Business Groups Press Washington State Legislature for Tax Cuts, Other Pandemic Relief

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After surviving 10 months of shutdowns, heavy layoffs, steep losses and chronic uncertainty, many businesses in Washington say they won't see the end of the pandemic without significant help from state lawmakers.

But one week into the 2021 legislative session, prospects for that relief are anything but clear.

The good news: There's strong bipartisan support in the Democrat-controlled state House and Senate for quick action on measures such as emergency grants for small business and more than $2.6 billion in cuts for unemployment taxes and other business costs.

Such relief could "make or break" small businesses struggling under COVID-19 restrictions, said Anthony Anton, president of the Washington Hospitality Association, one of many trade groups with high hopes for the 2021 session.

But the Legislature's first week also brought warning signs for business, including talk of new taxes and push by labor for extra unemployment benefits. And on Wednesday, Senate Democrats voted down a business-backed Republican amendment that would have sped up Gov. Jay Inslee's timeline for fully reopening businesses, such as restaurants and gyms, that are still operating at just partial capacity.

"I didn't think we would be starting off the session like this, with no hope for those" businesses, said Sen. Perry Dozier, R-Waitsburg, who sponsored the failed amendment. Wednesday's vote, he added, "was a very tough blow for them."

It probably won't be the only one. Going into the session, business leaders and lobbyists knew their agenda faced more than the usual challenges under a Democrat-run legislature. Lawmakers would be trying to negotiate the 2021-2023 state budget while responding to a public health crisis that has dislocated tens of thousands workers, shuttered some 3,000 businesses, overwhelmed the state's social safety net and created a projected revenue shortfall of $2.4 billion.

The revenue shortfall alone had all but guaranteed a push by Democrats for new taxes, including many the business lobby has opposed.

Among them, a 9% percent capital gains tax and a tax on health insurers, both of which are in Inslee's proposed $57.6 billion budget last month. Business groups were also girding for fights over other new taxes, including revived proposals for a carbon tax and a statewide high-earners' tax similar to the JumpStart tax enacted last year in Seattle.

Business rarely likes new taxes; but in this session, lobbyists are making the case that new taxes both will slow economic recovery and won't be necessary, given state revenue projections that continue to improve and expectations of new state aid from President-elect Joe Biden's incoming administration. "Right off the bat, it just concerns us that [many Democratic legislators'] talk mainly is about more revenue," says Gary Chandler, lobbyist with the Association of Washington Business, one of the state's biggest business groups. "So our message to legislators ... first of all, please during this session do no harm."

But in addition to opposing tax hikes, business groups also seek specific fixes from the Legislature. Near the top of the list: temporary relief from the expected increases in unemployment taxes most businesses would otherwise face as the state replenishes an unemployment insurance trust fund heavily depleted by pandemic-related layoffs.

Well before the session opened Monday, lawmakers and lobbyists said, bipartisan support had emerged for the quick passage of key measures that could deliver quick aid to businesses. These ranged from unemployment tax relief and more grants for small businesses to reductions or deferrals in property tax and various licensing fees, and a measure that would exempt businesses from business & occupation taxes on federal emergency funds, such as the Paycheck Protection Program, lobbyists and lawmakers say.

"I've never seen more interest on early action than I have this session," said Nathan Gorton, a lobbyist for Washington Realtors. "Legislators are really trying to prime a number of bills to push out and and get through the process very quickly."

So far, the business lobby's pandemic legislative strategy has delivered mixed results.

For example, under legislation pushed by Inslee and Sen. Karen Keiser, D-Des Moines, chair of the Labor, Commerce, & Tribal Affairs Committee, businesses will score a huge win — a cut of more than $1 billion in new unemployment taxes for 2021 and a total of $2.6 billion in relief through 2025.

But that comes at a political cost: The bill also raises the minimum weekly payment for workers receiving regular unemployment benefits, from $201 to around $274.

That increase, pushed by state labor groups, will be welcomed by laid-off low-wage workers. But business groups note that it will accelerate the depletion of the unemployment trust fund — by nearly $198 million in 2021 alone, according to state estimates — which ultimately will mean higher employment taxes.

"It's essential for us to get our businesses back open so they can rehire [and] give workers their jobs back, give them a paycheck, before we start trying to expand benefits," said Patrick Conner, state lobbyist for the National Federation of Independent Business.

But many Democratic lawmakers and labor groups say the benefit increase is non-negotiable. "We're talking about increasing the benefit for people that made between $20,000 and $27,000 a year," said Joe Kendo, lobbyist with the Washington State Labor Council. "The notion that that extremely modest benefit adjustment is somehow unfair when leveraged against ... $2 billion or more in tax considerations for employers — that seems absurd to me." Even some business lobbyists see the benefit increases as key to getting unemployment relief through the Democratic-controlled statehouse.

Business has also come up short on another legislative priority: reopening state business faster than envisioned under Inslee's Healthy Washington strategy, which many business groups fear will effectively keep them closed until early summer.

Last week, Republican leaders came under fire for trying to trying to pressure Inslee to accelerate the reopening by blocking several of the governor's emergency measures.

And as the defeat of Dozier's amendment suggests, few Democratic lawmakers thus far have been willing to openly oppose Inslee's reopening plan or to complain, as Republicans have, that the governor's numerous emergency proclamations have largely sidelined the Legislature.

But some business lobbyists think that could change. One reason: Many Democrats are also feeling heat from struggling small businesses in their districts — heat that Republicans and business groups hope to leverage legislatively.

Case in point: State Senate Minority Leader John Braun, R-Centralia, is working with Sen. Mark Mullet, D-Issaquah, known for his pro-business leanings, on legislation that would immediately move the state into the less restrictive Phase 2 and empower state lawmakers to determine when counties could reopen further.

The bill's prospects aren't clear: Business lobbyists doubt it has the votes to pass both the House and Senate with veto-proof margins. But Mullet said his ultimate goal is to persuade Inslee to revisit his reopening plan.

So far, the governor isn't signaling parley. "We are confident in our approach," an Inslee spokesperson said in an email Thursday. "Legislators have their own take but we are focused on preventing infection, hospitalizations and deaths."

But Mullet thinks he'll find support among fellow Democrats who've spent the nearly two months since Inslee re-imposed restrictions hearing harrowing stories from struggling small business owners.

Mullet describes the political calculus this way. If the 2021 session had opened before Inslee re-imposed business restrictions, "I guarantee you, nobody, no Democrat would be dropping bills to shut them down based on the current [health] data."

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