-Welcome to "City Inside Out."
I'm your host, Brian Callanan.
From passing a new income tax on high earners
to establishing new guardrails for artificial intelligence,
state legislators were busy this session in Olympia.
-The legislature stand adjourned.
[ Cheers and applause ]
-A short 60-day legislative session featured one
of Washington state's longest ever debates,
24 hours plus over a new income tax.
-After a dramatic investment of time by the House,
we passed the millionaires tax.
-But that tax on high earners
wouldn't generate revenue for another three years,
and it faces legal and possibly voter
initiative challenges ahead.
-The folks of Washington
have been very clear they don't want this.
-Lawmakers also passed bills to prevent Ice agents
from wearing masks,
regulate artificial intelligence
and spend historic amounts on housing, roads and bridges.
-I asked for a truly historic investment
in our infrastructure.
-But why does the state still have a projected budget deficit?
-There was a headlong rush to spend the income tax
before it even passed.
-And who were the winners and losers this session?
Our panel of journalists weighs in.
-Some very serious cuts to early education and child care.
That is absolutely going to affect folks
with young children.
-It seems that they still don't really have
a plan set out for funding public defense services.
-Some insights from an eventful session in Olympia.
Next, on "City Inside Out."
♪♪
And thanks once again for joining us here
on "City Inside Out" on the Seattle Channel.
Brian Callanan, glad to be with you
and very glad to introduce three journalists
to discuss what just happened in the state legislative session,
including Shauna Sowersby.
She reports on state politics for The Seattle Times.
Shauna, good to have you here.
-Thank you for having me.
-We also have with us Paul Queary.
He is editor of The Washington Observer.
Paul, nice to see you again. -Glad to be with you.
-All right.
And here we go with Sarah Mizes-Tan,
state government reporter for KUOW and KNKX.
Sara, thank you for being here. -Of course. It's a pleasure.
-Let's jump into this here.
Paul, let me start with you.
I want to talk about the new state income tax.
Our legislature approved
the so-called "millionaire's tax."
This is a 9.9% tax on households with incomes
of more than $1 million a year,
affecting about 20,000 Washingtonians.
The tax would raise just about $3 billion a year
and would provide funding for education and child care,
the Working Families Tax Credit, small business relief as well.
It would create some sales tax reductions, too.
Paul, you wrote about this and said the tax
would have been unthinkable a few years ago.
But here we are, now it's happened.
Help us with what this means.
Take us big picture on this.
-Well, I think that this really tees up a kind of,
um, you know,
a fundamental argument about tax policy in Washington state.
I mean,
this has been considered functionally unconstitutional
for nearly 100 years
because of a Supreme Court ruling from the 1930s
that found that your money is your property
and therefore subject to the property tax limit.
-Right. Which has to be even on everybody.
-Right. It has to be even on everybody.
And so this tees up two things.
One, there's going to be a fight in the courts
about whether it's constitutional or not.
So eventually, it winds up in front of the Supremes.
And almost certainly there's going to be a repeal initiative.
So it's going to wind up in front of the voters,
maybe as early as this fall.
And it's been before the voters many times in the past.
And the voters have always said no.
So, now... -Not in its exact form.
This is more the high earners, but still.
-This is more the high earners.
There was a high earners income tax on the ballot
about ten years ago.
-Okay. Right, right. -But the threshold
was much lower than $1 million.
Um, and they were trying to impose that by initiative.
So you would have had to vote "yes."
And this will be a repeal.
So in order to get rid of it, you'll have to vote yes, um --
-Vote yes to vote no, kind of. Yeah, yeah.
-Easier to get voters to vote "no."
So, you know, we'll see how it, you know, how it plays out.
-A lot going on here.
Thank you for that breakdown here.
Shauna, you were writing about this,
too, in this delicate balance of putting this income tax together
involved a partial rollback of last year's increase
in estate tax rates for the wealthy.
So Democrats, I think, we're paying attention to this idea,
to this argument that a measure like this
might push the wealthy out of Washington.
What struck you about how this bill was crafted?
And I'm trying get to that point of
are the high income people going to move out of the state?
Because I know that was a key issue here.
-Well, we certainly keep hearing that.
That's for sure.
Um, you know, I don't know
if that's enough to push people out of the state.
