Lawmakers — and 8,000 others — await a capital gains tax bill

2021 Washington Legislature, Day 52 of 105

Everett Herald political reporter Jerry Cornfield: jcornfield@heraldnet.com | @dospueblos

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OLYMPIA, March 3, 2021 — Good morning.

As we near the halfway point of an unprecedented virtual legislative session, we’re keeping a close watch on the Senate to see if majority Democrats bring their capital gains tax up for a vote anytime soon.

Democrats are still perfecting the tax, which would, according to the latest fiscal analysis, be paid by roughly 8,000 people. Expect amendments on the floor to a measure already slimmed down from its original version.

“It could be in the coming days. It could be longer,” Democratic Sen. Marko Liias of Lynnwood told reporters Tuesday. “We want to be sure we get the policy right. This would be a big step forward for fixing our broken tax system.”

Asked if the caucus has the votes to pass it, he said, “I don’t think there is any suspense.” In other words, yes, they do. Democrats have a 28-21 majority in the Senate.

Because it is a revenue bill, he said, it is not subject to the March 9 deadline for each chamber to advance bills to the opposite chamber.

Democrats in the House, where their majority over Republicans is 57-41, are anxious to see it sent over. The Dems are unswayed by arguments that the tax is unnecessary because of a coming flood of federal aid and an unanticipated surge in tax collections.

“Now is the exact right time,” said Rep. Noel Frame of Seattle at a separate news conference Tuesday. Those federal dollars will provide a fiscal bridge until revenues from the capital gains tax roll in, she said. When the federal funds are gone, the need will still be there, she said.

As for that massive COVID-19 relief package making its way through Congress: It contains $635 million for child care assistance in Washington — which is more than what the capital gains tax is projected to generate in the next biennium.

The state is also in line to receive $4.2 billion, a sum that the governor and lawmakers will be able to spend pretty much as they wish until it runs out.

That’s because Congress isn’t imposing tight restrictions on how the dollars are used, nor is it setting a hard deadline to spend them. Language in the federal bill is deliberately broad. It says funds can be used to cover costs and negative economic impacts of the pandemic, and to “replace revenue that was lost, delayed, or decreased … as a result of such emergency.”

Translated, it means federal dollars can be used to mop up budgetary red ink, to supplant the funding of existing programs or be set aside for use in 2022 and beyond.

Mic drop

A shout out to Seattle Times reporter Joseph O’Sullivan for his story on the chronically underfunded public health system. It arrives as Inslee and majority Democrats eye other new taxes to provide needed funding for the system. The challenge is finding one they can pass and which voters won’t repeal.

O’Sullivan asked Inslee at a news conference last week if he was “committed to signing a budget that provides substantial increases to public health,” even if none of the Democrats’ proposals survive. The response was brief and a tad dismissive.

“Yes, I’m confident we’re going to have increases for public health,” he said. “One way or another I am confident that we will achieve that for obvious reasons.”

Hot topics

Leaders of the embattled Employment Security Department and the Office of the State Auditor will go in front of a state Senate panel Thursday morning to discuss the former’s handling of unemployment claims and the latter’s response to a recent data breach.

The 8 a.m. work session will occur in the Labor, Commerce & Tribal Affairs Committee.

At the same time, on a different livestream, a carbon fee bill will get its first public airing in the Senate Environment, Energy and Technology Committee.

Senate Bill 5373, crafted by Democratic Sen. Liz Lovelett of Anacortes, would impose a fee of $25 per metric ton of carbon emissions and use the money to combat climate change through emission reduction projects. Under the bill, nearly $5 billion in bonds would be issued and paid off with carbon fee collections.

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