Concerns over the repercussions of an approved capital gains tax have the Republican lawmakers of Washington’s 20th Legislative District worried of what’s to come.
During a virtual town hall May 20, state Sen. John Braun, of Centralia, Rep. Ed Orcutt, of Kalama, and Rep. Peter Abbarno, of Centralia, answered questions from constituents following the 2021 legislative session.
Proceedings were largely remote due to the ongoing pandemic, which Abbarno said was good for those wishing to passively follow the goings-on of government.
For active participants, however, it proved a hindrance in having their voices heard, especially those who differed from the positions of Gov. Jay Inslee and state Democrats, Abbarno said. Braun said the session was one of the most partisan he had seen in regard to what was able to pass this year.
Much of the approved legislation this year would result in more taxes and higher prices for Washington residents, the lawmakers said, including the passing of a capital gains tax. The capital gains bill imposes a 7 percent tax on assets like stocks, bonds and business interests over $250,000 in a year, though assets like real estate, livestock, timber, and others, are exempt.
Orcutt said capital gains tax proponents are attempting to get the legislation in front of state courts to rule on its constitutionality, opening the way for a more direct income tax. He said such a tax goes against the will of Washington voters, who most recently in 2010 turned down an income tax for the top 1 percent of wage earners in the state.
“Even though it would only have affected the top 1 percent, 64 percent of the people in the state said ‘no’ to it,” Orcutt said. “I think that stands pretty strong and I think that’s the sentiment even today.”
That vote wasn’t the first time voters turned down a potential income tax.
“Ten times in the last 80-plus years the voters have said ‘no’ to an income tax and it’s been proposed every imaginable way,” Braun said. “It’s just who (Washingtonians) are, I don’t believe it’s even political.”
Braun expressed worry over the current state Supreme Court “stretching the law” in any ruling on the capital gains tax, though he is optimistic those working on the legal challenge are making a good case.
“I believe if you read the (state) constitution, it is strongly (in) the favor of saying that law is unconstitutional,” Braun said.
The version of the bill signed by Inslee includes an emergency clause which prevents the possibility of a voter referendum on the legislation, something the lawmakers at the town hall were against. Braun said initially the Senate had taken the clause out, but House Democrats were able to reintroduce the bill language, and ultimately the Senate accepted it in a 25-24 vote.
“The people deserved an opportunity to weigh in on this,” Braun said, noting it is possible for a voter initiative to challenge it next year.
Orcutt said any of the $415 million bill proponents say will be collected annually by the tax won’t come to the state until 2023. He expressed concerns over the fact the revenues are tied to ongoing programs — the Working Families Tax Credit and the Fair Start for Kids Act — “and yet we know it’s one of the most volatile taxes out there.”
“In good (economic) times, yep; we’re going to get a lot of money out of that, but when the economy starts to falter, it’s going to have the biggest drop of any tax revenue source that we got,” Orcutt said.
When the first COVID-19-related restrictions were put in place the state saw a “huge drop” of about $9 billion in revenue projections over four years, Orcutt said, but every subsequent forecast saw better estimates, with recent revenues forecasting $366 million more than what was anticipated in March.
“My concerns are when you’ve got adequate amounts of money, stick with what you got,” Orcutt said. “Even in tough times we should do the same thing.”
Abbarno mentioned other bills involving cap-and-trade and low-carbon fuel standards, which due to the virtual session didn’t receive hearings with representation from individuals like 20th Legislative District constituents, he said.
“You didn’t hear from folks in rural areas. You didn’t hear from the folks that I was hoping to hear from,” Abbarno said. “You heard from, really, the supporters of these bills and the majority party.”
Abbarno added those pieces of legislation were “massively regressive.”
“Over and over again through the session we heard about the upside-down and backward tax system that the state of Washington has,” Abbarno said, adding he believed it was created through Democrat dominance over the past decades and especially when both chambers of the Legislature and the governorship are under that party’s control.
“(The legislation) impacts everyone at the gas pump and then it’s going to impact you at the grocery store. It’s going to impact you in goods and services,” Abbarno said about the cap-and-trade and low-carbon fuel standards bills, adding rural communities will be disproportionately affected.
Abbarno mentioned line-item vetos in the cap-and-trade and fuel standards bills Inslee made which had drawn criticism from both sides of the aisle.
“What’s really troubling is, obviously, the lack of respect for the legislative process,” Abbarno said.
He felt legal challenges against Inslee’s vetoes would prevail in court.
The impacts on residents from the new legislation came at a time when many in the state are still struggling from the pandemic. Orcutt said Republican legislators spent extensive time working on ways to ease some of the restrictions “safely, effectively, efficiently” without the current economic impacts of the status quo.
“(Businesses) incurred a lot of costs. A lot of employees incurred a lot of costs as a result of the shutdowns,” Orcutt said.
Those ideas never came to fruition as Inslee’s executive orders during a prolonged state of emergency stay in place.
The lawmakers addressed efforts by Republicans in both chambers who are working to rein in the governor’s emergency powers which led to restrictions before, during, and even after the session. Braun acknowledged there is “reasonable need” for some emergency powers for the governor, but prior to the pandemic, those powers were used in catastrophic one-time events like natural disasters that didn’t go on for too long.
“We are now 14, 15 months into a state of emergency, and now we’re back out of session, and the state is still run in a way that wouldn’t have been imagined by our founders,” Braun said.
Braun said proponents of reforming gubernatorial power are looking for reasonable ways to involve the Legislature in rulemaking during a state of emergency, acknowledging the need for a separation of powers and representation by locally-elected officials.
“We don’t expect to get our way all of the time. What we expect is the ability to voice the concerns of our citizens and make it clear where we stand, and where the majority stands on some of these proclamations that have been enormously harmful to folks around the state,” Braun said.
