By Clara Coyote

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.