Economic recovery and future investments in response to the COVID-19 pandemic were front and center in Gov. Jay Inslee’s proposed 2021-2023 biennial budget announced Thursday, with a capital gains tax and a tax on insurers among methods designed to pay for the potential expenditures.
During a press conference, Inslee went over highlights of his budget proposal, which will come before the Washington State Legislature when they reconvene in January. Both the state House of Representatives and state Senate will formulate their own proposals during the upcoming budget session year.
Key expenditures included in Inslee’s proposal deal with recovery efforts in the wake of COVID-19, including economic relief for businesses and Washington residents impacted by the pandemic.
“Now is not the time to make cuts to the provisions of the state that help our families and our businesses,” Inslee said, adding that the need for rebuilding the economy through stimulus and continued efforts to help those impacted by the pandemic was also a focus.
Inslee presented a graph showing job losses in post-World War II recessions, indicating that the COVID-19 pandemic has already led to the greatest percentage of jobs lost comparable to the peak employment month at more than 11 percent among those recessions. The state’s employment has recovered somewhat, but still remains at about the level of peak job loss as the 2008 recession at about 6 percent, according to the graph.
Given the job loss, the governor was proposing legislation “to substantially reduce the burden” of unemployment taxes on businesses. The proposal would reduce the tax burden by $790 million in 2021, and $1.9 billion through 2025, Inslee said, which he added would result in a 37-percent decrease in the unemployment tax bill for a business employing 50, he gave as an example.
On the employees’ end, Inslee said his budget proposes increasing the minimum weekly benefit amount for unemployment insurance, as well as funding the Working Families Tax Credit which has not been funded since its creation years ago.
Other expenses planned in the governor’s budget included $150 million to the state Public Works Assistance program that provides low-interest loans to local governments, more than $750 million to help the state’s homelessness and mental health crises exacerbated by COVID-19, and $400 million in the state’s K-12 budget to address educational opportunity gaps and learning loss brought on or increased by the closure of school buildings in the wake of the disease.
Apart from dipping into reserves and utilizing savings, the governor’s proposal would also seek additional funding for the expenses through a capital gains tax. He said the tax would be on the sales of stocks, bonds and other assets, but would not apply to sole-proprietor businesses, homes, retirement accounts, farms or forestry lands, nor would it tax earned income from wages and salaries.
The tax wouldn’t go into effect until the second year of the biennium and would generate more than $3.5 billion over four years, the governor said. He added the tax would apply to fewer than 2 percent of Washingtonians, whom Inslee said made on average $750,000 annually.
Inslee said Washington State’s local and state tax system was “wildly regressive,” showing a graph indicating that while the top 1 percent of incomes paid about 3 percent of their incomes in tax, the bottom-20 percent paid more than a sixth of theirs.
“This is grossly unfair, grossly unacceptable, and bad for our economy,” Inslee remarked.
Though a capital gains tax was not able to pass in prior years, Inslee said 2021 would be different because of the present need for relief for Washington families in the midst of COVID-19.
“We have enormous wealth in this state, and this is a very small ask of the most wealthy folks in our state,” Inslee said. He said he would be open to other “fair, progressive” tax systems proposed by the legislature should his capital gains tax not be considered.
Healthcare Funding and Potential Public Health Restructuring
The governor’s proposal also includes a new revenue source for long-term healthcare needs from an assessment on health insurance carriers and third-party administrators. Included in his budget is $397 million for public health resources, including personal protective equipment (PPE), testing supplies, and contact tracing.
As part of an overall focus on public health, Inslee said he would be putting forward legislation that would create regionalized health districts, intended to coordinate resources in multiple counties to meet public health needs. Local public health districts have struggled at times during the pandemic, which the proposal seeks to address.
During the press conference Rep. Marcus Riccelli, D-Spokane, said his constituents have seen firsthand what happens when politics are put over public health. The Spokane Regional Health District recently fired its director, Bob Lutz, in the midst of record-setting days of COVID-19 cases, regional news station KREM reported at about the time of Lutz’ firing in November.
“It’s time for us to recognize that diseases don’t care where you live, or what county you are in,” Riccelli said. He said creation of stronger health districts would ensure equity in public health across the state.
Sen. June Robinson, D-Everett, said local public health jurisdictions across the state have been “chronically underfunded,” resulting in staff burnout and data systems. Alongside funding, she said it was important to “take a good examination” at the structure of public health in the state.
“We want to move into and be thinking about a post-COVID world, and what kind of structure that we need both at the local level and at the state level to really support the people of Washington” Robinson said.“
