Could Washington’s $16.8 billion transportation tax start a tax battle with Oregon?
Will Oregon back away from the Interstate Bridge Replacement (IBR) project if Washington lawmakers elect to tax their gas and fuel? The IBR project team has requested $1 billion each from Oregon and Washington, which is in addition to proposed tolls that would help pay for the project.
Three weeks ago, members of the Washington State Legislature began considering the largest transportation package in the state’s history. The $16.8 billion proposal, dubbed Move Ahead Washington, is the fourth transportation package in the past two decades being proposed by the legislature. One part of the revenue is a 6 cent tax on refined fuel exported out of the state.
Washington refines most of the fuel burned in the Pacific Northwest. The idea behind taxing exported fuel was to avoid increasing the gas tax on Washingtonians. The export tax is calculated to raise $2 billion over 16 years.
The state levies a $0.49 a gallon gas tax on Washington residents. Fuel exported outside of the state is exempt by law from that levy. The proposed transportation package from Democrats would repeal that exemption, passing new taxes on neighboring states that depend on fuel refined along the Puget Sound.
Sen. Annette Cleveland (Democrat, 49th District), while a proponent of the Move Ahead Washington package, worked to give Oregon a brief break on the proposed gas export tax earlier this week. She said It is a “grave concern” to Oregon, who is our “partner” on the Interstate Bridge project. Her amendment to SB 5974 delayed implementing the tax for five months, to June 30, 2023.
But that wasn’t enough for Oregon Gov. Kate Brown, who is outraged at the tax. On Thursday, she indicated she had spoken to Gov. Jay Inslee.
“I spoke with (Gov. Jay Inslee) today and made very clear that Washington taking unilateral action to increase gas prices for Oregon families and businesses is unacceptable,” she said on Twitter. “Washington leaders should know their actions will impact Oregonians’ lives. Continued collaboration between our states will always lead to better outcomes for both Washington and Oregon.”
According to the U.S. Energy Information Administration, over 90 percent of Oregon’s fuel comes from Washington. The state would likely be hit the hardest by a potential fuel export tax.
It is unusual for elected representatives to consider such a large measure during a short, 60-day session, much less in an election year. What is also unusual, is the proposal does not raise the state’s 49.4 cent gas tax, the third highest in the nation. Instead Democrat legislators decided to tax gas and fuels that are exported to Oregon, Idaho, Alaska, and other northwest communities.
“Taxing the neighbors sounds like easy money until you start having to make deals with them over something important — something like, for example, replacing the rickety, 100-year-old bridge that links Vancouver and Portland,” says Paul Queary at the Washington Wire. “Cutting a two-state deal to replace the bridge has been an intractable political mess for decades.”
That’s why Cleveland prevailed on the Senate Transportation Committee to delay the implementation of the tax from February 2023 until June 2023 as the panel was passing the revenue part of the transportation package on Monday, Queary said.
“I don’t have to tell you, I’ve worked for many, many, many years to address the need to replace the Interstate 5 bridge and my commitment to the partners involved in this effort, chiefly Oregon, and the federal government,” Cleveland said in introducing her amendment.
“One of the sources of revenue included in this package, the exported fuel tax, is a source of grave concern to our partner, the state of Oregon,” she said. “They’ll be paying a disproportionate share of this tax to help fund our Move Ahead Washington package, while also working to fund their own portion of the I-5 bridge replacement, which seems overly burdensome and unfair to me.”
Included in the list of projects is $1 billion for the Interstate Bridge Replacement (IBR) program, among the $2.6 billion in capital projects. There is also $3.1 billion for transit, $3 billion for highway preservation and maintenance, $1.3 billion for the state ferry system, $1.2 billion for “safe schools” and active transportation, bike and pedestrian improvements.
Funding the proposal includes a 6 percent tax on fuel exported out of the state, which would raise $2 billion. Aircraft fuel taxes would also go up by 11 cents. The bill’s language exempts states that have a higher gas tax than Washington, which allows California to avoid the new tax.
Sen. Curtis King (Republican, 14th District) introduced an amendment to eliminate the gas export tax. “We’ve heard from Oregon, we have heard from Idaho, and I think we’ve heard from Alaska, which is where we sell most of this gas,” he said. “They are not jumping with glee, I can tell you that. Oregon has talked about things like retaliation.”
“I suppose, if enacted, Oregon will look at ways to retaliate,” Oregon state Sen. Lee Beyer — who chairs the state’s transportation committee — told Oregon Public Broadcasting. “I have questions about the constitutionality of the proposal,” he said. “I suppose if enacted, Oregon will look at ways to retaliate.” He’s also a member of the Bi-state Bridge Committee of 16 legislators who oversee and provide direction to the IBR team.
Sen. Annette Cleveland discusses her amendment to SB 5974, her efforts to get a replacement of the Interstate Bridge, and her support of the Move Washington Forward package. Video courtesy TVW
“I think there’s a variety of problems with this 6 cent expert fuel tax addition,” King said. “I think we ought to remove it.” A party-line vote, including Cleveland, rejected his amendment.
Sen. Rebecca Saldana, (Democrat, 37th District), noted that nearly half the oil refined in the state “goes out without any benefit to our local transportation system.” She joined Cleveland in voting against the King amendment.
Yet 20 minutes later, Cleveland introduced her own amendment about Oregon’s “grave concern.” She asked to delay implementation, but not eliminate the tax.
