When a tax doesn’t produce as much money for government as expected, or desired, watch out for efforts to either raise the rate or make more people subject to the tax. That happened this year when the Democratic majority again tried to lift the 1% cap on the rate of property-tax growth, through SB 5770. Thankfully, pressure from the public and Senate Republicans derailed that effort.

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July 2024

Hello Friends and Neighbors,

While I don’t clearly recall the assassinations of President Kennedy in 1963 or his brother Robert in 1968, I was in high school when guns were twice pointed at President Ford (in 1975, only 20 days apart!) and a 20-something when President Reagan was seriously wounded in 1981.

After 40-plus years I had hoped our nation would never see another assassination attempt … but that hope obviously ended when former President Trump was nearly killed by a bullet on July 13 in Pennsylvania, another American hero was killed and two more were wounded.

It’s a very sad day in America when you can’t go to a political rally, as a candidate or a supporter, without worrying about becoming a victim of physical violence.

Although the motives of the 20-year-old Pennsylvania shooter remain unknown as I write this, he may have been incited by the “existential threat to democracy” claims made by some about the former President, including at least one statewide elected official here in Washington.

The calls we’ve heard since the assassination attempt to lower the “temperature” of political criticism reminds me of a piece of legislation we passed this year: a resolution about “civic health,” requested by Lt. Gov. Denny Heck.

The resolution correctly notes there has been a decline in respectful discourse in the public square. It established a Joint Committee on Civic Health of the Washington State Legislature, which is charged with providing preliminary recommendations to “strengthen our democratic republic” ahead of the 2025 legislative session, and final recommendations before the 2026 session.

The rules of debate in our Legislature are geared toward challenging the policies being proposed, rather than the motives of those making the proposals. I won’t be in office to consider the recommendations to come from this joint committee, but it sounds like a worthwhile undertaking… and especially necessary in times like these.

Sharp drop in capital-gains tax collection pushes revenue forecast downward

Four times each year, state government’s chief economist presents a bipartisan group from the legislative and executive branches with a revenue forecast covering the current budget cycle and the next one.

I’m the chair of the Economic and Revenue Forecast Council, on which I serve due to being Senate Republican budget leader. The forecasts are a huge help to me and the other legislative budget writers, partly because they help us spot trouble. The latest forecast, from June 26, also gave me a flashback.

In May 2021 the governor signed the bill creating Washington’s tax on capital-gains income, which had been a dream of his (and many of his allies) for years. Here’s part of the statement I made at the time:

“Today the governor stuck with the misleading, partisan messaging about SB 5096, calling it an ‘excise tax’ that will pay for early learning and child care. The truth is, this is a new tax on one type of personal income – meaning an income tax, not an excise tax – with no guarantee how the money will be used…And even worse, it’s highly volatile…!

My flashback was to the “highly volatile” mention in that statement. You see, this latest forecast shows the biggest drop in state revenue since the pandemic, and the capital-gains income tax is the reason. Here’s how I explained it in a statement issued following the June 26 forecast:

“When we adopted the year’s first-quarter forecast in February, the state’s chief economist warned us to expect slow economic growth – but the economy is not to blame for this predicted drop in revenue. The change in this quarter’s forecast goes hand-in-hand with a sharp decline in the state’s capital-gains tax collections.

“In its first year the capital-gains tax took in about $800 million; here in year two the collections are on track to total about half that much. This is exactly the kind of volatility I and others predicted when the majority Democrats adopted the capital-gains tax.

“I’ve said it before: The capital-gains tax doesn’t pay for anything that can’t be funded with other revenue. Our schools and other important things like access to childcare never should have been tied to such a volatile tax. Today’s forecast is proof.”

And, to put a finer point on something I noted back in 2021, there’s just one way to ensure the revenue from a specific tax goes to a specific purpose: our state constitution needs to say so.

An example of that dates to November 1944, when Washington voters approved a constitutional amendment requiring the state gas tax “to be used exclusively for highway purposes,” meaning the construction and maintenance of roads and bridges. It’s in Article II, Section 40.

No constitutional restrictions are placed on the tax on capital-gains income, meaning those dollars can be spent on anything. In other words, K-12 and child care don’t depend on this tax.

U.S. Supreme Court ruling lines up with my ‘Three Branches’ bill

A decision of great importance was handed down by the U.S. Supreme Court recently. It was of great interest to me, because it corrects a ruling from 40 years ago in a way that will hopefully give new life to legislation I’ve proposed for many years.

Without getting too deep into the weeds, laws are made by the Legislature, and become part of the Revised Code of Washington. Agencies make rules to implement laws, which become part of the Washington Administrative Code (WAC). For employers, complying with rules can be as much of a burden as taxes.

The WAC contains more separate regulations than all but five other states, and it’s hard to believe all of those are really necessary; we can start turning things around by improving the way new regulations are developed.

I know how difficult it can be for those in the private sector to push back against wrong-headed rules adopted by government agencies, like the Department of Labor and Industries and the Department of Ecology. When asked to interpret those rules, the courts defer too much to the agencies, instead of being more independent and impartial.

With that background, here’s what the U.S. Supreme Court did by overruling a 1984 case best known simply as “Chevron.”

For the past 40 years, federal courts have been required to defer to government agencies when determining how to interpret a law that is less than clear. That has stacked the deck in the agency’s favor and against whomever is challenging the rule.

By ending what’s also called “Chevron deference,” our nation’s highest court is not just looking to level the playing field. It is cautioning lower courts against reflexively adopting an agency’s position, even if that agency claims expertise in administering a complex law.

There’s also a subtle message to Congress in the overturning of Chevron: Do a better job of writing laws that people can comprehend, so there is less need for interpretation in the first place.

In each of the past five years, I proposed what became known as the “Three Branches” act. My intent was to help people, including lawmakers, to more easily see the connection between legislation and rules.

For instance, when debating a bill, we generally know what it would cost to implement; why can’t we know up front whether new agency rules would be needed? The rulemaking process is public, but not in the same way as the lawmaking process; if I knew a specific bill could bring regulations affecting employers in my legislative district, I could alert those employers in time for them to speak up.

My bill would have required agencies that make rules, like Ecology or L&I, to show specifically how their rules and their enforcement decisions match up with state law. It also would have required the courts to be independent and impartial when they resolve disputes involving rules, requiring them to look back at the actual legislation — rather than looking to the agencies that made the rules — when interpreting the law.

I’m sure my Democrat colleagues likely hear concerns about regulations just like Republicans do. For that reason I have to believe my proposal (most recently filed as SB 5073, in 2023-24) might have won bipartisan support, had it not been for one fact: the bill was always sent to the Senate’s state-government committee.

The chair of the state-government committee is the same Olympia Democrat who, year after year, refused to allow a public hearing on my emergency-powers reform legislation. He gave the same cold shoulder to my Three Branches bill. But, like me, this senator is not seeking re-election.

My hope now is that a Republican colleague will pick up my Three Branches bill and introduce it during the 2025 session. The new State Government chair needs to give it fair consideration, and the “Chevron deference” decision will act as a tailwind.

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I hope you will reach out whenever you have a comment or question about your state government. Have an amazing day!

Yours in service,

 

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