HB 2762, the subject of an earlier blog post today, would repeal tax preferences worth $3.7 billion in the current biennium. Small businesses, farms, corporations, nonprofits, churches, transit agencies, cities and counties … too many groups to list here .. would all face tax increases. For some, the increases are fivefold. See this 8-page list for scheduled repeal dates and the values of the preferences.

The Department of Revenue prepared a fiscal note on the bill. The measure repeals most sales and use tax preferences and B&O tax preferences in stages, beginning in 2017. The fiscal note makes clear just how much the bill would affect Washington taxpayers.

– Approximately 800,000 taxpayers will require notification of these proposed changes and 300,000 taxpayers will be directly affected by these changes.

– 131,000 new taxpayers will have tax filing requirements.

Those are dramatic numbers: 800,000 notifications … 300,000 directly impacted … 131,000 new taxpayers. Looking further at the note shows the range of effects.

On page 5, a repeal of differential B&O tax rates results more than triples taxes for some agriculatrual business, including:

– Processing of seafood.  This results in a tax rate increase from 0.138 percent to 0.484 percent.

– Processing of dairy products.  This results in a tax rate increase from 0.138 percent to 0.484 percent.

– Processing of fresh fruits or vegetables.  This results in a tax rate increase from 0.138 percent to 0.484 percent

Or consider this list of B&O changes effective in 2017:

B&O exemptions are repealed for day care provided by churches; childcare resource and referral services by nonprofit organizations;…operation of sheltered workshops; certain materials printed in school district and educational service district printing facilities; certain materials printed in county, city, or town printing facilities; sales of academic transcripts; housing finance commission; … grants by United States government to municipal corporations or political subdivisions; county, city, town, school district or fire district activity; sales/leasebacks by regional transit authorities; convention and tourism promotion; … agricultural fairs; hop commodity commission or hop commodity board business …

In 2021, newspapers come in for substantial tax hikes. Repeal of the preference for printing or publishing a newspaper results in:

…a tax rate increase from 0.2904 percent to 1.5 percent for advertising income, to 0.484 percent for the printing activity, to 0.484 percent for wholesale sales of newspapers, and to 0.471 percent for retail sales of newspapers.

Also in 2021, a litany of sales tax exemptions for business inputs – exemptions that tax principles fully justify – are repealed. Here are just a few:

Effective July 1, 2021: Sales and use tax exemptions are repealed for audio or video programming; digital goods and services purchased for business purposes; machinery and equipment used for manufacturing, research and development or in a  testing operation; tangible personal property incorporated in prototype for parts, auxiliary equipment, and aircraft modification; carbon and similar substances that become an ingredient or  component of anodes or cathodes used in producing aluminum for sale;

Read the entire fiscal note. HB 2762 is breathtaking in scope. Further, the legislation would destabilize tax policy, create substantial uncertainty for businesses and other taxpayers, and compound the distortions inherent in our business tax structure.

It’s a strange thing to be contemplating in the last days of a legislative session already plagued by budget shortfalls and a struggling economy.