‘A Pretty Surprising Meeting’: Washington State Income Tax Rejected by Task Force

Charles H. Featherstone / Herald of the Columbia Basin

OLYMPIA — Washington residents won’t pay state income taxes anytime soon if the state legislature listens to the recommendation of a group created to advise the state legislature on future taxation.

At a meeting in late March, the bipartisan Washington Tax Structure Task Force, which was formed in 2017 to help advise the state legislature, voted to remove an income tax from future consideration. individuals or companies of any kind as well as any potential value. – added tax and an employers’ compensation tax similar to that enacted by Seattle.

“It was quite a surprising meeting,” said Jason Mercier, director of the Center for Government Reform at the Washington Policy Center in Kennewick.

Mercier said he believes the task force — created by the state legislature in 2017 and made up of 13 members, including lawmakers, local officials and other stakeholders — was created to eventually recommend to the legislature to enact a state income tax.

However, Mercier said a study done for the task force found little support for a graduated income tax among state residents, especially among minorities.

“Voters were very clear on an income tax, and they voted it down six times,” Mercier said. “The surprise here is that Democrats expected to see more public support. But once outside of Seattle, it was universal. There was no support for an income tax.”

Mercier said the task force, which has one or two more meetings this year before making a recommendation to the legislature this fall ahead of next year’s legislative session, is still considering changes to the city’s property tax system. state, replacing the current business and transaction tax with a marginal gross receipts tax similar to what exists in Texas, as well as a statewide wealth tax.

Of these, changing the business and transaction tax would likely be the easiest, Mercier said, because there are nearly a century of state Supreme Court cases defining the tax and governing its application. .

Currently, Mercier said the B&O tax is applied to all of a company’s gross receipts. Amending the tax to allow exemptions or dedications – for example on the cost of production or salaries paid to employees – would make it easier to pay, especially for small businesses and start-ups.

“It’s really difficult for start-ups, whether they’re profitable or not,” he said.

However, such a tax would still be on business revenue, rather than profits, and would be part of a 1930s state Supreme Court ruling allowing the state to tax business activity, a Mercier said, rather than corporate earnings.

Mercier said a wealth tax would be the most difficult to enact, however, given the tax restrictions and definitions of property in the Washington state constitution and law.

“The bills only proposed to tax billionaires, and you can’t do that in Washington,” Mercier said.

A wealth tax is a tax on property, Mercier said, and the only way that could pass to be applied to everyone equally and to include intangibles — such as stocks, bonds and financial assets — as well as real estate such as houses, land and vehicles.

“And I don’t think that will happen,” he said.

Mercier said the Department of Revenue will continue to assess possible changes to the state’s tax system before the fall, when the task force is expected to make its final recommendations. But what lawmakers do with it will be up to them once they meet in 2023.

“This group will vote on suggestions, but there’s no obligation for the state legislature to vote on anything,” he said.

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