Majority digs in on new taxes as Legislature nears halfway mark of session
Tuesday marked the start of two weeks dedicated to a flurry of floor action in the state Legislature as the March 9 deadline looms to pass most bills out of their house of origin.
Democratic leaders in the House and Senate expect to act on big agenda items such as police reform and racial equity starting this week. There are also at least half a dozen or so tax proposals on the table, including the proposal for a statewide soda tax, similar to Seattle’s, to fund the health equity and public health account.
The bill faced significant opposition at its first hearing Monday from small businesses, largely in the restaurant industry, who questioned how they could afford distributors passing the cost of the 1.75 cent per ounce tax on sugary beverages containing 20 calories or more per 12 ounces, when they could barely survive as is in the wake of the pandemic.
“We have 88 employees, we’ve lost 30 of them already simply because we can’t afford to stay open,” one business owner explained to lawmakers.
“Senate Bill 5371 will add additional costs to my already elevated expenses for my business each month that I simply do not have,” said a Puget Sound area pizza restaurant owner. “After reviewing purchase orders from pre-COVID-19, I estimate that this proposal will cost $738 a month in taxes alone. My five gallon bag of concentrate will go from about $90 to $157. That’s a 57% cost increase.”
“It costs family wage jobs, and costing family wage jobs in this market, and in this environment is detrimental not just to this community, but also to the state,” said another business owner.
Voters have already had their say on such a tax, shutting it down in other cities preemptively with the passing of I-1634 in 2018. That barred individual jurisdictions from enacting any new tax on groceries on their own.
So why get behind this tax when it likely will just lead to a referendum?
“To fund public health, which we all agree is in really desperate need of a sustainable funding source,” Democratic Senator Emily Randall explained. “We will certainly continue having conversations and listening to feedback, both positive and negative.”
“What we’re hoping to do is to find a way to not just do the bare minimum, but to make some robust investments so that we can really help, not just for pandemic, but for all the important work that public health does,” Senate Majority Leader Andy Billig added.
Critics of the soda tax proposal and other tax proposals that are meant to make the state’s tax system fairer contend it actually does the opposite, and are regressive taxes that will hurt low-income communities and communities of color – the very communities democrats hope to help.
“Yes, sometimes it may seem like we’re trying to be regressive, but we’re actually not,” said Democratic Rep. and Color Caucus member Melanie Morgan.
“But we do have to remember that we saw the disparities in terms of communities of color that were affected by COVID. And we’ve been saying that for a long time, way before the pandemic even got here. But if we are truly going to be inclusive, and practice racial equity in terms of making sure that all communities get services, and resources, and vaccines properly, then everybody’s going to have to pay their fair share,” added Morgan, explaining that regressive taxes had for years been levied on the backs of communities of color and low-income communities.
“This is just not justice,” Morgan said.
“We have got to get away from this idea of either/or in terms of what we use in our budgeting or in our legislation, if we’re truly going to reach inclusion and make sure that everybody has equal access to health care, employment, et cetera,” she added. “In the state of Washington, we’re going to have to have a larger lens. And that’s going to come through an equity lens, as the House has been practicing for the last year and getting ready for legislation that ensures that communities of color are being taken care of as we’re moving forward.”
Capital gains tax
The tax proposal getting much of the attention this session is the proposed 7% tax on capital gains in SB 5096 that critics argue is an illegal income tax.
“I don’t think you’ll see that in the next day or two,” Billig said about the bill. “I think that there’s still some discussion on some final tweaks.”
One of the major criticisms about that bill is that it includes an emergency clause, even though it doesn’t actually kick in for months, should it pass. It’s a tactic that lawmakers can use to make a bill referendum proof, keeping voters from undoing it.
Billig was asked for the justification for that emergency clause during the democrats’ weekly media briefing Monday.
“We do have an emergency. We have an emergency when it comes to child care, and we have an emergency when it comes to tax fairness, and that’s the reason it’s there,” Billig responded. “I’m sure that there will be an amendment to take it off so we can have a public, open, transparent debate about it on the floor of the Senate. And then, the body representing every district of the state will make a decision.”