Establishing Fair Revenue
Adequate and Fair Revenue and Budget

Promote a balanced, fair, adequate, and flexible tax structure as well as the establishment of a public bank.


Issue Team Chair: Cynthia Stewart, cstewart@lwvwa.org
Public Bank Issue Co-Chair: Stoney Bird, sbird@lwvwa.org, 360-920-8357
Public Bank Issue Co-Chair: Ruth Fruland, rfruland@lwvwa.org, 206-850-7972
 DOWNLOAD the Revenue Issue Paper
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Right Now in Adequate and Fair Revenue and Budget

The first year of each biennium, the Legislature adopts a new biennial budget. It also makes changes to the current biennium because of new circumstances. This year, those circumstances include COVID-19 and its impacts on the economy of the state. In each case, the Legislature begins with consideration of the governor’s proposal and then moves on to developing its own packages. Public hearings have been held on the governor’s proposed operating and capital budgets and the new proposed capital gains tax, which would help support the proposed expenditures.

The House and Senate budgets were released last week. The revenue forecast of March 17 was the data that both chambers had been waiting for to finalize their proposals. That forecast projects revenue at $1.2 billion beyond what was anticipated at the last projection in November 2020. Many are now saying that the state will be flush and will not need new revenue. However, the Washington State Budget and Policy Center makes a very good argument for why a shift in the tax structure is necessary regardless of the unanticipated revenue. Additionally, it must be pointed out that there are long-standing needs that were not ever met by the pre-COVID budgets, and when shifting the structure, new revenue can be collected to address some of those. See the Washington Budget and Policy Center’s comments.

Both budgets include the capital gains tax and funding for the working families tax exemption. The current package of taxes intended to shift the imbalance in the current tax structure toward greater equity in combination include the capital gains tax, the wealth tax, the estate tax changes and the working families tax exemption.

Most budget details will be handled by individual Issue Chairs on their Issue Web Pages.

Budget deliberations will be the primary focus of the remainder of the session, even though there are still some policy bills that may be considered. It is important to recognize that deliberations are not always scheduled with enough time to prepare and keeping up with the changes is a challenge.


Bills That Need Special Attention

Capital Gains Tax

Although the Senate Capital Gains tax bill has not yet been passed in the House, it appears to be one of the revenues assumed in the House budget. It has not yet been scheduled for executive session.

SB 5096 would only affect people at the top 1-2% of the income spectrum and would provide funding to offset inequity for those at the lowest end of the income spectrum, who currently pay almost six times as much of their income in state and local taxes, through the working families tax exemption via the taxpayer relief fund.

At present, the bill contains the following provisions:

Capital Gains Tax – E2SSB 5096

Threshold $250,000
Rate  7%
Starts 1/1/2022
Exclusions
  • Real Estate
  • Retirement Savings Account
  • Livestock
  • Agricultural land
  • Business property
  • Timber/timberland
  • Excise tax paid to another jurisdiction
Uses
  • First $350 million to the Education Legacy Trust Account
  • Next $100 million to General Fund
  • Balance to the Taxpayer Relief Fund
How much it would generate Approx. $1.3 billion, 2023 -on


Working Families Tax Exemption

This bill would provide a remittance to families qualified because they are eligible for the federal earned income tax credit. This is the other end of creating additional balance in the state tax structure. Details are below, HB 1297. It has passed the House 94-2 and has passed both the Senate Human Services, Reentry and Rehabilitation Committee and the Senate Ways and Means Committee. It is now in the Senate Rules Committee.



Public Bank

The public bank, SB 5188, passed the Senate on March 5 as a substitute bill. It passed the House Consumer Protection and Business Committee on March 25 and the House Appropriations Committee on March 31. Funding for implementation of this bill is included in the Senate operating budget proposal. League will be asking the House to include funding in the final budget as the Senate has proposed.


Other tax measures that could be adopted are described in the preliminary report from the tax structure work group, which analyzes various tax options; but there is no recommendation at this time from this group. However, it adds several types of taxes to the mix for consideration next year that have not previously been on the table before, such as value-added tax, margins tax, corporate net receipts tax, bordering states tax and more. Most of these will not be in proposed legislation this year but the report is worth reading.


Additional tax issues that have already emerged include a number of bills that would give local jurisdictions additional options and flexibility among funding sources for affordable housing, shelters, parks and other needs.

Bills the League Supports


HB 1002, Relating to providing a business and occupation tax exemption for qualifying grants related to COVID-19 would exempt income from federal COVID relief grants from the state Business and Occupation tax. 


 Status Although co-sponsored by 33 Representatives, this bill has not yet had a public hearing. This could be considered necessary to implement the budget and has not yet died.


