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Dear Friends and Neighbors,
I have good news to report in this email update. We have moved to Phase 3 since my last update, and last week the state revenue forecast was very positive. However, I am concerned the capital gains income tax is still alive and some problematic legislation passed the House before the house of origin cutoff date. The details on all those issues are in this email update.
Revenue forecast projects $3 billion increase
Last Wednesday, the Washington State Economic and Revenue Forecast Council released its quarterly revenue forecast. Compared to the November forecast, revenue is projected to increase by $1.34 billion for the current 2019-21 budget cycle, and by $1.95 billion for the 2021-23 budget cycle — a $3.29 billion increase over the four-year outlook.
Last June we were potentially looking at a $9 billion budget deficit. However, the last three revenue forecasts have put us back at pre-pandemic revenue levels.
State tax revenues for the 2021-23 biennium is projected to be $56.6 billion, an increase of 8.2% over the current biennium. While this is good news for budget writers, this should help the Legislature focus on funding priorities without raising taxes. Our focus should be helping families and businesses still struggling through the pandemic.
Phase 3, long overdue
The other good news is that the governor finally announced his Phase 3 plan last week. Effective March 22 (today) all counties move to Phase 3. Republicans in the Legislature have been advocating for a Phase 3 for quite some time. In fact, Republicans went ahead and introduced their own plan the week before the governor. The “Open Safe, Open Now” or House Bill 1553 plan.
Up until the governor's announcement we had not seen much willingness on his part to advance the state to a new phase or listen to legislative leaders. I believe our push to move forward and the media attention encouraged him to open the economy further. In fact, he used several elements from our plan, particularly the county-by-county approach rather than the regional one he had been using.
It has been a tough, difficult year for many as everyone knows someone who has been impacted by the pandemic. However, it is time to move forward and we can do it in a safe and responsible manner – wear masks when needed, social distance where appropriate and be smart. I am excited to see businesses opening further, more people back to work and students in school as we move into Phase 3.
Capital gains income tax – unnecessary
Despite the strong revenue forecast mentioned earlier, the majority party is still pushing tax increases. Last Monday, in the House Finance Committee there was a public hearing on the capital gains income tax, Senate Bill 5096. It passed the Senate by one vote, 25-24, on March 6.
The bill should be shelved. Raising taxes during a pandemic is the worst time to raise taxes, plus it is not needed as evidenced by the revenue forecast. In addition to our state revenues being up, the American Rescue Plan Act (federal stimulus dollars), is sending Washington state about $7.1 billion in recovery money for local, county, and state governments, in addition to about $3 billion in COVID relief for K-12 schools, higher education, and childcare. Unless the numbers change, Washington state will have received more than $24 billion in federal stimulus funds over the past 12 months.
Not only is this tax unnecessary, it is unreliable given its volatility, and likely unconstitutional. All 49 other states call capital gains “income” and the IRS has also weighed in on this, classifying the capital gains an income tax. We know how the voters feel, having turned down various income tax proposals 10 times at the ballot.
Finally, the biggest concern is this would be the first step toward a full-fledged state income tax on our taxpayers. With our revenues being strong and resilient, this tax and others are not needed.
Contentious bills voted out of the House
Last week we hit the house of origin cutoff – the deadline for House bills to be sent to the Senate, and Senate bills to be sent to the House. Bills deemed necessary to implement the budget are exempt from the cutoff. While most bills had strong, bipartisan support there were some contentious and concerning pieces of legislation sent to the Senate. Below is a brief overview of some of those bills.
House Bill 1091 | Low-carbon fuel standard mandate | Would increase the cost of gas and diesel up to 57 and 63 cents a gallon without generating any new revenue for transportation projects. It would be bad for businesses and our economy, especially our ag industry, with little benefit to air quality.
House Bill 1078 | Felon voting rights | Would automatically restore felon voting rights before completed sentences, including for those who committed heinous violent and sexual offenses, which would be unfair to many crime victims and their families.
House Bill 1097 | Worker protections | This legislation shifts costs to employers. It contains vague standards and would create uncertainty for businesses in a time when they are already struggling and stressed in this difficult economic time.
House Bill 1236 | Rental property rights | This legislation would take away the rights of property owners to determine who they can rent to or when and why they can evict a tenant. Government would be able to dictate what property owners can and cannot do with their property under this legislation.
If you have any questions on the legislation mentioned in this email update or any other bills or state government issues, please do not hesitate to contact me.
Remember, you can testify on any bill in front of any committee. Click here to find out how you can stay involved and testify remotely.
It is an honor and privilege to represent the 15th District!
Sincerely,
Bruce Chandler
