Rep. Frank Chopp proposes $2 billion tax and spending plan. Other tax proposals are being considered.

Rep. Frank Chopp, D-Seattle and former House Speaker, has released the first major tax and spending proposal we’ve seen since the pandemic tore a $7 billion hole in budget projections over the next four years. His won’t be the only proposal, as the NW News Network reports Democrats believe tax increase are necessary to address the shortfall.

In announcing the plan Chopp says.

“The effect of the COVID-19 pandemic on our community has been absolutely tragic – taking lives and livelihoods, slowing our economy, devastating our state budget, and further revealing and worsening long standing inequities,” said Chopp. “As we continue to navigate these uncertain times, many are questioning what comes next, fearing the loss of trusted services and essential programs.

“Not only must we avoid austerity cuts, we need to save our existing critical services and make new investments that will benefit the communities most hurt by this pandemic. My Public Priorities and Progressive Revenues Plan demonstrates how Washington state can set a standard for the nation – protecting working families and preventing cuts by requiring large profitable corporations and the wealthiest among us to pay their fair share.”

Seattle Times reporter Joseph O’Sullivan writes,

His plan would implement a new tax on some capital gains to fund affordable housing, workforce education and a tax credit for low-income families.

It would create a payroll-style tax similar to Washington’s existing family-and-medical-leave law to fund early-learning programs and child care services.

And his proposal would impose a tax on large corporations, assessing them for each employee they have who earns more than $500,000 annually. That would fund public health services and Washington’s response to the COVID-19 pandemic, including the sourcing of protective medical gear from inside the state.

Chopp proposes to raise $500 million from the tax on large corporations, $1 billion from the payroll tax, and $500 million from the capital gains tax. The plan does not identify a capital gains tax rate or spell out the structure of the payroll tax. The tax on large businesses (called a Fair Share Contribution) is structured like this:

Tier one: a 5% corporate contribution on per employee compensation exceeding half a million dollars

Tier two: a 10% corporate contribution on per employee compensation exceeding ten million dollars

NW News Network reporter Austin Jenkins writes.

But unlike during the Great Recession, when the budget was largely balanced through spending cuts, this time around majority Democrats and their allies, like labor unions, are already signaling that tax increases are almost certain to be part of any solution. 

“The idea of solving this budget problem with an all-cuts budget is not something this governor is interested in and I can’t imagine he would sign such a budget,” Schumacher said.

He quotes the Senate’s top budget writer.

“I think it may be that this crisis is rationale for making meaningful tax reform,” said Sen. Christine Rolfes, the Democratic chair of the Senate Ways and Means Committee, in an interview last month on TVW. 

While emphasizing that formal tax discussions are not underway, Rolfes mentioned eliminating business and occupation taxes for small businesses and giving low-income families a sales tax rebate, while raising taxes “on those most able to pay in an economic crisis.”

Regarding a capital gains tax, something Democrats have flirted with for the past several years, or an income tax, often viewed as the third rail of Washington politics, Rolfes said “everything’s on the table.” But she also cautioned that a capital gains tax would likely be challenged in court and that an income tax would take a two-thirds vote of the Legislature and a vote of the people.

For all the discussion, Jenkins points out,

But talk of crisis-inspired tax reform may prove aspirational. In 2010, in the throes of the Great Recession, Washington voters soundly defeated an initiative that aimed to make Washington’s tax code more progressive by imposing an income tax on high income earners.

In flux.