Um, you know, I think some of the --
probably one of the most interesting things to me
about this, and I wrote about this
pretty heavily, was the public defense aspect
of this bill.
Initially, it included a pretty big bump
for public defense services, so...
-Which are in big trouble around the state.
-Correct. Yes, crisis all over the country.
-They don't have funding, right? -Correct.
Especially in smaller counties.
And so, this bill initially had a 5% carve-out.
Then it went to a 7% carve-out,
specifically dedicated to those services.
And then by the final bill, or the amendment
that was added by Rep. April Berg from Mill Creek
that had no public defense services in that,
or earmarked for that.
And I thought that that was particularly interesting,
because it seems
that they still don't really have a plan set out
for funding public defense services
in any sort of meaningful way. -Yeah.
They replaced that with some kind of all-purpose money
for local governments.
But it's not, you know, it's not earmarked
for that specific purpose.
-Right.
And with so many governments in budget trouble, right.
-And many local governments, you know,
kind of neglected this part of the government.
And so, you know, it's going to be interesting to see
how that plays out in the future.
-Sarah, let me go to you here.
And I wanted to follow up on what Paul was saying,
because Democrats structured this
so it can't be challenged with a referendum,
but we're certainly going to see some legal challenges.
I would say some sort of repeal campaign with an initiative.
This was a very hard-fought bill,
and I know 8 Democrats joined Republicans
to actually vote against it.
Can you talk to us about what happens now?
What do you think?
-Oh, yeah.
I mean, I think absolutely we're going to be expecting
court challenges.
I know folks mentioned, pretty much as soon
as the governor signs this,
we'll probably start seeing some court challenges.
And, of course, the ballot item.
I think you mentioned an interesting thing,
which is that there was an amendment in there
to keep it from being, uh,
what is the word? Repealed?
-Yes. Yeah.
The referendum -- It's blocked from a referendum.
-Exactly. Yeah.
And I think that's kind of, you know,
a lot of -- I heard a lot of folks
kind of mentioning it on the House floor during debate.
They were saying,
"Why don't we take this out
so that it's easier to go to the voters?"
"Is this undemocratic" -- Were a lot of questions
that we were getting.
You know, the interesting thing that I heard from folks
who were proponents of this
is that actually, it's a pretty regular item
to have in a lot of different,
um, bills that are related to generating revenue.
-I see, I see.
-It's just not necessarily something that people,
you know, people aren't always scrutinizing every
single revenue-generator bill. But, yeah, you know,
I definitely think it's one of those things in there
that feels a little bit like it might not.
It is, by the rules, of course,
but it does tip the scales a little bit in favor
of this bill being implemented.
-And any other thoughts on this?
I know we've got a new Supreme Court coming on next year.
I mean, any other thoughts about what's next here?
I'll open it up for another.
-I mean, I think it puts a lot
it puts this issue on the ballot,
you know, pretty much for everybody.
Every member of the House, where the 25-hour debate happened...
-Right, right. -...is on the ballot this fall.
-Oh, all those members of the House, right?
They're up for election.
So, you know, the whole question about
whether the income tax remains
the third rail of Washington politics,
which was certainly true, you know,
10, 15, or 20 years ago will be tested.
We'll find out about that.
Um, I think it's worth noting that those 8,
um, you know, Democrats voted against it.
You know, some of those folks were, I think,
clearly voting on principle,
but some of them were pretty clearly voting out
of self-preservation.
And, you know, so I think -- -Always a fine line there.
Yeah.
-This fall's election is going to be interesting.
It's going to be a test of that question.
-Yeah. -Um, you know,
and things look pretty good for the Democrats in general,
because having Donald Trump at the top of the ticket
has been great for Democrats in Washington since 2018.
-Yeah. Yeah. -So we'll see.
We'll see how it plays out.
-Okay. Any other thoughts? Yeah.
-Yeah.
I think it's kind of interesting just the idea
of an income tax for Washington State.
I know a lot of folks also mentioned, during the debate,
that they were worried this was going to be a slippery slope.
Once you open the door for one income tax,
it's very easy, in some people's
opinion, to add on more.
And then I also heard just this kind of idea
that, you know, what is the most progressive way
to tax Washingtonians?
