Olympia Watch: No details on budget and carbon taxes may be stalling

Can the legislature vote on a budget they haven’t seen?

In its Tuesday live update on social media, five Washington Policy Center (WPC) specialists provided citizens another “inside baseball” look at what is and isn’t happening in the final days of the 105-day regular session of the Washington State Legislature.

At the top of the list is the frustrating reality that Democrat leaders have not yet released the details of the two-year operating budget to either citizens footing the bill, or to most members of the legislature who will be voting on the budget in the next few days. The WPC specialists also covered the three forms of carbon taxes being proposed, and discussed the long-term care bill that all citizens will contribute to via a new payroll tax.

Jason Mercier is the director of the Center for Government Reform at WPC. Mercier reported that there may be a crack in the cooperation between moderate Democrats and progressives. Moderate Senate Democrats demanded no “emergency clause” on the capital gains tax. The bill passed by a slim 25-24 majority in the Senate.

The House saw it differently, passing a very different version of the capital gains income tax bill. They included language mirroring an emergency clause, which would prohibit giving the people a referendum vote. But now there are multiple amendments to be dealt with. One would force a referendum vote. 

“We keep hearing from the supporters how popular this tax is,” said Mercier. “Well, they can prove it by actually putting it on the ballot for the voters to consider.”

Washington Policy Center staff discuss the ups and downs of the legislative process in Olympia as the state legislature enters the final five days of their regular session. Graphic John Ley
Washington Policy Center staff discuss the ups and downs of the legislative process in Olympia as the state legislature enters the final five days of their regular session. Graphic John Ley

The WPC has public records from Democratic lawmakers saying they’re doing this not because they want a capital gains tax. They want to see if the state Supreme Court will overturn their ruling saying that income is property according to Mercier. If that happens, they can impose a broad-based graduated income tax without a constitutional amendment. 

“There’s actually an amendment proposed that would prohibit the Attorney General from making that argument,” he said. “The only reason to vote against that amendment is if in fact your goal is to bring a broad-based income tax to the state.”

Another amendment would make the bill effective only upon the Internal Revenue Service certifying the tax is an excise tax. The state constitution prohibits a graduated income tax, so progressives are calling it an excise tax, among other apparent attempts at word games.

Mercier mentioned the budget is not supposed to be released until Saturday. It is rumored to be 1,000 pages. The $59 billion spending document is going to be released less than 24 hours before session.ends. 

Asked by Chris Cargill, the Eastern Washington Director at the WPC, if any of the legislators will have a chance to read the bill before voting on, Mercier reminded him of Speaker of the U.S. House of Representatives Nancy Pelosi’s famous quote: “you’ll have to pass the budget in order to see what’s in it.”

Clearly the people won’t have a chance to weigh in, and Mercier pointed out that the legislators won’t know the details of what they’re voting on. This is anything but good governance. Mercier labeled it a horrible process and anything but transparent.

Paul Guppy is the vice president for research at the WPC. He focused on the fact that House and Senate Democrats have not yet released details of their operating budget. 

Every two years, the legislature specifically schedules a longer session of 105 days instead of the normal 90 days. The reason that they have 105 days is to have more time to work on drafting the state’s two-year operating budget. 

“It’s incredibly complicated, it’s $40 to $50 billion,” Guppy said. ”And yet, we find that they don’t even use 103 of those days. Instead, they (will) introduce the budget within 24 or 48 hours right at the very end of the session.”

 “What is the point of having a longer session, if it doesn’t give the public more time to see what lawmakers are putting in the budget, and, more importantly, so that lawmakers themselves can see what’s in the budget,” asked Guppy.

Carbon taxes

Gov. Jay Inslee has tried to get the legislature to pass his green agenda for the first eight years he has been in office. An original deal this session tied together a carbon tax, a cap and trade bill, and a low carbon fuels standard bill. 

Those pieces were tied together to deliver a transportation package with needed “revenue” from taxpayers. Todd Myers is the director of the center for the environment for WPC. He shared the cap and trade bill is projected to cost about 18 cents per gallon in 2023, and going up to about 25 cents a gallon by the end of the decade. The senate transportation bill has a separate gas tax of about 10 cents and the house has an 18 cent gas tax.

“There is actually a line in the cap and trade bill that says that the money wouldn’t go to transportation funding from the cap and trade if a low carbon fuel standard (LCFS) wasn’t passed by 2027,” noted Myers. He believes that means the sponsor, Rep. Joe Fitzgibbon (Democrat, 34th District), doesn’t think the LCFS will pass this session.

The linkage between cap and trade and the transportation budget has been removed, which was one of the requirements of some senators who voted for it. Mercier thinks the cap and trade bill may not happen, and the low carbon fuels standard may not move forward.

