Tag: wealth tax

Amid Court Battle Over Capital Gains Tax, House Finance Chair Previews Future Reforms

State Rep. Noel Frame (D-36)
State Rep. Noel Frame (D-36)

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. 

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 $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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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”