(The Center Square) – Two Washington State Democratic lawmakers introduced legislation this week that would fund access to health care by imposing an income tax on the annual pay of certain highly compensated hospital employees.
The bill comes after the Washington State Supreme Court ruled last month that the state’s capital gains tax – a 7% tax on profits of more than $250,000 from the sale of assets like stocks and bonds – was constitutional, essentially saying that an excise tax could be applied to income.
“Beginning January 1, 2024, for taxes due in 2025, an excess compensation tax is imposed on the hospitals that pay covered employees excess compensation,” reads Senate Bill 5767, which was introduced Monday by Sen. Christine Rolfes, D-Bainbridge Island, chair of the Senate Ways & Means Committee, and Sen. Emily Randall, D-Bremerton. “The tax equals the sum of the annual total compensation ... of any covered employee that is paid excess compensation during the tax year, multiplied by 7.5 percent.”
SB 5767 defines excess compensation as “the annual total compensation of a covered employee ... that exceeds 10 times the average annual wage most recently published, as of December 31st of the tax year, by the employment security department.”
The Center Square reached out to Rolfes’ office to ask if the introduction of SB 5767 was related to the recent Supreme Court decision on the capital gains tax, but did not receive a response.
Sen. Manka Dhingra, D-Redmond, took a stab at addressing SB 5767 during Tuesday morning’s media availability event held by Democratic leaders to discuss the legislative session.
“I think it’s always interesting when bills drop later on in the session, and I know I was surprised to see that one,” the Senate deputy majority leader said. “But, you know, you keep hearing a lot about wealth inequities in our state and, you know, I think everyone widely recognizes that we have an upside down tax structure.”
“And I think it’s always great to hear from people about their ideas on how to address inequities in our state,” she added.
At their own media availability event 30 minutes earlier, Republican leaders were not amused.
“You know, this is such a worrisome phenomenon now,” Rep. J.T. Wilcox, R-Yelm, said of SB 5767. “It’s not just about taxes; it’s about the idea that, you know, you demonize a group and you use the Legislature to go after them.”
“And if anybody thinks they won’t be part of some unpopular groups sometime, they should think again. The idea of using legislation to attack individual groups, small groups of people, is just so corrosive,” the House Republican leader continued.
Sen. John Braun, R-Centralia, noted that even before the Supreme Court’s decision on the capital gains tax, Democrats had introduced legislation that would increase the capital gains tax rate and lower the value exemption, applying the tax to many more Washingtonians with capital gains income.
Senate Bill 5335, which has not made it past the committee stage, would increase the captain gains tax from 7% to 8.5% and lower the threshold from $250,000 to $15,000.
“And we’ve been saying all along that if they get the ruling they ultimately got, that this is going to be a gateway to additional taxes on a whole realm of organizations and people around our state," Braun said. "And I think this bill is probably a message given we’re in – we have less than three weeks left in the session – is an indication of where people are going to go when they either, as J.T. said, have concerns about a particular organization or they just need to find extra money to do something else with."
Look for more excise taxes in the future, he pointed out.
“I would be shocked if when we come back into session next year we don’t have a myriad of different excise tax bills that go after different organizations and different groups of people, all for perhaps noteworthy causes but not done in a way that is, I think, in keeping with our constitution or in a way that’s fair and balanced,” Braun said.
