House Transportation Committee takes up revenue, spending bills tonight

This evening’s House Transportation Committee meeting is expected to set the stage for successful negotiations to resolve the differences between the two chambers approaches to a comprehensive transportation package. There’s a lot of anticipatory media coverage, most of it focusing on what has to happen to close the gap.

Joseph O’Sullivan writes in the Seattle Times that the two sides are pretty close to agreement.

The Democratic plan, which would spend $15.1 billion over 16 years, contains most of the same projects as the GOP proposal and would be financed with a similar, phased-in 11.7-cent boost in the gas tax and higher fees on truck weights and license plates.

Key areas of disagreement: use of sales tax revenues for transportation projects, language to block the governor from implementing low carbon fuel standards, and the size of a Sound Transit ballot measure to fund expanded rail.

As we wrote yesterday, these differences should not be deal killers. O’Sullivan quotes a statement by AWB president Kris Johnson:

…Johnson said, “this represents an important step forward in the effort to pass the state’s first major, statewide transportation package in a decade.”

House Transportation chair Judy Clibborn sounds optimistic in the Times story.

Although the legislative session is scheduled to end April 26, Clibborn said she doesn’t think that deadline will necessarily stop a package from getting approved.

“I think we would go into (an) extra session,” said Clibborn, adding later: “It doesn’t take months to negotiate if you really, really want to do the negotiations.”

Additional coverage from the Puget Sound Regional Council and the Spokane Spokesman-Review

The House package does not rely on revenues from the cap-and-trade proposal boosted by the governor. The News Tribune editorial board says any such plan needs serious vetting.

It’s no surprise that Inslee’s bill didn’t go anywhere this year: The idea of cap-and-trade is a still new to the public. In theory, it is beautiful. It seems bound to produce losers as well as winners, though. Washington needs the details and a realistic accounting of its downsides as well as its virtues.

The Legislature is poised to act on the first major new investment in transportation infrastructure in a decade. There’s no need to complicate that task with consideration of an untested revenue proposal.

Budget debate turns to taxes: Are carbon, pot and income in the mix?

House and Senate budget negotiators will move swiftly to close the gap between budget plans separated by more than a billion dollars and a philosophical chasm. And that means that everything is again in play, as a series of articles today makes clear.

Carbon. The carbon tax proposed by Gov. Inslee, which recently received national attention, did not make it into the House budget (it was always unlikely to appear in the Senate’s plan). Yet, today, Joe Copeland writes in Crosscut that it may be back

House Environment Committee chair Rep. Joe Fitzgibbon, D-Des Moines, said Thursday that he, administration officials, House representatives and even representation from the GOP Senate caucus have been meeting almost daily to discuss the possibility of reviving the Inslee’s dormant proposal.

Publicola also has the story. And the Wall Street Journal reports on a national carbon tax proposal being pitched to conservatives. This is a debate worth watching.

Pot. While it’s not a lot of money in the scope the $38 billion state budget, marijuana taxes play a role in both chambers’ budgets. The Seattle Times reports today on the different budget approaches to pot money

The Republican-led Senate estimates the marijuana industry will generate about $296 million in the next two years. Save for $8 million a year for the Liquor Control Board and $6 million a year split among cities and counties, that money will go toward education funding…

The Democrat-led House budget expects about $270 million in marijuana revenue. About $7.4 million a year would go to the Liquor Control Board, $720,000 to fund studies and $6 million a year for cities and counties. The rest is distributed, by percentage, to a number of prevention, treatment and health-care programs.

There are other differences, also worth watching.

Income tax. While not on anyone’s agenda in Olympia this year (at least not publicly), the personal income tax remains the white whale of tax reform for many Washingtonians. Seattle economist Dick Conway argues for a 10.6 percent flat rate personal income tax on the op-ed pages of the Seattle Times today. 

That’s not to mention the capital gains tax, B&O tax rate increases, bottled water taxes, and more that are currently in the House budget plan. We’re approaching the anything-can-happen last days of the regular session, which can be the very definition of taxing times.

House Democrats unveil budget: 13% spending increase, capital gains tax, increase B&O surtax, more

The House Democrats have released their 2015-17 budget proposal, with more revenue specifics than many had anticipated. Melissa Santos and Jordan Schrader have the story. 

House leaders said their $38.8 billion spending plan, a nearly 13 percent increase over the last two-year budget, would meet key requirements of the state Supreme Court’s McCleary decision that ordered the Legislature to fully fund basic education in Washington by 2018.

Paying for it?

The House budget proposes enacting a 5 percent tax on capital gains, lower than the similar 7 percent tax on sales of stocks, bonds and investment properties proposed by Inslee. The tax – which would exempt most sales of primary residences and retirement funds – would raise about $570 million a year.

…Another major source of revenue in the House budget comes from increasing the business and occupation tax on services businesses such as doctors, lawyers and architects. An increase of 0.3 percentage points in the tax rates for those businesses would generate $532 million in new revenue in the next two years.

But Democrats insisted some small businesses would actually pay less under their proposal, which enlarges a tax credit to eliminate B&O taxes for an extra 15,000 businesses.

House Democrats also set their sights on ending seven tax breaks. Their budget would repeal a sales tax exemption on bottled water, limit sales tax breaks for Oregon residents who purchase small items in Washington, and get rid of tax breaks for travel agents, tour operators and resellers of prescription drugs, among others. Together, those tax adjustments would raise $384 million.