Some tax experts honestly would say it is an income tax
in a lot of ways.
So I think it will be interesting to see.
I mean,
I don't necessarily think there's going to be
an income tax tomorrow or --
-Right, for everybody.
Yeah. -Yes. No, absolutely not.
But I do think it's maybe an interesting concept
to kind of think about.
You know, there is a push for a more progressive tax structure.
And really, what is that? What does that look like?
-Yeah. Got it. Let me move on here.
I'd like to think about
how the legislature was responding
to federal immigration enforcement
during the session,
There was a measure prohibiting law enforcement officers
from wearing masks, one,
limiting ICE agents to data -- from data access to data,
I should say, from automated license plate readers,
and the Immigrant Worker Protection Act,
just to name a few here,
which would make sure workers get notice
when federal authorities come into a workplace
for eligibility inspections.
Shauna, let's talk about this.
How will these measures impact our immigrant communities?
What were state Democrats trying to do here?
-Well, they certainly said at the outset of session
that that was one of their main priorities this year, was
you know, positioning themselves against the federal government.
And it seems like that's what they tried
to accomplish with a lot of this legislation.
You know,
whether or not federal authorities
who have already been breaking laws in other states
are actually going to abide by some of these laws
that are being implemented on a state level here.
That remains to be seen. -Yeah,
I was going to say are
state patrol officers going to arrest, you know what I mean?
Are they going to arrest federal officers?
Will it turn into something like that?
-I -- That would be a question that
would have to be answered when it happened, I think.
But yeah, I mean, you know, for the mask ban,
even, you know, we've seen
judicious murders in Minnesota happening on that sort of level.
And, you know,
so what's to say somebody who does something like that
is actually going to not wear a mask when they,
you know, pull somebody over.
-Right, right.
Sarah, let me go to you on this one.
And I'm thinking about just to follow up on this point,
there's been some pushback from police in our state about this.
We've actually heard this certainly in Seattle here,
this idea of a local officer reporting on
or possibly arresting an ICE agent, etc.
They're saying it's preposterous.
Is this a measure that could face a court challenge?
I'm just trying to figure out how this all plays out.
-Yeah.
You know, I think, again, remains to be seen.
There was a very similar bill passed in California
late last year
that was slightly different from the one
that happened just this session.
But the one in California did encounter a court challenge.
The court challenge essentially said that California's law,
which only applied for many different reasons,
it only applied to federal agents
and masking laws as it related to federal agents.
And the court basically said it's unfair
to regulate federal agents but not state agents.
So Washington's law does include both state agents
and federal agents,
but I think there is still some thought
that it could encounter some court challenges,
although it'll be different from what we saw in California.
-Paul, let me get your take here in terms
of how the legislature responded
to federal immigration enforcement in this session.
The bottom line I keep trying to get to
is should immigrant communities in our state feel safer here?
Is our state ready
if the Trump administration comes in with a big crackdown?
What do you think?
-You know, I mean, I see a lot of these changes
as sort of fundamentally symbolic, you know,
in the sense that it's not clear
that the state gets to tell federal agents
how to behave when they're operating within Washington.
And certainly, as we saw in Minneapolis,
ICE in particular, is quite defiant, you know,
toward the notion
that they're subject to any kind of local control
or local interference.
-Yeah.
-You know, I think immigrant communities should probably,
you know, feel better that, you know,
the state government is generally supportive of them
-as opposed to hostile. -Right.
-You know, as the federal government frequently is.
-Yeah. -So...
-Yeah, it's a lot, a lot to sort through there,
but I appreciate that discussion.
Paul, let me stick with you and I'll switch gears a bit here.
Talking about the high tech world
and artificial intelligence,
which was a big focus for lawmakers in Olympia
in this session, too.
There was one bill passed regarding putting in safeguards
for chatbot safety, especially ones that interact with kids.
Another requires AI operators to inform users
when content has been developed or modified by AI.
What did you make of that focus on AI
this year at the state level?
-Well, I think it's obviously a thing
that a lot of people are concerned about
with a sort of high level of gridlock
at the congressional level on a variety of issues, including AI.
You know, there's a lot of pressure on state governments
to act and on state legislators to act.
