(The Center Square) – With the legislative session days away, budget leads on both sides of the aisle wrestled on Friday with the idea of using carbon tax revenue to address aging infrastructure and the potentially slippery slope of passing a millionaire tax after residents rejected an income tax 10 times.
State lawmakers held multiple media availabilities with reporters on Friday ahead of the session’s start on Monday. From the transportation and operating budget to House and Senate leads, Democrats and Republicans laid out their positions and priorities, with Gov. Bob Ferguson answering questions as well.
Ferguson and the Democrat party’s support for an income tax, or millionaire’s tax, and their reluctance to use Climate Commitment Act funding for certain priorities dominated the conversation. Washington faces a $2.3 billion gap this year after Ferguson signed the largest tax hike in state history last spring.
“Forty-one states have an income tax, and they’ve survived,” Ferguson responded Friday to a reporter.
Operating Budget Panel: Potential “Millionaire” Tax
Last month, Ferguson laid out his supplemental budget proposal to address the deficit with $1 billion from the rainy fund and cutting about $800 million in spending, among other measures. If approved, it will increase the operating budget to $79 billion per biennium, surpassing last year’s record spending.
While he said the focus is on “the nuts and bolts” this year, he expressed support again on Friday for a “millionaire tax.” It would impose a new 9.9% tax on annual incomes over $1 million, generating about $3 billion annually.
Some fear the idea could lead to a universal income tax later. When asked about it, one reporter called it an “income tax,” which Ferguson quickly corrected; however, he would not clarify whether he would support reducing the $1 million tax threshold in future years if this clears the court.
“I don’t support [a threshold] less than $1 million a year,” Ferguson said, before a reporter then asked if that meant during this session or any year in the future. “I can’t answer any more clearer than that,” Ferguson said. When pressed again, the governor repeated, “Can’t answer any more clearer than that.”
Rep. Timm Ormsby, D-Spokane, and Sen. June Robinson, D-Everett, who both chair their respective budget committees in the state House and Senate, called Ferguson’s budget proposal “responsible.”
Sen. Chris Gildon, R-Puyallup, and Rep. Travis Couture, R-Allyn, who both serve as ranking members on those budget committees, called it the opposite. They said Ferguson’s budget doesn’t balance out over the next four years. Republicans have said they were largely shut out of the last budget negotiations.
The Democrat leads on the operating budget noted that revenue from a millionaire tax that could pass this year wouldn’t be available until 2029 if it clears the courts. They said it’s not a short-term solution but could help address what they call a regressive tax structure in the long term. The Republicans said the $12 billion tax hike Ferguson signed last year is regressive, and that millionaires are the first step.
“I don’t think any of us should ever call this a millionaires’ tax again, because we know where this is heading,” Gildon said. “They want to get it into the courts, they want to pass the income tax, let it work its way through the courts and then eventually expand it to each in every person in Washington.”
Each party offered a different opinion on the idea of capital flight, that income taxes and last year’s tax hike are encouraging the wealthy to leave the state. Ormsby said he sees no evidence of that, despite billionaire Jeff Bezos’ massive tax savings by leaving Washington state for fewer obligations in Florida.
Couture and Gildon say a millionaire or income tax won’t fix regressivity in the state’s tax structure and believe it could have major impacts on small businesses, too. The Washington Supreme Court will likely weigh in if Democrats pass it this year. Ormsby said he doesn’t have any plans for a universal income tax and thinks the slippery slope argument isn’t relevant to a millionaire tax that they will consider this year.
“Let’s focus on the policy that’s in front of us, not speculate about what that means in the future,” he said. “That would come in the future, and it would go through the same scrutinizing and unpacking process that any legislation in any committee that has any fiscal impact whatsoever would go through.”
Transportation Budget Panel: Utilizing CCA Revenue
Last month, the governor also proposed $2.1 billion for preservation and maintenance in Washington’s transportation budget over the next decade, a 34% increase. The announcement followed the closure of the historic bridges, deteriorating ferries, highway infrastructure and devastating natural disasters.
Instead of funding the additional spending with more taxes, Ferguson wants to pay for it by bonding out the existing revenues approved last session. Sen. Marko Liias, D-Edmonds, who chairs the Senate Transportation Committee, said it could be used for bridge repairs that last 80 years, but warned against using it for routine maintenance that may require more repairs by the time the state can pay them off.
Sen. Curtis King, R-Yakima, and ranking member of the Senate Transportation Committee, also warned about bonding out preservation work. Rep. Jake Fey, D-Tacoma, who chairs the House Transportation Committee, said it’s a little early to consider bonds, but he is willing to hear out Ferguson’s proposal.
“I agree with Sen. King that we should only bond for things that are going to last longer than the bond period,” Liias said. “So, if the governor’s proposal is to use bonded funds to replace some of the very old bridges that we have seen fail us in the last year, then I think there may be some value.”
Rep. Andrew Barkis, R-Olympia, and ranking member of the House Transportation Committee, wants to open up CCA revenue to fund some priorities this year. State law currently prohibits spending that money on highways and bridges. The Republicans want to change that, noting that Ferguson proposed using some of it to fund the Working Family Tax Credit, even though it’s not an environmental program.
The Department of Ecology recently acknowledged that its climate emission data was highly inaccurate.
Liias still wants to save CCA revenue for projects that will help mitigate the impacts of climate change, but King said the long reroutes caused by the lack of preservation are also harming the environment.
If Ferguson can use the CCA in the operating budget for tax credits, why not bridges, the Republicans questioned. The CCA is helping fund electrification of the state’s ferry fleet, but amid significantly rising costs, Barkis suggested switching back to traditional fuels. Fey said leasing ferries could also work.
“There will be a lot of scrambling between the operating and the transportation and others to utilize those [CCA] funds, and maybe they will reconsider,” Barkis said, “as somebody has said, temporarily those funds might be used for other things besides just the programs that have been put in place.”
