Washington is one of just 12 states with an estate tax, and the top tax rate here (20%) is tied for the highest in the country. Nevertheless, HB 1465 would double the top rate.

First, the bill would raise the threshold for estates to be subject to the tax. Currently, $2.2 million may be excluded from state estate tax. Under HB 1465, $2.5 million could be excluded. The exclusion amount would be subject to inflation for people who die on or after Jan. 1, 2023. (Additionally, the bill would increase allowed deductions from tax for family-owned newspaper businesses.)

Second, the bill would increase the tax rates for estates worth at least $3.0 million, and it would add four new brackets at the top. The bill would reduce estate taxes for estates worth between $2.2 million and $2.5 million. It would increase estate taxes for estates worth $3.0 million or more. For example, an estate worth $10 million would pay $370,000 more under HB 1465 than under current law. An estate worth $100 million would pay $9.2 million more under HB 1465 than under current law. An estate worth $1 billion would pay $144.2 million more under HB 1465 than under current law.

Third, HB 1465 would make a major change related to charitable donations. For federal estate tax purposes, estates may deduct the amount of any charitable donations. They may also currently be deducted from Washington’s estate tax. Under HB 1465, just 75% of the first $100.0 million of charitable donations would be allowed to be deducted from state tax and just 25% of any amount in excess of $100.0 million would be allowed to be deducted from state tax.

Currently, estate tax collections are deposited in the education legacy trust account. HB 1465 would deposit 10% of all estate tax collections to a new “equity in housing account.” The new account would be used “to address homelessness,” and at least $6.0 million from the account would have to be appropriated each biennium to the foreclosure fairness account.

According to the fiscal note, the bill would increase revenues to funds subject to the outlook by $59.1 million in 2021–23 and by $84.0 million in 2023–25. Revenues to the new equity in housing account would total $46.8 million in 2021–23 and $84.8 million in 2023–25.

The fiscal note doesn’t get into the potential impacts to charities, but they would be affected by HB 1465. Because of the charitable gift deduction, the estate tax currently incentivizes charitable giving. As a report from the Tax Policy Center notes, “Both the likelihood of giving and the share of estate given rise significantly with wealth.” If only a portion of charitable giving (particularly by the very wealthy) may be deducted from Washington’s estate tax, that is essentially a tax on charities that would otherwise have received those funds. Moreover, this could encourage the highly wealthy to move where their charitable donations would go farther.