Tax structure bill clears committee amid concern

Tax structure bill clears committee amid concern
The House Appropriations Committee voted to advance a bill that would tweak parts of the state tax code and reauthorize a state tax work group. Photo: freepik.com

The House Appropriations Committee voted on April 22 after a public hearing to advance a bill that makes changes to the state tax structure and extends the life of a state tax structure work group.

Among the changes made by HB 2157 sponsored by Rep. Gael Tarleton (D-36) is an increase to the preferential business and occupation (B&O) tax rate for travel agents and tour operators from 0.275 percent to 0.9 percent, though a provision eliminating the preferential B&O rate for precious metals and bullion was removed prior to the committee vote.

Prior to the April 22 vote, Tarleton described the bill as a “comprehensive piece of legislation to help address some inadequacies in this state’s tax structure. Our economy is changing, and cost of living is increasing.”

However, Rep. Drew Stokesbary (R-31) opposed HB 2157, saying “it does a number of things that those of us on this side of the aisle are concerned about.”

Among them is a provision that raises the income threshold for various property tax exemptions. “I think the way this property tax exemption is structured is helpful, but I represent a fairly high cost area, and a lot of my colleagues over here represent less affluent areas,” he said. “We still have some lingering concern that they’ll get left behind as we gradually increase who is eligible for this tax benefit.”

The bill also provides a B&O tax exemption for qualifying hospitals owned by a county with a population greater than two million and managed by a state university. That exemption would end in 2030.

Another provision modifies the retail sales tax exemption for out-of-state residents to an annual remittance. However, during the public hearing Patrick Connor with the National Federation of Independent Business told lawmakers that “customers from Oregon, from Alaska, from Montana, from various provinces will be less likely to come to Washington state.” Those who do visit the state, will avoid big purchase because “it simply would make more sense for them to wait to make those discretionary purchases at home rather than to pay the higher taxes…and then have hundreds or thousands of dollars being held for a year or so before they’re able to apply for a remittance.”

A similar perspective was shared by Amber Carter with Identity Clark County. “This exemption is doing precisely what it was intended to do” by “bringing out of state shoppers to our state that otherwise would not be purchasing Washington goods.”

Tht change was also one of the reasons Republicans were opposed, Stokesbary told colleagues. “We’re really, really concerned about what the elimination of this program will mean for our small businesses and employers – and more importantly employees, as there is a huge potential for loss of business and eventually loss of jobs…in some of those areas.”

The bill reauthorizes a a state House tax work group created by the legislature in 2017 through the operating budget that held several public meetings last year across the state to discuss potential policy changes. The new work group would submit a final report by the end of 2024, which would include previous studies.

HB 2157 has not been referred to a committee.

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