A Douglas County Judge ruled on Tuesday that the statewide capital gains tax, which progressive legislators passed last year, is unconstitutional. The ruling concerned two lawsuits that were consolidated into one—one by the conservative Freedom Foundation, the other by Republican former state attorney general Rob McKenna.
The decision marks a win for Washington’s ultra-wealthy, like Steve Gordon of Gordon Trucking and hedge fund manager Brian Heywood, who each contributed $20,000 to an initiative campaign to repeal the tax; former Starbucks CEO Howard Beher, contributed $5,000. Unsurprisingly, the Attorney General Bob Ferguson, a Democrat, said he would appeal the decision to the state Supreme Court.
Douglas County Superior Court Judge Brian Huber wrote in his ruling that the 7 percent tax on the sale of intangible financial assets, such as stocks and bonds, violates Washington’s constitution’s “uniformity clause” because it imposes “zero tax on capital gains below that $250,000 threshold.” The uniformity clause prohibits the state from taxing different property at different rates.
Democrats have argued that the tax is constitutional because it doesn’t assess property, but rather, the sale of property, making it an excise tax, not an income tax. Huber rejected that argument, saying the plaintiffs “properly characterized [the capital gains tax] as an income tax” in their lawsuit. And since Washington considers income to be a form of property, any income tax would need to meet the state constitution’s uniformity clause.
Washington is one of the few state’s in the country without an income tax. The state instead relies heavily on business and sales taxes to generate revenue. Democratic lawmakers have frequently criticized this model as regressive, because it means that people who earn less pay a larger percentage of their income in taxes than wealthy people pay. Democrats saw the capital gains tax as a way to reverse this regressive .
Following the judge’s decision, State Attorney General Bob Ferguson said if the tax were ultimately struck down, the state could lose hundreds of millions in funding for childcare programs, early learning, and school construction projects. “Consequently, we will continue defending this law enacted by the peoples’ representatives in the legislature. All the parties recognize this case will ultimately be decided by the State Supreme Court. We respectfully disagree with this ruling, and we will appeal.”
Following up on last year’s capital gains tax—a major legislative win for progressives during the 2021 session that puts a 7 percent tax on profits greater than $250,000 from the sales of assets, such as stocks and bonds—state Rep. Noel Frame (D-36) has her eye on comprehensive structural change for Washington’s upside-down tax code. The poorest fifth of Washington state residents pay, on average, 16.8 percent of their incomes in state and local taxes while the richest 1 percent of Washingtonians pay an average of just 2.4 percent.
A key piece of that larger agenda for Frame, the House finance chair, is a wealth tax; she introduced a version last year, HB 1406, which the state department of revenue estimated would bring in $2.5 billion a year. Frame passed the bill out of her Finance Committee last year before it stalled in House Appropriations. Frame said she sees the senate version, SB 5426, as this year’s vehicle, and hopes the Senate Ways and Means Committee will hold a hearing on the legislation.
Additionally, Rep. Frame said there will be smaller but meaningful bills during this year’s short (60-day) legislative session to clarify the implementation of existing legislation—for example, refining the 2023 rollout of the Working Families Tax Credit, a program Democrats passed last year, that will provide payments ranging from $300 to $1,200 to low-to-moderate-income people. Frame’s committee may also consider progressive modifications to the existing estate tax, by lowering taxes on small and medium estates while increasing taxes on the largest. This is work that first began with HB 1465, introduced (but not passed) last year.
Frame said that larger, systemic reform is emerge from the work of the multi-year bipartisan Tax Structure Work Group, which Frame chairs. Frame told PubliCola that she hopes to see bills as soon as 2023 refining an anti-displacement property tax exemption proposal meant to protect housing for mid-to-low income Washingtonians. In its final draft, Frame said, the legislation will incorporate feedback from town hall meetings where participants said renters as well as homeowners should benefit from the exemption. Frame said the work group will also figure out the details of her proposed wealth tax.
Frame believes small businesses also need help. “We have the business and occupation (B&O) tax passed in the 1930s as a temporary measure that never went away,” Frame said. The B&O tax applies to all revenues a business takes in, regardless of whether a business turns a profit. “This disproportionately harms small businesses,” Frame said. “A central goal of the working group is finding a better alternative.”
Frame said she’s well aware that the progressive capital gains tax is already facing a court challenge but said she’s undeterred about moving forward with additional reforms that could draw more lawsuits. “Just because the rich and the powerful will threaten us every single time with a lawsuit doesn’t mean we shouldn’t ask them to pay their fair share,” she said.
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.
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.
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.
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 overagain.
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.
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.
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.
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.
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 $2.5 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”→
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).
The decision marks a win for Washington’s ultra-wealthy, like Steve Gordon of Gordon Trucking and hedge fund manager Brian Heywood, who each contributed $20,000 to an initiative campaign to repeal the tax; former Starbucks CEO Howard Beher, contributed $5,000. Unsurprisingly, the Attorney General Bob Ferguson, a Democrat, said he would appeal the decision to the state Supreme Court.
The capital gains tax bill (
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.
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.”
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.
