Hazardous Waste Tax revenue spike expected after rate hike

Hazardous Waste Tax revenue spike expected after rate hike
Hazardous waste tax revenue is expected to increase by 64 percent for the 2019-21 biennium following legislation passed last year hiking the rate. Photo: freepik.com

Last year, the state legislature approved a rate hike for the Hazardous Substance Tax (HST) that funds toxic site cleanup, among other things. As a result, the state Department of Revenue (DOR) anticipates tax collections will increase by 64 percent in the 2019-21 biennium from what was originally expected prior to the rate hike.

The HST was created following the passage of Initiative 97 in 1988, originally intended for the Model Toxic Control Act (MTCA) to clean up thousands of toxic sites identified by Ecology. Since then, however, the revenue has been diverted to fund other programs such as stormwater projects.

Prior to the passage of ESSB 5993 last year, HST applied a .7 percent tax on the wholesale value of first possession of hazardous substances in Washington; as a result, tax revenue is connected to oil prices. Although revenue has decreased in recent years, it’s still much higher than the $20 million collected when the tax was first implemented – roughly $43.2 million in 2019 dollars when adjusted for inflation.

According to a November 2018 Ecology report, DOR anticipated HST revenue would be $318 million in the 2019-21 biennium. However, ESSB 5993 altered the HST by making the tax on petroleum products based on volume instead of value, at $1.09 a barrel plus inflation.

Non-petroleum products continue to be taxed at the .07 percent value rate. The MCTA account was also broken up into separate accounts: operating, capital and stormwater, and each account receives different portions of the revenue.

At a Jan. 15 work session of the House Appropriations Committee, Staff member Dan Jones revealed that DOR now anticipates $494 million in HST revenue for the current biennium – $141 million, or 64 percent more – than what was originally expected under the old rate. It’s also $12 million more than the initial estimates following ESSB 5993’s passage.

According to Jones, the MCTA operating account was originally expected to have a -$5.1 million balance for the 2019-21 biennium due to funds transfers that were ultimately vetoed by Governor Jay Inslee. Now, the account is anticipated to have a $41.1 million balance.

In 2018, Ecology reported a $89 million shortfall in the MCTA account. During that year’s legislative session, the legislature authorized $70 million in bonds and Ecology delayed projects and staff hires to make up for the remaining $11 million. Since last year, $17.2 million has been transferred to the account to pay back loans.

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