Short: A last-second tax bill out of nowhere

The following op-ed appeared in the Newport Miner and was published earlier in June.

By Sen. Shelly Short | For The Miner

Published June 12, 2019

Out of nowhere, House Bill 2167 was brought before the Senate for a vote on the last day of session, a bill which nearly doubles the business and occupational (B&O) tax banks across the state already pay. One House Democrat introduced this bill April 10, less than three weeks before session’s end. The actual language of HB 2167 was not made public, however, until just hours before it was heard, voted out of committee and off the House floor April 26. Rushed in one day from public testimony to votes out of committee and off the floor with little change. If this tax was truly necessary, then why not introduce it near the beginning of session for a complete hearing and vetting process by the Legislature?

Senate Republicans opposed this tax bill for two reasons. The first was that it was unnecessary. With extraordinary revenue from economic growth, we could fund the budget without new taxes. The second was because it was rammed through during the final two days of session. In fact, the Senate received HB 2167 as a title-only bill, which means it had a title on the first page while the rest was blank.

Despite our efforts to fight against it, including a few Democratic allies joining us in our opposition, the bill was passed by one vote in the Senate and signed into law by Gov. Inslee.

HB 2167 sets up a B&O tax of 1.2 percent on banks. The new law states it will focus on banks that have an income of at least $1 billion. This makes it sound like this new law won’t be consequential. But that is not the case. Most of the banks you know will be impacted. Making matters worse for us is that most of the affected banks are the ones located in our district. Most of you may not have an option of going to a smaller bank that won’t be burdened by this tax.

One might ask, “Why should I care about taxing banks?” The banking industry is one of the largest in the world. You may think that taxing them doesn’t affect you. However, many financial institutions and loan-lending entities adjust their lending practices to not only their national average, but also to whatever local and state regulations they and borrowers are subject to. Thanks to this new law, there is a strong chance you might be blindsided by new fees when you need that important loan. And with the size of these corporations, it’s no surprise that they are the ones we use whenever we need to start a business, finance our homes, or continue maintaining our farms.

In our district, many people are trying to start small businesses to make a living. Business loans are usually procured through these banks one way or another, as they are best equipped to finance a business. Even when you use a local community bank, that bank often forms a partnership with a multinational financial institution in order to fund a local business. During testimony on a different bill last year, Fannie Mae confirmed that adjusting loans based on local regulations does happen. Because of HB 2167, you may find yourself placed in a much more financially painful path when it comes to realizing your hopes and dreams.

Republicans weren’t the only ones blindsided by this bill. So was Sen. Mark Mullet, D-Issaquah. He hadn’t even seen the entire bill when it came over from the House, even though he chairs the Senate committee overseeing banks and other financial institutions. Given his financial experience, he also explained how this can have a ripple effect on lending practices for our average citizens. If such a claim could be alleviated, we still don’t know, he added, since this bill was rammed through without any legal analysis that could be done in two days. More importantly, Senate Democratic leadership disrespected Washingtonians by purposefully ignoring legislative process and constitutional principles designed to give everyone the opportunity to review, offer comments and changes. In fact, it is quite common for bills that go through the traditional process to have changed multiple times. In the end, it isn’t a surprise that Sen. Mullet and a few other Senate Democratic members sided with us in voting no. But it wasn’t enough to kill the bill.

Before Gov. Inslee signed this proposal May 21, Sen. Mullet joined Sen. Mark Schoesler, R-Ritzville, Sen. John Braun, R-Centralia, and Rep. Drew Stokesbary, R-Auburn, in sending the governor a letter requesting that he veto the tax on financial institutions – a tax that would total $133 million. But Inslee did not veto it, even though he had vetoed similar hastily passed tax legislation in the past.

This wasn’t the only tax affecting banks. House Bill 2158, which raises the B&O tax service rate from 1.5 percent to 1.8 percent, also became law. When you combine that with what HB 2167 does, the rate that banks pay will nearly double what they currently pay. In fact, banks in Washington will now be among those institutions with some of the highest tax burdens in the country.

All of this was brought about because our friends across the aisle claim that this new law will help folks who earn a lower income and are overburdened by taxes. If we truly want to lower the tax burden on those who are struggling financially, we shouldn’t do it by taxing the majority of places that hold their money. A wiser option would be to end superfluous taxes, especially after revenue has increased in two years from $41 billion to $50 billion.

And especially after introducing taxes that came out of nowhere in the last two days of session.