By / Kathleen Collins
SMACNA Legislative Consultant
By the time you read this, the Legislature will be coming down the home stretch to the end of a most unusual legislative session. The session was for the most part conducted virtually because of the pandemic. Only a handful of members were allowed on the floor to debate issues and all the others participated via Zoom. Most legislative staff worked remotely. All testimony for hearings was provided virtually. For the first time the public could sign-in on bills using the internet, which sometimes resulting in a couple thousand individuals weighing in on controversial bills. Overall, the virtual session resulted in less collaboration between legislators but more participation from the public.
Budgets and Taxes
Despite the early pandemic related revenue losses, key parts of the economy rebounded in 2021 to close the gap. In fact, the March revenue forecast brought state revenues back to what was expected, with six billion more in revenue for the coming budget cycle than the last one. Federal COVID relief funds arrived in three batches, most recently in March. The Legislature has spent some of the federal money on much needed unemployment insurance relief, rental assistance, and childcare support. The $4 billion the state received in March does not have to be spent until 2023, giving time to target other areas that will need help.
The operating budgets that will be passed by the Democrat controlled House and Senate are expected to be the largest general fund budgets in the state’s history. Yet despite no shortage of money, the Democrats are planning on passing a capital gains tax. This tax would impose a 7% tax on capital gains over $250,000. Presented as an “excise tax,” should it pass, the capital gains tax will be subject to a legal challenge on the basis that it is not an excise tax, but rather an income tax. Washington’s Supreme Court has said in previous rulings that imposing an income tax in Washington state would require a constitutional amendment. There are some who would like to see if the current Supreme Court would agree with this prior interpretation and some who fear such a ruling would open the door to broader taxation.
The transportation budgets have suffered pandemic-related loses that have not recovered. This, coupled with the strong desire for new transportation projects, has fuelled discussions about new transportation taxes. Unlike most years when a gas tax and assorted fee increases were the main funding sources, this year the Legislature will possibly also consider a price on carbon emissions. Some of that revenue would be dedicated to transportation. Governor Inslee’s cap and trade proposal is the most likely carbon funding proposal that could get across the finish line by the end of session.
Pandemic Assistance
The Legislature has already passed legislation aimed at reducing the impact of the pandemic on construction and other impacted businesses. HB 1095 relieved taxpayers from paying taxes on government assistance they received to address the impact of the pandemic emergency. This includes all taxes that would be otherwise be owed, such as B&O and sales tax. SB 5061 provided unemployment insurance relief to businesses impacted by the pandemic by not charging employers’ experience rating for their employees’ unemployment benefits from March 28, 2020 to May 30, 2020. The bill also capped tax rates over a five-year period, easing the timing for repayments into the trust fund.
We expect there may be more unemployment relief from the state. One possible bill would provide financial relief to employers whose rates have increased sharply because of layoffs. The state will most likely use federal funds to refill some of the unemployment trust fund that has been depleted due to the pandemic. To help workers who have been laid off, the Legislature is also likely to pass a bill that expands the family and medical leave program to make it easier to qualify. One version applies the changes only to the pandemic period. The other would make some of the changes more permanent.
Construction Bills
This article will be published near the end of the legislative session and there are a lot of issues and bills that are not resolved yet at this writing. However, it does look like some construction-related bills will pass. They are:
- HB 1050 – regulating refrigerants used in air conditioners and refrigeration units
- HB 1391 – clarifying the timing for bid listing for mechanical, electrical, and plumbing
- SB 5024 – easing restrictions on the construction of smaller condominiums
- SB 5032 – reauthorizing and improving alternative public works contracting procedures
We will provide more details on these and other bills that pass at the end of session. ▪
