South Kitsap Chamber of Commerce Legislative Update

Today is the last day to read in committee reports from the opposite house, except for House fiscal committees and Senate Ways & Means and Transportation committees.

We are heading down the final stretch. Of the bills, on our current watch list 3 have been passed by both the House and the Senate and wait for the Governor's signature.

In a much-anticipated ruling, the state’s highest court has upheld Washington’s tax on capital gains income. The 7-2 ruling, released Friday, said the 7% tax on capital gains income above $250,000 is properly considered an excise tax, not an income tax.

Not overturning precedent: The court’s ruling does not overturn a 1933 legal precedent that considers income to be property, which the state constitution said must be taxed uniformly, and which has prevented the Legislature from creating a progressive income tax. Still, “the court did seem to go out of its way to both cast doubt on and bemoan the results of that opinion,” The Seattle Times reports.

• The ruling “contradicts common sense,” The Wall Street Journal wrote: “The majority opinion boasts that ‘forty-one other states and the District of Columbia tax capital gains.’ Yes, and every one considers capital gains to be income.”

Immediate impact: In response to the ruling, Camas-based Fisher Investments announced that it will relocate its corporate headquarters to Dallas, Texas.

• Fisher Investments, founded in 1979 by investing guru Ken Fisher, expressed its disagreement with the ruling by saying its decision to move is “in honor of the Washington State Supreme Court’s wisdom and knowledge of the law, and in recognition of whatever it may do next.”

AWB statement: This ruling hurts the state’s competitiveness and moves Washington closer to an income tax, which voters have rejected many times, AWB said in response to the ruling.

• “Proponents argue the capital gains tax makes Washington’s tax system more progressive, but we have not seen an equivalent reduction in sales tax or business and occupation tax,” said AWB President Kris Johnson. “It is simply a new tax at a time when it’s not needed. In the last five years, the Legislature has raised 22 other taxes which will collectively raise $40 billion over 10 years. Instead of constantly looking for ways to raise more taxes, we encourage lawmakers to consider ways to invest in the economy.”

Impact on budget: The tax is expected to bring in roughly $500 million a year in extra revenue. That includes an estimated $248 million this biennium, $1.1 billion in 2023-2025, and $1.5 billion in 2025-2027. The state’s revenue forecast and this year’s legislative budget proposals all assume the tax will be collected, so the Supreme Court’s ruling will not affect budget projections.

Contact Government Affairs Director Emily Shay to learn more and get involved.

Senate budget: The Senate last week released its $69.2 billion operating budget, which calls for large boosts in funding for special education, housing, behavioral health services and addressing climate change. The two-year budget includes $5.1 billion in new spending and leaves $3.8 billion in total reserves.

• The plan includes $424 million for behavioral health facilities and $298 million for housing and shelter for the state’s homeless population. The Senate’s capital and operating budgets combined promise nearly $1 billion in new housing investments, a record level of funding.  

House budget: The House released its two-year $69.5 billion operating budget. Similar to the Senate’s proposal, there are no new general taxes. The biggest difference is that the House’s plan spends more and saves less, leaving $2.6 billion in total reserves.

• While the Senate’s budget would leave 10.2% of revenues in reserves by the end of 2025-2027, the House’s proposal would leave just 7.2% of revenues in reserves. The Washington Research Council has details

AWB’s position: AWB is encouraged to see that the Senate’s budget proposal does not contain any new taxes nor drain the state’s reserves. The budget reflects a slowdown in the record spending growth the state has seen over the past few years and the possibility of a downturn.

• “Washington’s economy is beginning to show signs of cooling, as evidenced in the latest revenue forecast and AWB’s employer surveys, and the risk of a recession is growing,” AWB President Kris Johnson said. “This means budget writers should be especially focused on preparing the state to weather a downturn.”

Bipartisan support: Republican leaders applauded the Senate’s spending plan, and Sen. Lynda Wilson called it the most inclusive budget proposal in years.

State revenue projection for 2023–25 forecast decreased by $483 million

Proposed 2023-25 Biennial and 2023 Supplemental Operating Budgets - PSSB 5187 Summary

Senate 2023-25 Biennium and 2023 Supplemental Capital Budget Proposals

House 2023-25 Biennial and 2023 Supplemental Capital Budget Proposals

Proposed 2023-25 Biennial & 2023 Supplemental Operating Budget - Budget Summary

Tell your Representatives to vote NO on HB 1628 (real estate excise tax)

Lawmakers in Olympia are considering a bill that would raise the real estate excise tax, driving up the cost of housing and giving Washington the highest REET tax in the country. They’re doing this at the same time they are looking for ways to address the state’s housing crisis.

This doesn’t make sense.

We cannot continue adding to the costs of housing and expect our affordability crisis to get better.

Please take a moment to contact your representatives and tell them to vote NO on HB 1628.

Be sure to check out other bills currently on our Bill Watch List.