainstream media, and informed, incisive opinion writing about issues that matter.

We know there are a lot of publications competing for your dollars and attention, but PubliCola truly is different. We cover Seattle and King County on a budget that is funded entirely by reader contributions—no ads, no paywalls, ever.

Being fully independent means that we cover the stories we consider most interesting and newsworthy, based on our own news judgment and feedback from readers about what matters to them, not what advertisers or corporate funders want us to write about. It also means that we need your support. So if you get something out of this site, consider giving something back by kicking in a few dollars a month, or making a one-time contribution, to help us keep doing this work. If you prefer to Venmo or write a check, our Support page includes information about those options. Thank you for your ongoing readership and support.

To place a charter amendment on the ballot, proponents must get signatures from as many registered voters as 15 percent of the turnout in the most recent mayoral election, or about 33,000 people. After that, the city council can choose to enact the amendment, put it on the ballot, or add their own alternative to the mix. This last scenario played out in 2014, when the council proposed an alternative to a preschool initiative that opponents said gave too much power to unions. The council’s winning alternative was sponsored by Tim Burgess.

3. Despite claiming the Democrats’ capital gains tax legislation (SB-5096) would put an unconstitutional law in place, Republicans are worried that if it passes, taking the law to the Supreme Court will backfire and open the door for an income tax.

Luckily for the Republicans, moderate Democratic Senator Steve Hobbs (D-44, Lake Stevens) added an amendment to the capital gains tax during  the Senate vote that stripped the bill of its emergency clause and took out language saying that the revenue from the legislation is tied to government functions. Legislation with an emergency clause, or legislation that includes language saying it’s necessary to support the functioning of state government, can’t be overturned by voter referendum. The removal of both sections clearly signals that opponents prefer to leave the bill open to a statewide referendum, rather than battling over its legality in court. Continue reading “Ballot Measure Would Reinstate Sweeps, Harrell Joins Mayor’s Race, and Republicans Hedge Bets on Capital Gains”

House Finance Committee Hears Testimony on Historic Capital Gains Tax Legislation

By Leo Brine

On Monday morning, the House Finance Committee took up Sen. June Robinson’s (D-38, Everett) historic capital gains tax legislation, which the Democratic-controlled Senate passed two weekends ago on March 6.

During the committee meeting, tech industry lobbyists and conservatives tried to slow the bill’s momentum. Tech lobbyists said the legislation, which calls for a 7 percent tax on capital gains of more than $250,000, would cause small tech startups to flee the state. Republicans chimed in, saying the tax wouldn’t merely drive away business, but it would drive away wealthy people and even the tech industry as a whole.

Specifically, the Washington Technology Industry Association (WTIA) testified that the tax will harm small tech-startups’ ability to recruit employees because stock options (which count as capital gains) would likely be taxed when the employee sells them.

According to the WTIA, stock options are a “primary compensation strategy” for startups. By offering stock options, startups can pay their employees lower salaries while allowing them to buy shares of their employer’s company at a low fixed price. Employees can then sell their shares when the company goes public or is bought out.

Molly Jones, vice president of government affairs for WTIA, implied that tech startups would pack up and head out of Washington if the tax passed. “We are concerned that passage of the capital gains tax will further drive founders, startups, jobs and future drivers of employment and economic growth out of our state,” she said. Her association polled startup members and found, she said somewhat obliquely, that 32 percent were “evaluating whether to relocate their headquarters.” She did say specifically that over 10 percent had already begun looking outside of Washington.

Support PubliCola

If you’re reading this, we know you’re someone who appreciates deeply sourced breaking news, features, and analysis—along with guest columns from local opinion leaders, ongoing coverage of the kind of stories that get short shrift in mainstream media, and informed, incisive opinion writing about issues that matter.

We know there are a lot of publications competing for your dollars and attention, but PubliCola truly is different. We cover Seattle and King County on a budget that is funded entirely by reader contributions—no ads, no paywalls, ever.

