B&O tax hike for higher education?

B&O tax hike for higher education?
State lawmakers are proposing a B&O surcharge on various businesses to fund career-connected higher education programs. Photo: freepik.com

The House Appropriations Committee has voted in favor of a bill imposing a business and occupation (B&O) surcharge on various businesses with the money going to a new state account to fund various new higher education programs.

At the April 22 public hearing for HB 2158 sponsored by Rep. Drew Hansen (D-23) and 20 Democrat cosponsors, business groups said although they favor greater support for the career and education portion of the bill, the B&O surcharge would harm the state’s business climate.

“This tax would continue to disproportionately assess taxes on those least able to afford it – small businesses and working families,” National Federation of Independent Business’s Washington state Director Patrick Connor told committee members.

HB 2158 would impose a 20 percent B&O surcharge on income from service activities, along with a 33.33 percent B&O surcharge on service and computing businesses that generate between $25-100 billion in annual revenue. The bill sets up a Workforce Education Investment Account and creates the Washington College Grant Program, the Washington Student Loan Program and the Workforce Education Investment Accountability and Oversight Board.

Testifying in support of the bill was Green River College President Suzanne Johnson, who told lawmakers that despite the state’s economic growth, Washington students aren’t properly connected to the related fields. “We are in a paradox. We have some of the greatest opportunities, but we seem to be failing in producing eligible Washingtonians to take advantage of those opportunities. With your investment, we can keep excellent faculty in our classrooms to deliver the skills and knowledge that our schools need to start their careers and pursue further education at university levels.”

Also supportive was David Zeeck, a member of the UW Board or Regents and former publisher of several regional newspapers including The News Tribune and Bellingham Herald. He told the committee that “as a business person, I know that a skilled workforce is the key to whether or not we succeed. We’re underserving a bunch of businesses in this state. This is the way to catch up.”

Although expressing reservations about the surcharges, Jerry Vanderwood with the Associated General Contractors said that they support the education and career portions of the bill.

“Career Connect would provide students and young adults a pathway to career success and introduce them to different career opportunities starting at a younger age…so that our youth will know what career opportunities are available to them and what they need to do to get started on their career path.”

However, Connor warned the committee that many of the businesses that would be subject to the new surcharge did not benefit from a recent federal tax reform bill. On top of that “you would see medical costs increase. The tax is applied to small medical practices, but not hospitals, driving up medical costs where health insurance and health care costs are already too high for too many working families and small businesses unable to offer insurance to their employees.”

Similar caution was offered by Lisa Thatcher with the Washington Society of Certified Public Accountants. “If HB 2158 passes, it will further contribute to the regressive and selective form of taxation on selective industries.” She added that the proposal “does not provide any funding that benefits our profession. I would say the benefits that flow from a stronger higher education system flow to a broad-based state economy” and therefore the tax “should also be broad-based and not just targeted on our professional services.”

No further action is scheduled for HB 2158.

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