HB 1069
, Concerning local government fiscal flexibility would add housing and homelessness to the permissible uses for a portion or all of a variety of local option taxes (criminal justice sales tax, criminal justice assistance account, lodging tax, REET, property tax levies, utility liens. 


 Status This bill passed the House of Representatives and has passed the Senate Housing and Local Government Committee. It is now in the Senate Rules Committee.



HB 1080/SB 5083 Concerning the capital budget. This is the Governor’s proposed capital budget. It makes historic investments in housing.

 

 Status HB 1080 has been reissued as a substitute, constituting the House proposed capital budget. It passed the House on April 2 and is in the Senate “held at the desk.” SB 5083 was reissued as the Senate capital budget proposal. It passed the Senate and has been referred to the House, where it has been referred to the Rules Committee.



SB 5091/HB 1093  Making 2019-2021 fiscal biennium second supplemental operating appropriations. This is the Governor’s proposed supplemental budget. 


 Status SB 5091 had a public hearing on Jan. 12 and HB 1093 had a public hearing on Jan. 14 but neither has yet been considered in executive session and both will likely be replaced by legislative proposals.



HB 1094
/SB 5092  Making 2021-2023 fiscal biennium operating appropriations. This is the Governor’s proposed budget for the new biennium. 


 Status HB 1094 was reissued as a substitute, constituting the House operating budget proposal. It passed the House Appropriations Committee on March 29 and is now in the House Rules Committee. A proposed substitute to SB 5092 (the Senate proposed budget) passed the Senate on April 1 and passed the House on April 3. These bills will go through the reconciliation process in the next two weeks.


HB 1277
 Providing for an additional revenue source for eviction prevention and housing stability services would establish a $100 surcharge on the document recording fee to support a new Eviction Prevention Rental Assistance Program. The nexus between document recording and the new program is that many of the documents that are recorded and subject to the fee are real estate transactions.


 Status HB 1277 passed the House on March 28 and is scheduled for a public hearing in the Senate Ways and Means Committee at 8:00 a.m. on April 10. 



HB 1297 Concerning working families tax exemption. If approved, this bill would remit payments to families who qualify by eligibility for the federal income tax category of earned income tax credit. Combined with a new progressive tax, this would help to move Washington State’s tax structure toward greater equity. 


 Status HB 1297 passed the House and passed both the Senate Human Services, Reentry and Rehabilitation Committee and the Senate Ways and Means Committee and is now in the Senate Rules Committee. It is considered necessary to implement the budget and will be further considered over the next two weeks.


HB 1332
Concerning property tax deferral during the COVID-19 pandemic, would suspend interest and penalties on nonpayment of property tax during the Coronavirus Disease 2019 (COVID-19) state of emergency and for months thereafter defer April 2021 property tax payments, and establish a COVID-19 property tax deferral loan account from which cities and counties may apply for loans.


 Status HB 1332 passed the House and passed the Senate Ways and Means Committee on March 27. It is now in the Senate Rules Committee.


HB 1362: Modifying the annual regular property tax revenue growth limit, would rescind the current limit on total property tax that can be collected (except for that on new development) of one percent per year and instead link the cap on property tax growth to the CPI.  This is badly needed by state and local governments because the property tax, one of the primary revenue sources of government at all levels, has not kept up with cost inflation.


 Status This bill had a public hearing in the House Finance Committee on March 18 but has not yet been scheduled for executive session.


HB 1406/5426: Improving the equity of Washington state's tax code by creating the Washington state wealth tax and taxing extraordinary financial intangible assets. This bill would apply a one percent tax on intangible assets exceeding $1 billion (only approximately 100 people in Washington State would be affected).


 Status HB 1406 passed the House Finance Committee on March 31. It is now in the House Appropriations Committee. SB 5426 was referred to the Senate Ways and Means Committee but has not yet had a public hearing. Both bills are considered necessary to implement the budget.


SB 5096: Capital gains tax, concerning an excise tax on gains from the sale or exchange of certain capital assets


 Status This bill passed the Senate on March 6 and has had a public hearing in the House Finance Committee. However, it has not yet been scheduled for executive session. It is considered necessary to implement the budget.  It was included as a revenue assumption and backing for the working families tax exemption in both proposed operating budgets.



SB 5138: Eliminating a business and occupation tax deduction for financial institutions to fund affordable housing. Gains to the state treasury as a result of this elimination would be deposited into the Housing Trust Fund. 


 Status This bill had a public hearing on Jan. 21 in the Senate Business, Financial Services and Trade Committee on Jan. 21 but has not yet been scheduled for executive session. It may be considered necessary to implement the budget.



