To help fund more than $16 billion in transportation projects, Democrats in Washington state 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 more authority to tax natural gas, steam and telecommunications companies — compensation for the proposal’s limited direct funding to cities and counties.
In doing so, Democrats are delivering on their promise not to raise the state’s gas tax, while broadening the scope of their transportation ambitions. But the tax proposals are facing backlash from the oil, gas and telecommunications industries, as well as Republicans who say the costs could fall on consumers.
Democrats control the levers of power in Olympia and Republicans have acknowledged that the transportation package is likely on the fast track to approval.
Previous transportation funding measures have been funded largely by state gas tax increases. But after taking that option off the table earlier this year, Sen. Marko Liias, D-Lynnwood, chairman of the Senate Transportation Committee, said Democrats looked elsewhere and ultimately opted for the export tax. .
The 6-cent-per-gallon tax is a fair proposition, said Rep. Jake Fey, D-Tacoma, it would mean neighboring states would share the environmental burden of Washington’s five refineries.
“I think it’s only fitting, 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 compensated the state for the environmental impact of the refineries while giving the state more opportunity to invest in its transportation system.
The oil and gas industry quickly opposed the new tax, arguing that it would cost jobs and could conflict with the trade clause of the US Constitution.
“With the fuel export tax, you are putting our current businesses and jobs at risk,” Tom Wolf, a lobbyist for BP of America, said in a public hearing Thursday.
Fey said the tax passed the initial sniff test by legal counsel.
Republican leaders in the state argued that the tax would hurt consumers. “Despite our huge surpluses that we have in the operating budget, the Democratic majority is instead choosing to add billions of dollars in taxes and fees,” said Sen. John Braun, R-Centralia.
In Oregon, which would likely absorb some of the impact of the tax, lawmakers are considering its implications. Rep. Susan McLain, D-Hillsboro, who sits on Oregon’s transportation and I-5 bridge committees, said she’s in discussions with colleagues to understand what this might mean for their transportation funding.
“It’s all part of the partnership we have with the states around us,” she said.
Democrats also want to give cities and counties the power to tax natural gas, steam and telecommunications companies up to 2% if they choose, especially for transportation projects.
“If you find anything we’re a bit weak on in this package, it would be local government support,” Fey said. “We needed to give them some ability to increase their income and local options are one 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 preferred method, of course, but that’s all we had the ability to do,” he said. “Doing something for nothing, that’s where we’re done.”
This proposal also met with negative reactions from industry representatives. David Ducharme, lobbyist for the Broadband Communications Association of America, said they support all carriage, but not the local tax option. “Local governments will most certainly use the authorization to increase the tax cap on telecommunications services and this will have an impact on our customers,” he said.
The Democrats’ proposal would invest heavily in state highways, completing major projects like Highway 520, setting aside $1 billion for the I-5 bridge over the Columbia River and spending $3 billion on maintenance. He would also spend billions on transit service, making roads more accessible to cyclists and pedestrians, fixing state salmon culverts and adding four new ferries to the state’s aging fleet.
At Thursday’s hearing, a line of labor, business, environmental and transit advocates testified in support of the funding measure. Governor Jay Inslee said he was “extremely pleased” with the proposal and urged its speedy passage through the Legislative Assembly.
While backing some of the proposed plans, Republicans have so far largely criticized the rollout of the package and its use of new taxes and fees.