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June 28, 2022

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Potential new taxes buoy $16B transportation plan by Washington Democrats

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To help fund more than $16 billion in transportation projects, Washington Democrats have proposed a new tax on fuel exports that could raise up to $2 billion. At the same time, Democrats also hope to give local governments increased authority to tax natural gas, steam power and telecom businesses — compensation for the proposal’s limited direct funding to cities and counties.

By doing so, the Democrats make good on a pledge not to raise the state’s gas tax, while also expanding the scope of their transportation ambitions. But the tax proposals are being met with backlash from the oil and gas and telecom industries, as well as Republicans who say the costs could fall to consumers.

Democrats control the levers of power in Olympia, and Republicans have acknowledged the transportation package is likely on a fast track to approval.

Past transportation funding measures have been funded largely through increases to the state’s gas tax. But after removing that option from the table earlier this year, Sen. Marko Liias, D-Lynnwood, chair of the Senate Transportation Committee, said Democrats looked elsewhere and eventually landed on the export tax as an option.

The 6-cent-per-gallon tax is a fair proposition, said Rep. Jake Fey, D-Tacoma, that would mean neighboring states would share in the environmental burden of Washington’s five refineries.

Legislature dollars

A truck joins other traffic crossing the Interstate 5 Bridge while traveling north on I-5 on Jan. 7, 2020. $1 billion for Interstate Bridge Replacement Project included in transportation package
Clark County could get a slice of the $16 billion Move Ahead Washington transportation package announced by state House and Senate Democrats on Tuesday.
The Capitol in Olympia. Washington House, Senate Democrats release $16B transportation package
House and Senate Democrats in Washington state on Tuesday unveiled a $16 billion, 16-year transportation revenue package that spends on a variety of…

“I think it’s only appropriate, since we produce the fuels for their use, that they support our climate activities and our overall activities in the package,” Fey said Tuesday.

Liias agreed, saying it both compensates the state for the environmental impact of the refineries while providing the state more chances to invest in its transportation system.

The oil and gas industry has been quick to oppose the new tax, arguing it would cost jobs and could conflict with the commerce clause of the U.S. Constitution.

“With the fuel export tax, you’re putting our current business and jobs at risk,” said Tom Wolf, a lobbyist for BP of America, said during a public hearing Thursday.

Fey said the tax had passed the initial sniff test by legal counsel.

Republican leadership in the state contended the tax would hurt consumers. “In spite of our enormous surpluses we have in the operating budget, the Democratic majority choose instead to add billions of dollars in taxes and fees,” said Sen. John Braun, R-Centralia.

In Oregon, which would likely absorb some of the tax’s impact, legislators are examining its implications. Rep. Susan McLain, D-Hillsboro, who sits on Oregon’s transportation and I-5 bridge committees, said she’s in discussion with colleagues to understand what it could mean for their transportation funding.

“It’s all part of the partnership that we have with the states around us,” she said.

Democrats also want to grant cities and counties the authority to tax natural gas, steam power and telecom businesses up to 2% if they choose, specifically for transportation projects.

“If you find something that we’re kind of weak on in this package it would be supporting local government,” Fey said. “We needed to give them some ability to raise revenues and local options is a way to do that.”

Rep. Bill Ramos, D-Issaquah, said lack of transportation funding is among the top complaints he hears from cities and counties. “It’s not my favorite method, for sure, but it’s all we had the ability to do,” he said. “Doing something versus nothing is where we ended up.”

This proposal was also met with pushback from industry representatives. David Ducharme, lobbyist for the Broadband Communications Association of America, said they support the overall transportation package but not the local tax option. “Local governments will most certainly use the authorization to raise the tax cap on telecommunication services and it will impact our customers,” he said.

The Democrats’ proposal would invest heavily in the state’s highways, finishing major projects like Highway 520, setting aside $1 billion for I-5 bridge over the Columbia River, and spending $3 billion on maintenance. It would also spend billions on transit service, making roads more accessible to bikers and pedestrians, fixing the state’s culverts for salmon, and adding four new ferry boats to the state’s aging fleet.

In the hearing Thursday, a queue of labor, business, environmental and transit advocates testified in favor of the funding measure. Gov. Jay Inslee said he’s “extremely happy” with the proposal and urged its quick passage through the Legislature.

While supportive of some of the proposed projects, Republicans have so far largely criticized the package’s rollout and its use of new taxes and fees.

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