Legislative roundup: Scrutinizing increased tax on banks; “breathtaking cost;” and another economic caution.

A legislative session that adjourned with a flurry of last minute fiscal activity takes time to sort out. The Seattle Times editorial board has this assessment:

Democrats controlling the 2019 Legislature advanced some important policies. But this progress came at a breathtaking cost and they fell short in several key areas.

Though state revenue surged last year, the Legislature still couldn’t live within its means and passed a dizzying array of tax increases. As has become lawmakers’ secretive norm, some were passed in the wee hours with last-minute bills, precluding public engagement and analysis of how much they’ll cost residents.

Of 18 percent increase in state spending, the ST writes,

Much of the increase goes to public-employee salary and benefit increases. That includes raises for state employees negotiated by Gov. Jay Inslee and a generous new insurance benefit for part-time school workers, who will now receive full medical coverage for working just 630 hours per year.

The editorial extends its objection to lifting the levy cap, saying,

The formulas needed tinkering because some districts were left short in the transition. But legislators went too far by allowing substantially larger local levies. An attempt to add language ensuring that higher local levies are only used for enhancement programs, and prevent them from being used to further increase basic-education salaries and worsen inequity between rich and poor districts, was irresponsibly rejected.

There were some pluses, the editorial says, particularly in mental health funding. For more on that, read Joseph O’Sullivan’s reporting. Also, Katherine Long has an extended look at the new Workforce Education Investment Act.

It’s a “unique and brilliant” approach, said college-aid expert Sara Goldrick-Rab, a Temple University professor and author of “Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream.” She called the bill “pretty much the most progressive state higher ed funding bill I’ve seen at the state level in years.”

The Workforce Education Investment Act is expected to raise nearly $1 billion over four years through a three-tiered hike in the state’s business-and-occupation tax. It calls for increased tax rates on about 82,000 of the 380,000 taxpayers who pay the B&O tax, or about one-fifth of all businesses.

In Crosscut, Melissa Santos examines the “last-minute tax on big banks.”

A new tax on big banks — a so-called “windfall profits tax” — wasn’t introduced or discussed publicly until after legislative leaders had already agreed to include it in their budget.

The text of the bank-tax bill didn’t appear anywhere until Friday morning, one day after lawmakers announced they had reached a budget deal, and two days before the end of the legislative session. 

It passed, of course, and it is not a trivial thing.

House Bill 2167 is set to raise business and occupation tax on large financial institutions — those making at least $1 billion in net income per year — from 1.5 percent to 2.7 percent. The new tax is expected to raise about $133 million in revenue for the state over the next two years, making it a significant part of the $836-million revenue package lawmakers approved over the weekend.

The explanation offered by Rep. Gael Tarleton:

Tarleton, who chairs the House Finance Committee, said the last-minute bank-tax bill was needed after Senate leaders once again rejected the House’s proposal to enact a capital-gains tax.


While Washington’s economy has been remarkably robust since the recession, most states have enjoyed strong revenue growth. Governing magazine writer Liz Farmer reports caution flags are emerging.

A record 41 states collected more revenue last year than they did before the 2008 recession, even when inflation is taken into account. And in many cases, the recovery is significant. In 16 states, tax revenue was at least 15 percent higher in the third quarter of 2018 than their last peaks.


Despite last year’s numbers, preliminary figures of tax collections in more recent months cast a cloud over this sunny picture. Sales and corporate tax revenues are remaining steady, but income tax collections are missing the mark in nearly half the states.

According to data compiled by the Urban Institute’s Lucy Dadayan, income tax revenues were lower than expected in 19 states heading into tax season. On average, there is a 2.2 percent income tax revenue gap those states have to make up before the current fiscal year ends on June 30 (for most places)…

“If income tax returns fall short this April, it would be prudent for state officials to revisit longer-term fiscal planning strategies,” says Dadayan. “Individual and corporate taxpayer behavior will undoubtedly continue evolving in the next months and even next few fiscal years.”


Finally (or finally for now), the Seattle Times and Associated Press have a roundup of what passed and what didn’t in the 2019 session.