Details on the overall proposal are here. Here’s the budget bill. The capital gains tax, branded as “fair share tax,” is described here. The B&O changes are here. And the list of seven exemptions targeted for repeal, most of which have been seen before, is here. Although there’s not a carbon or cap-and-trade tax proposal included in this proposal, Rep. Reuven Carlyle, House Finance chair, says he wants that to be part of the coming discussion.

The public debate has officially begun. The public hearing on the budget plan is scheduled for Monday afternoon.

Washington Climate Collaborative Issues Cap-andTrade Economic Impact Analysis

The Washington Climate Collaborative today released an analysis of the Economic and Environmental Impacts of the Carbon Pollution Accountability Act (CPAA) in Washington State.  Or, more simply, they released a study of the costs and effects of Gov. Jay Inslee’s proposed carbon cap-and-trade plan. The research was conducted by Energy Strategies LLC and researchers from two universities in the Northwest.

Here’s the press release and one-page fact sheet. The key  employment and tax conclusions:

Over the next 20 years, implementation of CPAA will result in an average annual loss of approximately 56,000 jobs with nearly 6,000 of those annual lost jobs coming from manufacturing.

Total aggregate worker and proprietor’s income will be reduced by an annual average of $3.1 billion per year. If divided by total Washington households this is equivalent to an annual average $1,200 reduction per household. 

Washington will see an average annual net tax revenue loss of $658M from lower sales, property, and excise taxes resulting from reduced future economic growth. The average annual net revenue raised from the program will be just under 60% of the Governor’s projections.

And the impact on families:

The average Washington family is expected to see a $56 per month direct increase in their monthly gasoline, heat and electricity bill. This does not include the indirect cost increases in other goods like food. 

The price of a gallon of gas is expected to immediately increase by $0.11 per gallon and $0.39 per gallon by 2035 under CPAA.

The CPAA is a key part of the governor’s 2015 policy agenda. Analysis from the governor’s office concludes:

1. The net statewide economic effects are extremely small in relation to the state economy. Employment, output, income and inflation-adjusted income are essentially unchanged under the carbon charge policy. Most of these measures show slight improvement over 20 years. A very small decline in inflation-adjusted income is extremely sensitive to inflation assumptions over the study period…

2. Inflation-adjusted fuel and energy prices could increase due to a carbon charge, compared to a “business as usual” baseline, as follows:

Gov. CPAA impact table

As the Spokesman-Review editorializes this morning, at this stage of critical transportation negotiations, the governor’s plan adds complexity. And, according to the WCC, has significant unintended consequences. 

There’s doubtless time to debate the conflicting analysis. There’s not, however, time to delay making the necessary transportation investments now. Again, echoing the S-R, it’s time to raise the gas tax.


Spokane Spokesman-Review: State needs a gas tax increase

The Spokesman-Review editorial board makes a compelling case for raising the gas tax now. (It’s a great editorial, though it does dredge up some unhappy Super Bowl memories to make a point.)

When legislators debated a gas-tax increase at this time last year, the statewide average price per gallon was $3.32, according to AAA. On Wednesday, it was $2.15 statewide and $1.76 in Spokane.

Not raising the gas tax this year is like failing to give the ball to Marshawn Lynch on the half-yard line.

But the state better hurry and huddle up, because Congress may be coalescing around a federal gas-tax increase of 12 cents per gallon to shore up the deficit in the U.S. Highway Trust Fund.

The Opportunity Washington research report expands on the need to invest in transportation this year.

In 2012, the Connecting Washington Task Force, a blue-ribbon commission of labor, government, and business leaders chaired by Gov. Chris Gregoire, reported that Washington’s population is expected to grow by 28 percent by 2022, annual vehicle miles traveled are expected to reach 60 billion by 2020, freight volumes are expected to triple by 2035, and central Puget Sound transit ridership is expected to grow 90 percent by 2040.

Accompanying these projected needs are funding challenges. Revenue from the fuel tax, the primary revenue source for transportation projects, cannot keep pace with demand due to increased vehicle fuel efficiency reducing the amount of fuel purchased in the state. Connecting Washington recommended a state investment of $21 billion over 10 years for preservation and new projects. (The full cost of meeting the state’s needs was estimated to total $50 billion.)

Lawmakers have not approved a significant new statewide transportation investment since those recommendations were released.

Legislative transportation leaders appear to be getting closer to reaching agreement . At AWB’s Legislative Summit:

Sen. [Curtis] King [Senate Transportation Committee Chair] said that before the Legislature moves ahead with a transportation package, cost-saving and accountability reforms must be put in place.

“As the talks move forward, we are getting closer on reforms we agree on and finding common ground on a few sticking points,” King said. “I give a lot of credit to the labor unions. We are moving forward together as a united front on this effort.”

The Spokesman-Review indicated that this year, creative revenue alternatives may be a problem.

…Gov. Jay Inslee has complicated matters by announcing a wholly new approach to infrastructure funding: a cap-and-trade carbon scheme that would produce uncertain results. Inslee wants to “tax polluters instead of commuters,” who, by the way, are also polluters. His plan would subject the state’s largest carbon emitters to this carbon levy without raising the gas tax.

However, the chairs of the House and Senate transportation committees are cool to the idea.

Inslee gets points for creativity, but dropping an idea of this magnitude into the middle of the debate is unhelpful. 

A lot of work has gone into documenting the need for investment and establishing funding priorities. The sooner lawmakers can reach agreement on how to pay for what must be paid for, the better off we will all be.