The GOP went all-in on taxes — and lost

Usually in the honeymoon period, between an election and when lawmaking begins, legislators are a bit shy about using the “T” word. That’s because taxes are the pain side of politics. Better to talk about the promise for now, and hold back any unpleasantness for later. But not this year. In gatherings this past week to preview what’s coming in Washington politics, Democrats were abnormally blunt about it:

“We should be taxing rich people and companies that can afford to pay more,” said Sen. Jamie Pedersen, D-Seattle, the new state Senate majority leader, speaking at the Re-Wire Policy Conference in Tacoma. Echoed Rep. Joe Fitzgibbon, D-Burien: “We have heard loud and clear from Washingtonians that they want us to invest more.” Why suddenly so bold on a topic that usually invites euphemism and squeamishness? The irony is that it’s all because Republicans asked state voters to weigh in on the question. Rewind to a year ago, when a Redmond hedge fund manager, Brian Heywood, went all-in on financing some ballot measures to put the Democratic agenda up for a vote. At a personal cost of $6 million, Heywood had designs on repealing Democrats’ tax and social programmes, while simultaneously rejuvenating the moribund GOP brand.

“It’s the first sign of a pulse for Republicans in almost a decade,” I wrote in September 2023. The premise went beyond just repealing some taxes. Heywood felt Democrats had been in power too long and gotten heedless, passing “stupid, overly aggressive, radical progressive policies.” The goal was to rally voters against it and sweep Republican candidates along. It didn’t go as planned, to put it mildly. The Legislature did approve three of the six initiatives, but the three that went before voters got crushed. Despite a red-leaning tide nationally, Democrats actually gained seats in the Washington Legislature and now have 60% majorities in both houses.

Democrats say the rear-guard GOP attack on their policies ended up having the opposite effect — it validated them. “The people largely upheld the work we’ve done over the last six years,” Pedersen said. But beyond that, the vote did something I’ve not seen happen before in Washington state politics. It was the most pro-tax statewide vote, by far, in the 35 years I’ve been covering this stuff. The rueful Democratic complaint for years has been that we’re a blue state on social issues but a red one fiscally. During the last statewide tax votes, back during the recession period of 2008 to 2012, voters soundly thrashed any effort, no matter how mild, to balance spending cuts with tax increases. In 2010, we rejected an income tax and a soda tax by more than 60%. We also passed a measure to curtail taxes into the future.

“Voters are telling us they’ve had enough. People want the government to live within its means,” a Republican leader summed up back then. This year all that conventional wisdom got turned on its head. Voters endorsed three huge taxing schemes at once — a capital gains tax on the wealthy for schools, a carbon fee system for climate change and a payroll tax for long-term care. “It was all by pretty considerable margins, too, and winning in parts of the state that you don’t typically see voting for taxes,” Fitzgibbon pointed out.

That last part is striking. The capital gains tax won in 32 of 39 counties, including places in Eastern Washington that voted more than 70% for Donald Trump. Who predicted ruby-red Ferry or Adams counties would endorse a capital gains tax? No one. The climate change measure raised gas prices that are supposed to be a bellwether for conservative politics, so the result there was even more surprising. That law was upheld in far-flung places like Okanogan and Walla Walla.

The vote was so counter to Republican thought that initiative backers were left flummoxed. “I think there were people who were confused as they were voting,” Heywood told Q13 after the election. “They didn’t know if they were voting this way or that way.” These were ballot questions where voting “yes” repealed a law — you had to say yes to say no to the law, in other words. So maybe voters got mixed up. The problem with that analysis is that a fourth initiative, I-2066, was also on the ballot to repeal some new rules Democrats had put on natural gas. That was a “yes to say no” situation, too, and it passed. So voters figured that one out but not the other three?

An after-election poll by DHM Research also showed voters grasping the ballot measures just fine. Example: 92% of people who told the pollster they voted “no” to preserve the capital gains tax said they did so because it’s a tax on just “a handful of wealthy households,” or that eliminating it would “cut funding to child care and education.” These are both nonconfused, on-point responses. The pollster found voters didn’t seem discombobulated by the climate change measure, either. Bottom line: A multimillion-dollar GOP bet to put Democrats and their tax policies on their heels has instead only emboldened them. They said they’re going to start by “scrubbing the budget,” but they’re already leaping rhetorically past that exercise.

“Voters in this last election gave us some pretty strong direction,” Pedersen summed up the thinking. “Do they want us to cut public schools? No, they do not. Do they want us to cut environmental funding? No, they don’t.”

“Heywood burned $6 million to discover that Washington voters value child care, taking care of seniors, and fighting pollution with clean energy, more than tax breaks for hedge fund managers and big polluters,” said Aaron Ostrom of the progressive group Fuse. “ ‘Dumb money’ seems like the right label.”

None of this is the last word, of course. Democrats have some pretty big spending deficits to patch. I’m also not sure voters were saying “tax more,” so much as “we’re fine with these past taxes.” So it’s easy to imagine people punishing Democrats if they “go off the rails and do all sorts of crazy things,” as Pedersen pledged last week they would not. But for now, for the GOP, this was a bad bet for the ages. Like in no-limit poker, when you push “all-in” and lose, you haven’t just lost — the winner’s leverage soars because they now own all your chips. So because of their opposition’s gambit, Democrats find themselves holding their biggest stack in decades — and they’re acting none too shy about using it.