Gas, B&O, Payroll and Capital Gains Tax Hikes to Minimize Deep Spending Cuts
The Democratically controlled Washington Senate over the weekend approved a $78.5 billion two-year operating budget with a 6-cent per gallon increase on the state’s gas tax. The Washington House approved a $77.8 billion operating budget Tuesday after Democrats rejected two dozen Republican amendments.
Tax increases in the Senate Democratic budget include a business and occupation tax surcharge on large business and financial institutions, a new tax on unrealized capital gains for high-wealth individuals, a new payroll tax on employers with more than $7 million in annual payroll and tripling the allowed annual growth rate on property taxes.
The two chambers now must negotiate a compromise and win approval from Governor Bob Ferguson who has expressed concern about tax increases and, in particular, threatened to veto the wealth tax.
The Washington Legislature is on a shorter schedule than Oregon lawmakers, who are conducting roadshow hearings to collect public testimony before releasing their two-year budget plan. Oregon’s final budget won’t be set until after the May revenue forecast.
On a 31-18 vote, the Washington Senate endorsed the gas tax increase effective July 1. The provision also includes a 2 percent annual inflation adjustment to the gas tax. It is part of larger set of transportation tax increases expected to generate $500 million per year from cars, boats, planes, electric bikes and ferries to complete projects underway and catch up on maintenance.
The gas tax hike was part of an overall $14.8 billion tax package, according to reporting by Jerry Cornfield ofWashington State Standard.
“We are billions of dollars behind in maintenance and preservation. We have a ferry system that is in shambles. We have citizens dying at a record pace on our roads,” said Sen. Curtis King, R-Yakima, the lead Republican on the Senate Transportation Committee who helped craft the package. “We had to respond, and that’s what we did.”
Sen. Marko Liias, D-Edmonds, chair of the transportation committee and the chamber’s lead transportation budget writer, said the revenue “will unlock investments in every corner of the state. It will fill potholes and fix bridges in urban communities and in rural communities. It will keep promises that we have made.”
Oregon lawmakers also are looking at a major transportation funding package to cover a sizable Department of Transportation revenue shortfall, complete unfinished major projects and sustain critical maintenance operations. Transit providers also are seeking increased revenue. Details of the package haven’t yet been released.
Washington Budget
The Washington Senate vote on the two-year budget was closer at 28-21.
Senator June Robinson, D-Everett, chair of the Senate Ways and Means Committee, said a looming budget shortfall resulted in hard choices, such as delaying expansion of early learning programs, furloughing state workers and draining the state’s reserves. She said the budget does boost funding for special education and preserves critical public services.
Under the budget, Robinson said the state would spend $5.4 billion more than the current biennium, including $1.6 billion for education and new collective bargaining agreements with state workers. The budget shaves $3 billion in spending in the upcoming biennium and $6.2 billion over the next four years, she said.
To make the budget work, $6.2 billion in increased taxes would come from lifting the cap on annual property tax growth and new taxes on assets of wealthy individuals and payrolls of large companies. A hearing on the Senate tax package was scheduled Monday.
Senate Republicans supported a $75.3 billion two-year budget. Senator Chris Gildon, R-Puyallup, their lead budget writer, said, “We can do it without all the drastic cuts that people have been talking about. We can do it without any of the harmful taxes.” He also criticized Senate Democrats for dipping into state reserves.
Unlike Oregon with rising state revenues, Washington has gone from a $15 billion revenue surplus three years ago to a nearly equal deficit now.