Being fully independent means that we cover the stories we consider most interesting and newsworthy, based on our own news judgment and feedback from readers about what matters to them, not what advertisers or corporate funders want us to write about. It also means that we need your support. So if you get something out of this site, consider giving something back by kicking in a few dollars a month, or making a one-time contribution, to help us keep doing this work. If you prefer to Venmo or write a check, our Support page includes information about those options. Thank you for your ongoing readership and support.

Republicans piled on, saying the bill will drive the state’s wealthiest to uproot and live elsewhere. They also said the tax will eventually start to affect more than the minuscule 0.23 percent of Washington residents the Democrats estimate would be impacted by the tax.

Republicans also foreshadowed their strategy going forward if the Washington State Supreme Court eventually takes up the bill, by labeling it an unconstitutional “income tax” and comparing it to previously failed income and graduated income tax bills.

House Finance Committee Chair Rep. Noel Frame (D-36, Seattle), who told PubliCola last week that the bill is a priority, kept the discussion moving; 100 people signed up to testify, though only 28 spoke. Nearly 4,000 people signed their names into the legislative record, with more than half, 2,380, signing in support.

One Seattle tech worker, Kevin Litwack, who has received stock options in the past, contradicted the spokespeople for his industry by testifying in support of the bill. “Of course, the tech industry pays well,” he said, “but we don’t need a vast fortune.” Litwack said his peers who view taxes as an obstacle to amassing huge amounts of wealth may “take their money and run,” but “even more will come to replace them, drawn by the values of community and shared responsibility that our state embodies. We, not those purely chasing wealth, are the ones you should want here to build Washington’s future.”

None of the Democratic legislators on the committee spoke to the removal of an emergency clause from the bill that would have put the tax in place immediately and protected the bill from voter referendum. Moderate Sen. Steve Hobbs (D-44, Lake Stevens) sponsored and passed an amendment on the Senate side that removed the clause, irking progressives such as Seattle State Sen. Joe Nguyen (D-34, Seattle).

The bill will head to a finance committee executive session for a vote “soon,” Rep. Frame’s office told PubliCola. The Democrats have an 11-6 majority on the committee. From there it would go to the House floor, where the Democrats are also in control.

Democratic State Senate Sends Capital Gains Tax to House

State Sen. June Robinson (D-38, Everett)

by Leo Brine

For the first time in Washington state history, state legislators had a floor vote on a long-proposed capital gains tax. Even more novel: They passed it.

As expected, on Saturday, March 6, the Senate Democrats, led by Sen. June Robinson (D-38, Everett) pushed SB 5096 through the senate. The bill passed 25 to 24 with most of the Democratic majority, including all of Seattle’s delegation, voting for it. The entire Republican caucus, along with moderate Democratic Senators Steve Hobbs (D-44, Lake Stevens), Mark Mullet (D-5, Issaquah), Annette Cleveland (D-49, Vancouver) and Tim Sheldon (D-35, Potlatch), voted against the bill. A capital gains tax has been part of Governor Jay Inslee’s biennial budget proposals since 2014 and has appeared in every biennial budget proposal since.

The bill proposes a 7 percent tax on capital gains—profits from the sale of stocks, bonds and other long-term assets—over $250,000; the Washington State Department of Revenue estimates that fewer than 20,000 people statewide will be subject to the tax. The bill would take effect in 2022 and an amendment adopted Saturday requires the threshold amount to be adjusted for inflation annually.

The tax excludes capital gains from the sale of real estate, farming and ranching livestock, certain agricultural land sales, timber and timberlands and retirement accounts.

After debating 19 amendments, the senate adopted three, including one that irks progressives; the amendment, inserted in the bill by centrist Sen. Steve Hobbs, struck down the emergency clause that would have protected the bill against a voter referendum.

The other two amendments were proposed by bill sponsor Robinson and another by Sen. Marko Liias (D-21, Lynnwood), respectively.

At most 18,000 people or, roughly 0.24 percent of Washingtonians, will have to pay this tax.

Robinson’s amendment directs the first $350 million collected per fiscal year from the tax to go into the state’s Education Legacy Trust account with the following $100 million going into the state’s general fund. Any more collected would go into a “Taxpayer Relief Account,” which will fund tax breaks for low-income Washingtonians.

