A bill has been introduced in the Legislature that would reduce the business and occupation (B&O) tax rate for many manufacturers. Currently, the rate ceiling for manufacturers is 0.484 percent, but certain manufacturing activities face lower rates in current law. For example, commercial aircraft manufacturing and timber or wood products manufacturing have rates of 0.2904 percent.

HB 1249 would reduce the rate ceiling for manufacturers, processors for hire, printing materials other than newspapers, publishing periodicals, and manufacturers selling their own products at retail or wholesale. Through Dec. 31, 2029, the rate would be 0.2904 percent on the first $50 million that is taxable and 0.484 percent on the taxable amount above $50 million. Then, beginning on Jan. 1, 2030, the rate for all taxable amounts would be 0.2904 percent.

Additionally, as noted above, timber and wood products manufacturers currently have a 0.2904 percent rate. That rate is in effect under current law through June 30, 2024. HB 1249 would extend that rate for these manufacturers through June 30, 2056. (There is no fiscal note for the bill yet.)

This bill is similar to a provision that was passed by the Legislature in 2017 but vetoed by Gov. Inslee (part II of SSB 5977). (The 2017 bill also would have dropped the manufacturing B&O rate ceiling to 0.2904 percent, but it would have stepped the rate down over four years.) We wrote about that bill and manufacturing’s importance to the state in a 2017 report.

The Association of Washington Business has more on this year’s bill here. AWB notes that in a recent survey of their members, 81 percent “would not recommend Washington as a place to locate a manufacturing business” and 73 percent said that was because of the state and local tax burden here. Indeed, as we discussed in a policy brief last month, Washington is a high-tax state for business.