In the current and accelerating health and economic crisis, state and local policy makers need the tools to activate resources to protect Washington residents.
This is particularly important as public health needs are escalating while public revenues are dropping. We understand that the Legislature will adjourn soon, so this may be something that our leaders must revisit in a special session, when we can fully comprehend the extent and damage of the pandemic.
A big question for our state’s leaders regarding the coronavirus pandemic is how we finance the care and public health that our people need. While the federal government is stepping in, it is not enough for our state. The Legislature is about to adjourn with a budget that was built before the coronavirus hit. That will leave us with burgeoning needs for a pandemic that is expanding exponentially. How do we finance current public services and insure the protection of our future health and wellbeing as a society?
We can probably expect that the pandemic will diminish retail business by at least 5 percent. Our public services depend on sales taxes and business and occupation taxes generated through retail activity. A 5 percent decline in sales and B&O taxes will result in a loss of over $800 million a year in state revenue. That jeopardizes Apple Health, K-12 education, higher education, child care, and numerous other public services upon which we depend. And it doesn’t generate the revenue to tackle the coronavirus epidemic.
There are steps that the Legislature could take to appropriate fund public services and provide economic relief to businesses, workers and families all hit hard by the corona virus epidemic. Here are some suggestions:
- Reduce the B&O tax by 10 percent for all businesses,
- Fund child care and early learning, with matching funding from the federal government,
- Provide health coverage for people aged 60-64 (considered at risk),
- Pay for all coronavirus tests,
- Fund an emergency income assistance program for workers whose hours are cut back or who are laid off,
- Make up for the loss in public revenue from the drop in retail activity.
How do we finance this? We go to those who have benefitted most from our economy:
- Raise the estate tax on very wealthy decedents immediately, that is, as of April 1, 2020. The Legislature can do this by passing SB 6581. This will exempt 25 percent of estates now subject to the estate tax and raise the estate tax on estates valued at over $6.5 million. Revenue from this change will result in over $30 million a year.
- Enact SB 6017, the tax on excessive compensation. This is an excise tax on about 350 employers who compensate some of their employees in excess of $1 million. It raises about $325 million a year.
- Amend and enact HB 2907, the tax on employers on compensation in excess of $150,000. Lower the threshold to the ceiling on FICA tax payments ($137,700), and step the tax up, beginning at 1 percent, then 2 percent over $250,000, then 3 percent between $500,000 and $1 million. Make this a statewide tax. Anticipated revenue is $650 million annually.
- Enact HB 2821, which replaces a federal tax on health insurers which expires this year. This insurance premium tax would raise about $100 million annually.
- Enact HB 2679, requiring health carriers with a surplus greater than 400 percent of the carrier’s capital requirements to contribute to the state 3 percent of this excessive surplus. Anticipated revenue is $80 million annually.
- Enact the tax on capital gains, as embedded in SB 5961, generating $800 million a year.
Does this pencil out? Yes it does:
|Estate Tax SB 6581||$30,000,000|
|Excessive Compensation Tax SB 6017||$325,000,000|
|Compensation in excess of FICA tax HB 2907||$650,000,000|
|Insurance Premium Tax HB 2821||$100,000,000|
|Excessive Surplus Tax HB 2679||$80,000,000|
|Tax on capital gains SB 5961||$800,000,000|
|Reduce B&O tax by 10%||$420,000,000|
|Fund child care and early learning||$399,337,000|
|Apple Health for ages 60-64||$86,440,200|
|Coronavirus tests 100,000 @ $100 each||$10,000,000|
|Emergency Income Assistance program||$250,000,000|
|Make up for the forecasted loss of sales and B&O revenue||$800,000,000|
More To Read
September 10, 2021
May 3, 2021
Washingtonians are getting less income from paychecks, more from dividends, interest, and rent
April 2, 2021
Context is key when making comparisons—but too often it goes missing