Democrats are using the revenue from the capital gains tax to fund another bill the Democratic senate recently passed, a child care bill aimed at expanding affordable child care and early childhood development programs in the state. Democrats say the pandemic has illuminated and exacerbated the issue of unaffordable child care.

That’s certainly good scripting from the Democrats, especially if the legislation goes to a referendum. And there’s no question the pandemic has dramatized inequities in child care. But the pandemic has highlighted all kinds of systemic inequities.

Sen. Liias’ amendment stops people from being taxed twice on real estate sales. Washington’s real estate excise tax (REET) taxes the sale of all real property. To prevent the taxes from stacking, the amendment specifies transactions subject to REET would not also be subject to the capital gains tax.

The most significant amendment, however, was Hobbs’ amendment to strip the emergency clause out of the bill. Hobbs, a moderate Democrat who emerged a decade ago as a sometimes GOP ally during the Republicans’ successful efforts to wrest control from the majority Democrats, said there was no need for an emergency clause; the clause would have put the tax into effect immediately.

There was no floor debate over Hobbs’ amendment. Continue reading “Democratic State Senate Sends Capital Gains Tax to House”

Capital Gains Tax, Stalled in Previous Sessions, Moves Forward

By Shauna Sowersby

As another major cutoff date in the Washington State Legislature approaches, the once-controversial capital gains tax appears to have more momentum this year than it has since the idea was introduced nearly a decade ago. 

The bill, which is headed for a likely Senate vote today, would impose a 7 percent tax on capital gains—profits on the sale of assets such as stocks—over $250,000.

Legislators have until March 9 to pass the proposed capital gains legislation out of the Senate where it was originally introduced. A variety of factors have changed the prospects for a capital gains tax since similar  measures were initially floated in 2015.

The most obvious factor: the global COVID-19 pandemic.

Senate Majority Leader Andy Billig (D-3, Spokane), tacking to Democrats’ agenda, told PubliCola the bill has more momentum this year than he has seen in previous years for two reasons: uneven economic recovery and a child care crisis that has been “revealed and exacerbated” by the pandemic.

In order to deal with those issues, Billig said, legislators have two goals in mind. First make the tax system more fair. And second: “increase support for families and workers with child care expenses.”

Each year, the first $350 million in revenues from the tax would go into the Education Legacy Trust Account, which would help support schools and access to education. The rest of the anticipated revenue would be put into a new Taxpayer Relief Account. 

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Being fully independent means that we cover the stories we consider most interesting and newsworthy, based on our own news judgment and feedback from readers about what matters to them, not what advertisers or corporate funders want us to write about. It also means that we need your support. So if you get something out of this site, consider giving something back by kicking in a few dollars a month, or making a one-time contribution, to help us keep doing this work. If you prefer to Venmo or write a check, our Support page includes information about those options. Thank you for your ongoing readership and support.

An updated fiscal note issued by the Office of Financial Management reported that only about 8,000 taxpayers would pay capital gains taxes. Those who would owe the tax would have their first taxes due in 2023, producing estimated revenues of more than $522 million, with revenues expected to climb to more than $609 million by 2027.  

There could be other reasons the bill has more support now than in the past. 

A staffer for the Senate Democrats believes there’s been a shift in narrative. The pandemic has laid bare the class divide in the state, the Democratic source said, and Washington state residents have begun to realize the upside-down tax structure is unfair for the working and middle class.

Small business owners are speaking up. During a press conference earlier in the week, Karla Esquivel, owner of the Andaluz boutique in Columbia City, added that the tax would help customers because fixing the regressive tax code would allow them to ultimately have more spending money, which in turn would be beneficial to local businesses.

Another reason the bill actually has a chance to pass the Senate—historically, the place where it hits the skids—is because Democrats have control of the chamber, which was not the case until 2017. Moreover, in the past, some Democrats such as Sen. Steve Hobbs (D-44, Lake Stevens) have been against the capital gains tax. The balance appears to have shifted somewhat, although not entirely. With the debate front and center, some of those Democrats who still find themselves on the fence may have a harder time avoiding the issue.
Continue reading “Capital Gains Tax, Stalled in Previous Sessions, Moves Forward”