Before state revenues increased unexpectedly to record levels in the latter part of 2020, it seemed the 2021 legislative session would focus on addressing a significant budget deficit. Now the discussion has shifted to the host of proposed taxes and how that squares with the need for financial relief for struggling businesses, along with exactly how much lawmakers will be able to accomplish with the session conducted remotely.
While some legislators hope to keep bill discussions narrowly fixed on COVID-19 and economic recovery for small business, almost 300 bills were introduced on Jan. 11, the first day of session.
Senate Republican Leader John Braun (R-20) said at a Bellevue Chamber of Commerce Legislative Kickoff that “we’re in a very fortunate position; our budget is largely balanced – it is balanced over the next four years.” He added that the state economic outlook is “still uncertain and, I think, fragile.”
Though state coffers bulge, the effects of Governor Jay Inslee’s COVID-19 restrictions have disproportionately affected numerous industries such as hospitality and retail.
Sen. David Frockt (D-46) said at the legislative kickoff that “we need to be more intentional” about addressing relief for those employers, adding that lawmakers are working on a variety of efforts including local economic development and tax increment financing.
Sen. Bob Hasegawa (D-11) said the pandemic exposed inequities in health, the tax code, and education. He called the session an “opportunity…to look and address these systemic problems.”
Employers that have managed to hang on up to this point are now facing a massive unemployment insurance tax rate increase that could put them out of business. Braun said he believes the legislature should provide relief to the unemployment insurance trust fund “so we don’t have a significant new tax. There are a number of things largely COVID-19-related where we can make one-time, critical investments.”
Other topics to be examined are:
- A capital gains income tax;
- A low carbon fuel standard (LCFS); the fourth since 2017;
- Legislative authority during a state of emergency; and
- Loosening COVID-19 restrictions.
While Inslee recently announced his “Healthy Washington Roadmap to Recovery, SB 5114 sponsored by Braun and Sen. Mark Mullet (D-5) would allow businesses to “immediately and safely reopen” under Phase 2 of that roadmap.
“Every legislator should have to own up as to why they’re keeping their businesses closed,” Mullet said. “I do think it’s for the legislature to have an up or down vote. If people choose to vote it down, that’s fine.”
For many legislators on both sides of the aisle, including Mullet, it’s the first they feel they’ve had a chance to weigh in on public health policy since March – an issue that inspired SJR 8201 by Republican Deputy Floor Leader Chris Gildon (R-25). The proposal would allow the legislature to call itself into a special session with a three-fifths vote, rather than a supermajority as is currently required.
SCR 8400, sponsored by Sen. Doug Ericksen (R-42), calls for a special legislative session starting Jan. 12.
Sen. Steve Bergquist (D-11) said at the legislative kickoff that “the governor has given opportunity for the (Democrat) caucus to weigh in. I think the communication has been open. He has been able to take his own route in some instances, but in the end that’s his prerogative.”
Yet Braun feels that by keeping Republicans out discussions Inslee has become “disconnected from a big part of the state, (with) tragic results for small business and the hospitality sector. This is a gigantic deal. The governor’s lost what moral authority he had, so people just aren’t listening anymore. They don’t have the luxury of a giant tech to work for in their district.”
Another topic likely to inspire strong digital debate is the host of proposed new taxes. Despite record high revenue, Inslee has proposed a capital gains income tax in his 2021-23 operating budget.
Among those opposed to it is Mullet, who said that “you can’t look at these other taxes in a vacuum. There’s a huge tax burden (already) being put on the Washington economy…we’re trying to do a transportation package this year, which is another form of tax increase. They’re not factoring in the other things they want to accomplish.”
Rep. Drew Stokesbary (R-31) said that adding a capital gains income tax is “poor budget practice,” noting that states reliant on them “have been in far dicier situations than us. We don’t need that. We can pass a budget without new taxes.”
It’s also unpopular with Washington voters; a recent Crosscut poll found only 41 percent supported a capital gains income tax.
Inslee will give his inaugural address to both chambers on Jan. 13.