SB 5188: Concerning the creation of the Washington state public bank. This bill would establish a public financial cooperative (it was renamed from its previous title of public bank) that would provide opportunities for state, local, and tribal government entities to competitively finance a broad array of public infrastructure and economic development projects, including housing, at competitive rates with low administrative costs and fill gaps that the current banking system cannot or will not fill.


 Status This bill passed the Senate and passed the House Consumer Protection and Business and the Appropriations Committees and is now in the House Rules Committee.



SB 5220: Concerning the taxation of salmon recovery grants, would support grants related to salmon recovery by redefining how they are taxed.


 Status This bill passed the Senate on March 4. It passed the House on April 9. No amendments were made in the House so it will likely go to the Governor for signature next week.



HB 1213/SB 5237Expanding accessible, affordable child care and early childhood development programs, would establish a new account for child care and early learning, increase eligibility and reduce co-payments in the working connections child care program, expand eligibility in the early childhood education and assistance program, and more. 


 Status HB 1213 passed the House as a substitute on March 9 and passed  the Senate Early Learning and K-12 Education Committee on March 24. It has been referred to the Senate Ways and Means Committee. SB 5237 passed the Senate and passed the House on April 8. Since it was amended in the House, it will go through the reconciliation process in the next two weeks.



HB 1460: Closing the digital divide by establishing excise taxes on telecommunications services to fund the expansion of the universal service programs in Washington.  


 Status This bill passed both the House Finance Committee as a substitute and the Appropriations Committee. It is now in the House Rules Committee. It may be considered necessary to implement the budget.


HB 1465: Making the estate tax more progressive by exempting small estates, reducing estate taxes on medium estates, increasing the estate tax on larger estates, and addressing equity in home ownership and homelessness. 


 Status This bill had a public hearing in the House Finance Committee on Feb. 9 but has not yet been scheduled for executive session. This bill is considered necessary to implement the budget, though it is unlikely to pass this session.



HB 1496Creating a more progressive tax system in Washington by enacting an excise tax on sales and extraordinary profits of high valued assets.  This capital gains tax would help to support the proposed Fair Start for Kids bill. 


 Status This bill had a public hearing in the House Finance Committee on Feb.11 but has not yet been scheduled for executive session. This bill is considered necessary to implement the budget but may be supplanted by SB 5096, which is moving through the legislative process.


Bills the League Supports That Have Passed


HB 1095: Concerning the taxation of governmental financial assistance programs would exempt grants associated with a federal emergency from B&O and other taxes. This bill passed as a substitute bill on the floor of the House of Representatives with a 98-0 vote. It has passed the Senate on a vote of 49-0. It was signed by the Governor.


Bills the League Supports That Missed the Cutoff


HB 1025/SB 5006: Relating to local parks funding options, would give local jurisdictions the option of levying a 1/10 of 1% sales tax if approved by the voters to support park development commensurate with population increases and address the revenue shortfalls these jurisdictions have experienced because of the COVID pandemic. Both bills died at the cut-off for moving out of the fiscal committees.


SB 5216: Concerning additional transparency and accountability for tax preferences, would require itemizing and accounting of tax preferences, thereby providing greater transparency. This bill was referred to the Senate Ways and Means Committee but did not have a public hearing. This bill did not pass from the committee by the cut-off.


HB 1035Providing local governments with options to grant rent relief and preserve affordable housing in their communities. This bill would provide a property tax exemption for development of qualifying affordable housing units.  It puts a number of conditions on the qualifications. This bill had a public hearing on Feb. 8 in the House Finance Committee and executive session on Feb. 18 but no action was taken. It was not passed out of committee by the cut-off so has died for this year.


Bills the League Is Watching


HB 1111Concerning investment income tax deductions. This bill needs additional analysis. It had a public hearing on March 16 in the House Finance Committee but has not yet been scheduled for public hearing.


HB 1081/SB 5084Concerning state general obligation bonds and related accounts. This bill sets the bonding authority for the biennium and will be modified once the capital budgets have been approved. HB 1081 passed the House Capital Budget Committee on March 31 and is now in the House Rules Committee. SB 5084 passed the Senate Ways and Means Committee on March 27 and is now in the Senate Rules Committee.



Bills the League Opposes


None identified at this time.

How To Be Involved


  • Let your local legislators know you support the capital gains tax.
  • Learn about public bank through a workshop offered by the LWVWA Public Bank Committee and let your local legislators know you support a public bank.
  • Reply to Action Alerts under these issues in the weekly legislative newsletter.
  • Subscribe to the LWVWA Legislative newsletter so that you receive it weekly on Sundays during the session starting Jan. 10, 2021 and ending with a wrap up in May 2021.
  • Contact Cynthia Stewart, cstewart@lwvwa.org, to be included in a periodic group email that provides additional information.

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