State Democrats unveil targeted tax breaks, but say broad relief isn’t sustainable

Feb 24, 2022, 10:05 AM | Updated: 12:43 pm
Washington state legislature, redistricting commission, legislative session, redistricting, tax rel...
(AP Photo/Ted S. Warren, File)
(AP Photo/Ted S. Warren, File)

When Democrats in the state House and Senate released their supplemental budget proposals this week with nearly $6 billion in additional spending — and on the heels of yet another better-than-expected revenue forecast — one issue floated to the top for Republicans.

Gov. Inslee lays out his $62 billion supplemental budget proposal for 2022

“There’s no tax relief in this budget,” said Republican state Senator Lynda Wilson.

“We have inflation that’s at a 40-year high, the cost of everything is high,” she continued. “It’s creating financial issues for all of our people in Washington. Everything, the cost of gas, and food, and housing and electricity are up. There was $15 billion in revenue surplus and they couldn’t find a way to put substantial and sustainable tax breaks in that bill.”

In announcing the Senate Democrats’ proposed two-year supplemental spending plan, lead budget writer Christine Rolfes also offered hope.

“Given the unanticipated size of the positive revenue forecast last week, I expect we’ll continue to discuss size and scope of potential tax and fee reductions over the next few weeks,” she predicted.

Those potential tax and fee reductions materialized Wednesday, when Senate Democrats revealed a trio of proposals that Rolfe described as “fresh and exciting.”

“The first was a bill that’s been kicked around Olympia for quite some time, which is a tax credit increase for very small businesses,” she explained. “So for mom-and-pops and entrepreneurs, but it’s an extended tax deduction for B&O taxes.”

She says the tax credit should mean that roughly 70% of the state’s smallest businesses would pay reduced or no B&O taxes this year.

The next two proposals fall in a different category.

“The second one that is, I think, really fun,” Rolfes said. “We put $20 million into an account that we have called the ‘fair account,’ which is for state and county fairs around the state, and that is for the purpose of reimbursing fairs through a grant process if they don’t charge admission this summer. So free fairs is what we are going to do.”

“The thinking behind that is we have revenue in the budget from a good economy,” she continued. “And the thinking behind it is to encourage people to get out into their communities, and to visit other communities around the state, and enjoy fairs because fairs are fun, they showcase different regions, they’re fun for kids and educational, and a lot of adults participate in fairs. So it just was intended to cheer people up and get people out after two years of fighting about the pandemic.”

The third program also encourages people take advantage of the great outdoors in Washington by visiting state parks for free.

“The proposal is to backfill state parks and the other public land agencies for the revenue that they get from the Discover Pass, which is essentially a parking pass for visiting the state parks,” Rolfes described. “The idea there is we backfill to the revenue that they would get so that we could issue the Discover Pass for free for one year.”

“There are details to be worked out on that,” she added. “But the idea is it’s great marketing for people. It’s a way to tell people, look at what your tax dollars support, look at the resources that we have in the state, look at the special places and go out and visit them.”

While more targeted tax and fee reductions are possible by the time a budget is finalized, Rolfes says people should not expect that to come in the form of broad tax relief.

“It’s not sustainable in our budget, and we’ve heard that loud and clear,” she clarified. “I’ve been looking at different options, but it’s really important going forward in times of financial uncertainty, It’s really important to have reserves — if we did something broad, we would blow through the state’s reserves.”

Washington Democrats unveil expansive $16 billion transportation package

As for how a state with a surplus of around $15 billion can be considered to be in a time of financial uncertainty, Rolfes says the explanation is relatively simple.

“We’re going into a period of inflation and running the state government will be more expensive,” she explained. “If we’re not strategic about saving for that, we’ll end up in a recessionary situation where we’re cutting things again.”

“I was in the Legislature during the recession and that’s just not a place we want to be — we want the public to know that our government is sustainable,” she added.

The House’s proposed budget also includes a three-day sales tax holiday over Labor Day Weekend on purchases under $1,000 to help stimulate the economy. Rolfes didn’t speak at length on the idea, but did credit it as a creative proposal.

“It’s worth discussing,” she opined.

Part of the issue with these kinds of proposals are the unintended consequences, with Rolfes pointing to her own separate idea of creating a sales tax holiday for restaurants.

“I was thinking it would be fun to have a sales tax holiday for restaurants and bars, but when I mentioned that to somebody who owns a restaurant, they said, ‘Oh my gosh, what a headache — I have all of my sales taxes on my computers programmed, and I’d have to pay my accountant to reprogram it all for one weekend,’” she explained.

The bill for the sales tax holiday is scheduled for a public hearing Thursday at 1:30 p.m. in the House Appropriations Committee.

Before the end of session, both chambers must agree on a single final budget to send to Gov. Jay Inslee.

You can see more details on the Legislature’s proposed budgets here.

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State Democrats unveil targeted tax breaks, but say broad relief isn’t sustainable