So, you know, I think most -- there's a lot of pushback
from AI companies and from tech companies who, you know,
at least say that they want,
you know, sane regulation at the national level
as opposed to a patchwork of regulation at the state level.
-Right. Right.
-You know, they seem happy enough to operate
without regulation for the moment.
-That's true, too.
I'm going to take it a little larger here just to
kind of big tech.
And, Sarah, maybe I can start with you. Kind of a mixed bag
for tech companies,
I would say this session. Definitely a win in terms
of defeating a measure to regulate electricity rates
and environmental impacts of data centers,
Senate Bill 2515.
But they lost a big tax break for those facilities, too.
Let's get into this.
How did legislators approach big tech this year?
This was a really interesting debate.
-Yeah. Are you talking about the data center bill?
-Yeah. Yeah. -Yeah.
That was one that kind of stretched on
until the very final hours of session.
You know, I think at it's -- Just for a high level explainer,
data centers are currently not taxed
or sales tax is not applied
when data centers are looking to replace computers
or different items within data centers.
And so I think there's a thought that because there are so many
and it's an emerging market for Washington,
it could be a huge revenue generator.
So there was a proposal to tax data centers.
And I know the governor was mentioning
that it was critical for implementing the budget,
and that did go all the way up
until the very last hours of session.
-Did it turn out the way you thought it would in terms of
how all those different measures shook out there?
What was your take on what happened?
-Yeah, no, I do think that data centers should, I mean,
you know, I do think that it shook out the way
that it should have.
We absolutely have a budget crisis
that needs to be addressed.
-Right. That's one piece of it.
And maybe I can bring you in here, Shauna.
I'm just looking at this measure specifically regulating the way
data centers use electricity.
And I just wonder if it might come back
to the state legislature again next year,
because I know there's still going to be a lot
of demand for data
and there's still a huge demand for electricity.
So many different cities and counties are talking about this.
Talk to me about what happened this session and what
might be happening in sessions in the future, if you can.
-Yeah. My colleague Conrad Swanson
actually wrote quite a bit about this, but --
-You worked with him on that.
-Correct. Yes.
And so there was a lot of lobbying activity
from Microsoft and Amazon going on behind the scenes.
It looked like it was going to make it there
for a little while.
And then, you know, something happened behind the scenes
and it fell apart before it was able to make it
to the end of session and get passed.
-Do you think it comes back?
Like I say, I just think this is an issue.
-They say it will. -Okay.
-Yeah, it sounds like, you know,
maybe there's some appetite for it in coming years,
but with, you know, some more guardrails on it.
Um, you know,
maybe some adjustments to kind of make some
of the big tech groups a little bit more happy with,
with the way the bill shakes out,
but it sounds like it's something
that they're going to continue to bring back
until they get passed.
-Paul, any thought on the data centers here?
-You know, the data center issue is fascinating
because of the involvement of blue collar labor.
Um, that bill, that broad bill to regulate data centers,
died in part
because there was a real opposition
from electricians and plumbers and pipe fitters.
I mean, those facilities are, you know,
sort of bottomless wells of work for those folks.
Um, and so they were able to kill that broader thing.
The tax break bill actually hung in the balance
right until the end of session,
in part because of a, you know,
a fight over whether to take the revenue or,
you know, whether to preserve the tax break because of the,
you know, the, the job aspect of that.
And ultimately the revenue carried the day.
But it was a very close vote.
-Yeah, it was indeed. Yeah.
And I, maybe I can touch on, uh, budget issues just as,
as we start getting closer to the finish here.
I mean, we're talking about in terms of
where the dollars need to come in.
Uh, sure, they've got a balanced budget,
but I just was looking at, uh, at some of the deficits
that are happening over the next several years here.
And I wanted to touch on that because when they say,
yep, we've balanced it,
but we're foreseeing another budget deficit coming up here.
Can we go down the line here?
Sarah, what are your thoughts on that overall budget package
that Democrats agreed with here?
-Yeah. You know, I think you cannot talk about the budget
without mentioning the millionaire's tax as we had.
I personally, I felt like the two were very much intertwined.
You know, I think Democratic leadership had mentioned
that they are grappling with a budget crisis
just due to inflation and the federal government
and their rising lawsuit costs. And, you know,
they found one time fixes to be able to balance it this time.
