New tax to pay for wildfires?

New tax to pay for wildfires?
A Senate bill would place a gross receipts surcharge on insurance companies to generate new revenue for wildfire suppression and forest health projects. Photo:

Since 2009, the state Department of Natural Resources (DNR) has spent more than $700 million fighting wildfires. Sen. Kevin Van De Wege (D-24) and six other Democrats have introduced SB 5996, which would create a gross receipts surcharge imposed on insurance companies to generate hundreds of millions in additional revenue that would go to wildfire-related efforts. However, companies would be permitted to pass the cost of the tax on to customers.

The bill received a “do pass” recommendation from the Senate Ways and Means Committee on April 19 despite concerns from both legislators and the insurance companies about effects to the industry.

Prior to the committee vote, Sen. John Braun (R-20) told colleagues that “given the additional funding we have from existing taxes… we can find a way in there to make these very important – I would say even critical – investments in forest health without additional taxes.”

Under the original version of the bill, a two percent tax on insurance premiums would have been increased to 2.52 percent which would generate an additional $338 million through 2025. Before approving the bill, the Senate Ways and Means Committee removed the tax increase and replaced it with a gross receipts surcharge, though medical professional liability businesses would be exempt from the surcharge. The revenue would be placed into the Wildfire Prevention and Suppression account. The bill also explicitly allows insurance companies to recover the costs of the new surcharge from customers.

The bill prioritizes where the money would go, placing emergency firefighting at the top followed by fire suppression activities; forest health work would be the lowest priority. A proposed amendment would have altered the priority list to place forest health work at the top, but was rejected.

“I think these investments are wise but that we should be investing in the long-term prevention here (and) therefore eventually reduce the need for the short-term costs of fighting fires,” Braun said, speaking in support of the amendment.

One amendment introduced by Sen. Guy Palumbo (D-1) would have specified that forest health activities receive 20 percent of the revenue through 2033. Although he ultimately withdrew the amendment, he added that previous wildfire and forest health bills approved by the legislature still have not been funded.

“If we’re going to do a new tax that’s dedicated for fire suppression…we should ensure that some of that money actually goes to forest health, to do the bills that are already on the books,” he said.

Aside from funding priorities, Braun also argued that the surcharge could have repercussions for the insurance industry. “Not only does it lay a new tax on the average citizen through their home insurance or their car insurance, it also puts at risk some very key employers in our state…that operate around the country and will be subject to retaliatory taxes as a result of this bill.”

He added that the bill could put in “jeopardy hundreds maybe thousands of jobs in Washington State.”

Although he voted to advance the bill, Sen. Reuven Carlyle (D-36) told colleagues that “it is important that we understand the implications for the out-of-state taxation issues. I just want to make sure that as we send this to the floor, that there is additional effort to really understand the potential implications.”

The bill has not yet been assigned to another committee.


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