But Mercier noted that anything can happen in the 5 remaining days of the regular session, including Gov. Inslee calling legislators back in an emergency session. At that point, anything could be put back on the table.


New payroll tax on long term care insurance

In 2019, the legislature enacted a law where the state will provide a “benefit” of long term care insurance for citizens. It will be paid for with a new payroll tax. In this session legislators have changed an “opt out clause” and how long citizens have to use this out.

“There is a bill that would make changes to the 2019 long term services and support trust,” said Elizabeth Hovde, a policy analyst for the WPC. “That law was made to help people afford long term care needs in our state, and help the state’s save on booming Medicaid costs.”

The original law created a trust. “Everyone in the state, all the workers, will be charged 58 cents per $100 that they earn, regardless of income,” she said. Everyone who pays in will get a lifetime benefit of $36,500 or $100 a day.

But there are important caveats. You only get the benefit if you live in Washington. If you move out of state, the benefit is not transferable. “It’s not a portable benefit,” said Hovde.

The legislation is now headed to the Governor’s desk. It will limit the time that you can opt out of the payroll tax, which takes effect January 1, 2022. The legislation only allows people to opt out if they purchase a separate long term care insurance policy by November 1 and inform the state.

“The sad thing about the opt out being changed to having a plan purchased by November 1, is that a lot of people aren’t even going to know what’s happening,” she said. “They’re going to see it on their check in January, and it’s going to be too late to do anything.”

“They’ve kept people in the dark on purpose,” she said. “I think they need the trust to be solvent; and without a lot of people paying in, it won’t be.”

“What this is, is a straight up entitlement model that’s being imposed on all of us whether we ask for it or not,” said Guppy. “I think it’s kind of insulting.”

The WPC analysis shows a long-term care benefit of $36,000, or $100 a day, is a nothing benefit. “Anyone who has helped elderly parents or an older relative knows that that kind of funding is just not going to cut it,” he said. 

Guppy thinks this is by design. “Once the entitlement is in place, the democrats will then come back and say it’s underfunded, we need a better benefit, we need to raise the tax, we need more money for it.”

The original proposal was HB 1087 in 2019. According to the state Office of Financial Management (OFM), the new payroll tax levied by HB 1087 would take more than $1 billion from workers’ paychecks each year the WPC reported. It’s prime sponsor was the SEIU.

The WPC shared: “it is estimated the state will save an average of just $65 million per year over the next three decades.  But even that savings is overstated after considering the cost of the new LTSS program. OFM estimates the state will need to hire 130 new FTEs (full time employees) and will spend more than $22 million per year to run the new program. So workers pay $1 billion in new taxes every year so the state can save a meager $43 million.”

 “We hear constantly about how regressive our tax system is how unfair it is,” said Guppy. “One side says we need an income tax, we need a wealth tax, because of all regressive taxes.”  And yet those same people created another regressive tax that will go right on our payroll that will reduce people’s take home pay.  

“There’s a frustrating hypocrisy in their arguments,” he said. “A new payroll tax is coming in January.”

Hovde pointed out that when the $36,500 runs out, which will happen very quickly, people will go back on Medicaid plans. “They were Medicaid before, they’ll be on Medicaid again. And right now their paychecks will be reduced. So it’s not even the favor it’s being made out to be. This is a tax grab,”

Cargill brought up another of these surprise “benefits” the legislature has enacted on paid family leave. “About a year and a half ago or so, where I remember people seeing that their paychecks went down because of the other tax on paid family leave. I remember people saying to me at the time, why didn’t I know about this? Why didn’t I hear about this? My check has gone down.”

Hovde suggested employers inform their employees about this coming payroll tax now, and let them know they can opt out if they purchase private long term care insurance before Nov. 1.

A special session?

At the end of the update, Cargill wondered how in the world can the legislature get all of this stuff done by Sunday? There are huge bills still outstanding — the budget, the income tax, the three carbon tax bills. This might mean the legislature coming back for a special session.

“As we know with a special session, if the governor calls it, everything is back on the table,” said Mercier. “This could be good for the emergency powers (bill), because maybe we can have that debate once again. But it’s very unlikely they will get all of these done by Sunday.”

Cargill responded by wondering how they would justify a special session when they have more money than ever coming in the budget? “Are they really going to go to the people in Washington say, you know what, we need a special session in order to raise taxes?” he asked.

Guppy reminded them that the legislature is expecting $3.2 billion more revenue (not to mention all the federal COVID money). “If they were simply focused on the people’s business, they would be able to get this done in that longer 105 day session.”

“Their base is focused in Seattle and they’re trying to appeal to that,” he said. “But they also face the opposition from the rest of the state. So tackling unpopular ideas, is the sign that explains why they are down to the wire on these complicated issues, passing the budget, and why they think they might need a special session to get more time.”

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