But the budget actually doesn't balance in 2028.
And they're going to be looking to income generated --
or revenue generated from the income tax.
-They're kind of banking on it, yeah.
-Yeah. Essentially they're banking on it happening.
Um, and so we,
we absolutely heard from Republicans this session
who said it feels like a house of cards a little bit.
A very delicate balance that's in play.
-Yeah. A deficit of more than $800 million,
I think projected for 2028.
Any thoughts on that overall budget piece there, Paul?
-You know, I think that there was a headlong rush
to spend the income tax before it even passed.
And so the whole, you know, the whole question of
whether the legislation will be back
to sort of lower the threshold from $1 million
down to something else, I think is very much in the balance,
because right now, the way that they write the budget,
they, you know,
they essentially use kind of rosy revenue projections
and, you know, very conservative growth projections, you know.
And those two things, you know, those two lines diverge.
And so, you know, year after year, we're back here with,
you know, with budget deficits.
And, you know, there's no particular end in sight
at this point, even with the millionaire's tax.
I mean, the current rate of growth
will eat up the revenue from the millionaire's tax
almost immediately.
-Wow.
And any thoughts on that overall budget?
-Well, I mean,
they pulled a lot of slick budget maneuvers this year, too.
And that remains to be seen whether or not,
like Sarah was saying,
a lot of that depends on this income tax going into effect.
So there was money coming out of the LEOFF 1 pension,
which is going to backfill rainy day dollars
that they're taking out.
So the LEOFF 1 is the 3 billion out of
the law enforcement and firefighters pension fund.
It is over-funded. The money needs to go somewhere.
But you know,
whether this was the right choice
to kind of fill some of the gaps in for this deficit
that we have for the next few years is that,
you know, is that the right move?
-It's a question mark, and I was really interested.
Just one last touch on the income tax,
the millionaires tax here.
Did Governor Ferguson get enough?
I'm looking at this
and thinking about initially I was like, nope, nope.
That's not going to work for me.
And that's like, yep, that's going to work out fine.
Did enough come out of that in terms of working families,
tax credit, things of that nature?
Would you mind if I start it here?
-We'll go down the line. -Sure.
I mean, he appeared pretty happy with it.
I also, like probably many others,
thought that it wasn't going to make it through,
whenever he came out with the announcement that said...
-This isn't going to work. -This isn't going to work.
And maybe we come back to the table next year.
And so I was a little surprised to see such a huge,
striking amendment from Rep. Berg come in
that seemed to check off all the boxes
-that the governor wanted. -Yeah. Any thoughts on that?
Did the governor get enough here?
-I mean, he got -- There was a larger expansion
of the Working Families Tax credit,
which is real tax relief for low income people.
And then there was a thing
that the governor got that kind of came out of left field
sort of late in the process,
which is free school breakfast and lunch
for all Washington school kids,
which is a thing that the governor campaigned on
and something that he tried to get the legislature
to do last year and wasn't able to get them to do.
-And little Easter egg they had. -Right.
And that's sort of a, you know, that's kind of an interesting,
you know, dynamic
because 70% of kids are already eligible for free
and reduced lunch.
So do the remaining 30% even need it?
And also, that doesn't really categorize as tax relief per se.
-Yeah. -You know, because
it doesn't really apply to you unless you have kids in school.
-Interesting.
-So, you know,
whether the governor -- I mean,
the governor seemed satisfied with what he got
and he seems on board.
But if you look at the whole package broadly,
there's not much in the way of tax relief
for sort of middle income folks.
-Got it. Some final thoughts on what the governor got out of
this big negotiation, Sarah?
-Yeah, yeah,
I agree that I think it really is dependent
on who you ask in terms of if there's enough of that revenue.
Going back to regular Washingtonians,
I think the estimates we've gotten were about like 30% of it
goes back to regular Washingtonians,
but that does count things like free lunch
and the cost of providing free lunch and breakfast.
I agree that I think it is debatable, you know,
how much a regular Washingtonian is going to feel these things.
Um, you know, sales tax breaks
on over-the-counter medication or diapers or hygiene products,
obviously helpful.
Um, I do think that it was nice to see a cutout
or a carve out for childcare and early education.
Those are things that you could kind of see direct reciprocity
with the budget cuts that are happening right now.
