Following nearly two weeks of marathon floor sessions, including weekends, state lawmakers have considerably narrowed the policy issues still alive for this year’s 105-day session. As of this Tuesday’s house-of-origin cut off deadline, 405 of nearly 1,100 measures introduced have now passed one house or the other and been sent to the opposite chamber for further consideration. Eleven measures have passed both chambers.
As the legislative session is scheduled to end on April 25th. Lawmakers are now turning their attention to state budget and transportation measures, and committees will be busy reviewing the bills they were sent from the opposite house. The next cut off deadline is March 26th, the last day bills from the opposite chamber can be passed out of a policy committee. Fiscal and transportation committees have more time, until April 2nd, to pass bills out of committee.
Both the House and Senate met this weekend for extended floor sessions. Senate lawmakers spent most of the day Saturday working through more than two dozen proposed amendments to SB 5096, a controversial measure to impose a state income tax on capital gains. Washington currently has no state income tax. The bill is controversial, because Washington’s state constitution prohibits the kind of graduated tax on income the bill would impose.
Proponents have maintained that the tax would not be on income but would be an excise, or “transaction” tax, despite that clear findings by the IRS and all 50 states show that capital gains are income. Much of the debate and some of the proposed amendments centered on this issue, with some Senators questioning, for example, why taxpayers would have to submit a federal income tax return to file a state capital gains tax return if it is not, in fact, an income tax.
Opponents, including some Democrats, also argued that the new tax is not needed right now, because expected revenue projections, to be released on March 17th, anticipate a greater than expected increase in state tax collections for this biennium. In any event, they said, there is no urgency to pass this bill, and Sen. Steve Hobbs (D-Lake Stevens) proposed an amendment to remove the emergency clause from the bill, to allow a possible vote on the measure by the people. The amendment passed, but it is unclear whether the House will re-insert the emergency clause and block a vote by the people when it considers the bill.
Following hours of debate, SB 5096 narrowly passed the Senate by a 25-24 vote, with all Republicans and four Democrats voting against the measure. The bill was sent to the House Finance Committee for further consideration.
If the bill passes the legislature and is signed by Gov. Inslee, it is clear that it will be headed for a court challenge. Most observers in Olympia agree that a court challenge is the underlying intent of passing this bill, with proponents hoping for a state supreme court decision that would overturn previous court rulings that such an income tax is unconstitutional, thus opening the door for general state and local income taxes.
If the bill is passed without an emergency clause, a referendum to place the issue before voters this fall could be launched. Washington voters have solidly rejected any form of state income tax ten times before, most recently in 2010.
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