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A potential state payroll tax would increase business taxes by 46%

Some revenue options being considered by the Senate Democratic Caucus (SDC) were made public last month. (I wrote earlier about their business and occupation tax ideas.) The largest tax on employers on their list is a payroll tax of 6.2%. The tax would be paid by employers on the total compensation “paid to employees making […]

Inslee, Senate Democratic Caucus revenue ideas would significantly increase B&O taxes

Even though legislative spending choices are the cause of the projected operating budget problem, former Gov. Inslee proposed major new tax increases as part of his 2025–27 operating budget proposal. Similarly, several “revenue options” from the Senate Democratic Caucus (SDC) were made public last month. These proposals would significantly increase business taxes. Businesses already pay […]

No help for operating budget writers in the November revenue and caseload forecasts

As Kriss wrote last week, state revenues are now expected to be lower than forecasted in September. Compared to the February revenue forecast (on which the current budget is based), revenues from funds subject to the outlook (NGFO) are now expected to be $1.008 billion lower through the outlook period (2023–25, 2025–27, and 2027–29). Note, […]

Proposed Seattle bill would make the payroll expense tax permanent and add reserves to address the tax’s volatility

A bill (CB 120912) has been introduced in the Seattle City Council that would make several changes to the city’s payroll expense tax (PET). We wrote in detail about the tax, which is highly concentrated and volatile, in a policy brief last year. The tax is levied on compensation paid in Seattle to employees, and […]

Seattle is considering a 2% capital gains tax

A bill has been introduced in Seattle City Council to impose a 2% capital gains tax on the sale or exchange of long-term capital assets. The bill is being discussed today as part of Seattle’s budget process, and it looks like the Select Budget Committee could vote on it next week. The bill is mostly […]

Election results do not change our estimate of a $5 billion state budget shortfall

On election night, the Seattle Times reported that I-2109, I-2117, and I-2124 had been rejected. The story added that the results “mean that Washington’s Legislature will likely avoid a major budget shortfall in the upcoming legislative session.” That is not accurate. Our estimate of the substantial projected operating budget shortfall did not assume passage of […]

Washington’s state and local taxes and spending per capita ranked 14th and 15th highest among the states in 2022

The tax burden on businesses in Washington is above the national average, as we wrote in a policy brief earlier this week. New data from the U.S. Census Bureau allows us to compare total state and local taxes and spending in Washington to other states for fiscal year 2022. The two main ways to compare […]

Audit recommends changing the paid family and medical leave rate formula again

In 2022, Washington’s paid family and medical leave (PFML) program experienced cash deficits. Solvency concerns resulted in several program changes that year, including actuarial reporting requirements. (We discussed the program and its solvency problems in a 2022 policy brief.) In 2023, the Legislature appropriated $200 million from the general fund-state to the family and medical […]

New brief: The Business Tax Burden in Washington is Above the National Average

State business and occupation (B&O) tax collections are up 258% since 2000. But businesses also pay sales, property, and many other state and local taxes. Indeed, businesses paid 49.7% of total state and local taxes in Washington in fiscal year 2022, according to a report from the Council on State Taxation. (Nationally, businesses paid an […]

WA Supreme Court: B&O deduction for investment income applies only to investment income that is “incidental to the main purpose of a business”

State statute allows a business and occupation (B&O) tax deduction for “amounts derived from investments”—unless they are “amounts received from loans” or “amounts received by a banking, lending, or security business” (RCW 82.04.4281). Nevertheless, today the state Supreme Court held that “Businesses can claim only the deduction for investments that are incidental to the main […]