I guess the thought is that,
you know, those are kind of the two buckets
that typically get cut when we're in a budget crunch.
So this is a way
to maybe shore up that money so that in the future
we're not making those cuts again and again.
So I could see that being something
that maybe would put some people at ease after 2029.
-Right. Right. -Yeah.
Um, obviously for the regular Washingtonian,
especially if you don't have children.
-Yeah. -I don't, you know,
I guess you'll get a slightly cheaper bottle of shampoo.
-Okay. For those hygiene products, right, right.
-And we saw during that 24 hour debate.
-Yes. Over the income tax.
-About that, about, you know, devoting 49% of,
of the revenue to,
to tax relief or cutting the sales tax by a penny.
-Yeah. Yeah, right. -We saw that stuff
and ultimately that stuff didn't happen.
-Yeah, that's so interesting.
A lot of moving parts there still.
We do need to wrap up, and I'd like if I could,
can we talk about one issue, maybe one we haven't covered yet
that you have your eye on in the aftermath
of this legislative session?
Sarah, can I start with you, please?
-Yeah, sure.
I think we're going to be looking at just affordability.
You know, I think we asked a number of times
how the legislature was looking at tackling affordability.
And I think it's kind of like a really mutable term
that people can -- legislators can say a lot of things
fall under the umbrella of affordability.
But I do think that we really want to dig in a little bit
and say, okay, what did really,
truly happen in the realm of affordability this session
and what still needs to be addressed?
I do think that regular Washingtonians will be looking
down the tunnel
at some very serious cuts to early education and child care
that is absolutely going to affect folks
with young children.
And, you know, there are some,
uh, there are some small gives,
some bills that went through on discounting
medications and energy bills
and creating more affordable housing.
But these are all things down -- Some of them are down the line.
And so we are curious.
There were some bills that fell off
that would have more directly addressed affordability.
Curious to see, um, you know, if those will come back.
-I am, too. Thanks for sharing that.
Paul, what do you have your eye on?
-So I'm interested in the,
the legislature tapping the Climate Commitment Act
money to pay for the working families tax credit.
I mean, that's a legally allowable use of that money.
But, you know, that's Governor Jay Inslee's,
former governor Jay Inslee's sort of legacy legislation.
And the idea was that the money would go toward climate change,
you know,
emission reduction and other kind of environmental things.
And he apparently objected strongly.
-In this session. -Yeah.
In this session to having the money used in that way
and was not heard.
So, you know. -Yeah.
Where do you think that goes?
So a portion of it is now going towards other --
-Right. And, you know,
the Climate Commitment Act is viewed in many,
you know, circles as sort of a backdoor gas tax.
And it's not particularly popular.
And, you know, Inslee was very much the driving factor there.
And I think one of the things we learned from this is that,
um, Governor Ferguson is perhaps not as engaged in those issues
as Governor Inslee was.
-That would be an astute observation there, for sure.
Shauna, help us wrap up here.
Final issue that maybe you have your eye on
that we haven't talked about? What's on your mind?
-Yeah. There's actually a bill
that's being signed by Governor Ferguson today.
It's a very watered down version of a bill
that I've been following for the last couple of years,
but it would end the practice of taking money
from foster students -- or foster children and youth
and using that to pay for their services.
So any time they get SSI benefits or disability
or anything, that goes to DCYF for their care.
And so the bill this year ends the practice
for 18- to 21-year-olds in an extended youth care.
But it doesn't end it for all the other foster youth
that are below that age.
And so I'm hoping that maybe in future legislatures,
we can actually take this issue seriously
and end the practice once and for all but --
-Yeah, what's the impact been?
-Well, we take quite a bit of money from foster children
to prop up services in DCYF.
And I think we can all agree that's not right.
Um, I think we can all agree that that's something
that they should probably have done away with yesterday,
but we'll, we'll see in the future.
-All right. Thank you for that.
And we will be right back.
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We'd like to know what you think.
Send us an email at contact@seattlechannel.org
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Great to get that input.
And a big thanks to Sarah Mizes-Tan,
Paul Queary, and Shauna Sowersby.
Really appreciate you being here.
-Thank you. -Oh, you're welcome.
-And we will see you next time on "City Inside Out."
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