“To all my colleagues on both sides of the aisle. In approaching this monumental task has been a collaborative process, and an effort where all voices are heard, and all perspectives are respected in order to reach a consensus project,” she said.
Jake Fey (Democrat, 27th District), also sits on the Bi-state Bridge Committee, in addition to acting as chair of the House Transportation Committee. “In terms of fairness, I think it is only appropriate since we produce the fuels for their use that they support our climate activities and our overall activities in the package,” he said. “”We bear the brunt for the environmental impacts that are created by having the refineries here in the state.”
Asked whether the tax proposal could sour the ongoing discussion about replacing the Interstate Bridge, Beyer said: “I don’t want to jump to any conclusions on that.”
Washington Senate Transportation Committee Chair Marco Liias (Democrat, 21st District), said there is precedent for a state to charge an exported fuel tax that targets a neighboring state’s drivers.
“Florida, Texas and Tennessee … have taxes that they apply to exported fuel from their in-state refineries,” Liias said during a Feb. 8 virtual press conference. “Washington will not be the first to consider this as a revenue tool.”
Rep. Vick Kraft, (Republican, 17th District) saw it differently. “We should be focused on real solutions to significantly reduce traffic congestion in our Southwest Washington region, which means moving ahead with a third bridge now,” she said. “No tolls, no taxes, no fees should be implemented.
“This all comes down to the need for government to listen to the commuters and truck drivers who drive these routes regularly, who would benefit from a third bridge, and prioritize existing funds to pay for this much needed infrastructure,” Kraft concluded.
Sen. Curtis King offers an amendment to remove the export fuels tax from the Moving Forward Washington transportation package during a hearing of the Senate Transportation Committee. It was rejected along a party line vote. Video courtesy TVW.org
One legislator argued turnabout is fair play when it comes to the export fuel tax. Rep. Sharon Wylie (Democrat, 49th District) represents tens of thousands of commuters who live in Washington, but have Oregon taxes withheld from their paychecks because they work at jobs in the Portland area. “My people pay 10 percent Oregon income tax if they don’t have a job on my side of the river,” Wylie said.
The $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) passed last month included “at least” $14 billion in federal funding for Oregon and Washington. According to Oregon Sen. Ron Wyden, Oregon alone will receive $5.36 billion. Washington is expected to get $8.6 billion. Wyden touts the possibility of “more” being available via competitive “grants.” This money is added to the $6.6 billion (biennium) Washington will spend on transportation and Oregon will spend $3.3 billion in highway fund revenue for 2022-23.
Under the IIJA package, over the next five years Washington will receive around $4.7 billion for highways and $605 million for bridges and another $1.8 billion in public transportation spending, according to Washington Sen. Patty Murray. There is a special $5 billion Mega Projects Grant Program included in the bill that would fund the Interstate Bridge project, according to one report.
Four bills combine to make up the Moving Forward Washington transportation package. Senate and House Transportation Committee Chairs Liias and Fey unveiled Senate Bills 5974 and 5975 and House Bills 2118 and 2119.
The proposal includes $5.4 billion in new taxes, not only on Oregon and Idaho and Alaska, but on Washington residents as well. The bill’s proponents also want to grant cities and counties the authority to tax natural gas, steam power and telecom businesses up to 2 percent 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.”
The measure authorizes local government to impose new taxes on utilities such as natural gas. It also authorizes a 2 percent tax on phones, both landlines and cell phones. Car tab registration fees increase as well.
The price of getting an enhanced driver’s license would increase. It also authorizes local governments to use sales taxes for the benefit of transportation projects. The proposal also allows adjustments of I-405 tolls to increase speeds in HOV lanes in Seattle.
One item significantly expands red light cameras, in what are called school zones and hospitals zones. The bill enacts a one-mile buffer allowing red light cameras to ticket people one mile away from hospitals, from schools, from parks, according to Mark Schoessler, (Republican, 9th District).
“If you get off the freeway in Olympia, Slater Kinney road, you’re already in that school zone,” he said. “You get a mile past that school, and you’re almost into South Bay School. That’s repeated all over Puget Sound and the rest of our state.”
Sen. Mark Schoessler and Seattle radio personality John Carlson discuss the Moving Forward Washington tax package and all the tax increases that are included in it for citizens. They begin with the significant expansion of red-light cameras within 1 mile of hospitals, schools, or parks.
“Who ever heard of parks, and hospitals having a one-mile radius of 20 mph with photo cameras,” Schoessler told KVI radio host John Carlson. “This is one of the back of the budget items that should scare the taxpayers as much or more than the overall package.”
Carlson noted you could be 10 or more blocks away from a school or park and suddenly get a red light camera ticket.
Will a “tax war” ensue between the states, conservative talk show host Lars Larson recently chmed into the discussion.
“There are a lot of people in Washington state who are objecting to the idea of Oregon tolling freeways . . . in the Portland metro area,” Larson said. “The majority of the people paying the toll will be from Washington. Now Washington is proposing to start sucking tax dollars north across the Columbia River from people on the south side by adding six cents a gallon to every gallon of gas.”
The Move Ahead Washington proposal bans the sale of gasoline engines in the state by 2030. The Biden administration recently announced plans to end production of gas powered cars by 2035. Nationwide, less than 1 percent of the nearly 290 million registered vehicles are electric.
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