(The Center Square) – The day after Washington Gov. Bob Ferguson signed into law a two-year, $78 billion operating budget that amounts to the largest tax increase in state history, critics expressed disappointment and concern about how higher taxes will impact families and large and small businesses.
Sen. Nikki Torres, R-Pasco, one of the GOP budget writers who offered a no-new taxes budget proposal, told the Center Square she was holding out hope until the last minute that Ferguson would keep his word not to raise taxes on already burdened Washingtonians.
“I was really hoping that he would just strike it all and say come back for a special session, but obviously he did not do that, and I’m very disappointed that he didn’t do that because he campaigned on that,” Torres told The Center Square on Wednesday. “Washington is so unaffordable right now … this $9 billion in tax increases is not going to make it more affordable.”
During a press briefing after Tuesday’s bill signing, Ferguson was asked about Engrossed Substitute House Bill 2081, one of five tax bills signed Tuesday to fund the operating budget.
ESHB 2081 modifies various business and occupation tax provisions, including increasing tax rates, creating a temporary B&O tax surcharge on large companies, clarifying investment income deductions, and establishing exemptions for certain investment vehicles.
“There are some revenues there that we need to take a closer look at to make sure there aren’t unintended consequences, so I would not be surprised if there are some changes – beyond technical changes – to those revenue streams in the supplemental budget,” Ferguson replied when asked about the concerns raised by the business community about new and higher taxes. “We’re going to make sure we have lengthy conversations with folks in taking a look at each of those revenue streams.”
Asked for specific examples that he may be concerned about, Ferguson declined, saying, “I don’t think that’s proper. We’re going to have plenty of time to do that.”
Mark Harmsworth, director of the Small Business Center at the Washington Policy Center think tank, told The Center Square that the consumer will ultimately pay the higher taxes attached to businesses.
“The business isn’t just going to sit there and say, ‘Oh, that’s nice, you’ve just raised my taxes, I’ll just eat the cost.’ You know, some businesses – particularly restaurants and retailers – their percentage profits are incredibly small, so this is a huge effect on small business,” he elaborated.
Harmsworth suggested that many talking points about taxing the wealthy to pay their fair share are disingenuous, as they most impact small and medium-sized business owners.
“I think there’s this misconception that every small business owner is a multimillionaire and is driving around in a Lamborghini. Now that’s just not the case,” he said. “And often, you know, they’re taking salaries that are equal or less than some of their employees, and you know, they’re just barely making it basically, and then you slap on this and you start seeing these businesses go out of business.”
Ferguson vetoed portions of the five spending bills, but did so sparingly.
According to an email forwarded from Torres, the total amount vetoed by Ferguson was $26 million.
“There’s a whole list with numerous items that were vetoed,” Ferguson said during a Tuesday media availability event, but he did not provide any specifics at the time other than referencing vetoing a section in one of the spending plans that would have removed a tax exemption for community banks.
In his section veto of Senate Bill 5794, Ferguson wrote, “Repealing this B&O tax deduction would significantly increase lending costs for community banks at a time when we are trying to keep housing expenses as low as possible.”
The governor was asked about his message to hard-working Washington families worried about increasing taxes.
“We hear those concerns, and that’s why we took the time to go through the budget line by line,” Ferguson explained. “Inheriting a $16 billion budget shortfall is … not the way I wanted to start as governor. I understand very clearly that this will be a challenging budget for Washingtonians.”
As reported by The Center Square, nonpartisan staff to the Senate Ways & Means Committee say the actual budget shortfall is $7.5 billion, not $16 billion.
In the meantime, Democrats are celebrating that the operating budget has been signed into law.
“Even in the face of financial challenges, we’ve safeguarded essential services like healthcare, mental health services, public safety, and social programs that our communities rely on daily,” Washington State Democrats emailed The Center Square.
Tax hike opponents outside of government, including the Association of Washington Business, contend that the budget as passed is devastating.
“There is no section of our membership that is not going to be negatively impacted by this budget,” AWB Vice President for Government Affairs Morgan Irwin said. “Whether that is a direct tax on their business or tax upstream or downstream on the goods and services that they produce or provide, everyone, and I mean everyone, is going to be affected by this budget.”
Irwin said AWB was initially optimistic early in the session that Ferguson would exercise more restraint regarding tax increases.
“You can’t make something more affordable by making it more expensive,” he said. “Our view is that the Legislature made almost every aspect of the Washington economy this year more expensive to operate, more expensive to buy in, more expensive to sell in, and more expensive for consumers across the board. Any socioeconomic level, and any industry that people buy from, their goods and services will cost more because of this budget, and we don’t think that that was the right move.”
