On Friday, the House Finance Committee amended and approved HB 2156, HB 2157, and HB 2158, all of which are assumed in the operating budget passed by the House. We described these bills as originally proposed in our brief on the House- and Senate-passed budgets. HB 2157 and HB 2158 are scheduled to be heard this afternoon by the House Appropriations Committee.

HB 2156 would impose a capital gains tax and change the real estate excise tax (REET) rate so that it is graduated. The Finance Committee approved a substitute bill on Friday. (We described the capital gains provisions in detail in our brief on capital gains.) The substitute bill approved by Finance changes the capital gains tax exemption for property used in a trade or business to include “tangible property which is subject to wear, tear, decay or decline from natural causes, exhaustion, or obsolescence, including tangible personal property, real property excluding land, and intangible property having a definable life.”

The substitute also changes how REET revenues would be distributed under the bill so that the city-county assistance account would continue to receive a portion of them. The table below shows how this substitute compares to the REET bill that the Senate Ways and Means Committee passed on Thursday. A fiscal note for the amended bill is not yet available (but, as Kriss noted last week, a graduated REET would be especially volatile).

HB 2157 would make several tax preference changes (that’s the state’s term for exemptions, exclusions, deductions, deferrals, credits, and preferential rates) and reauthorize the Legislature’s tax structure work group. The Finance Committee approved a substitute version. As approved, the bill would still change the nonresident sales tax exemption to a refund program and it would still reauthorize the tax structure work group. Some of the changes made in committee:

• The bill would no longer increase business and occupation (B&O) and sales taxes for bullion and precious metals;
• It would increase the B&O tax rate for travel agents and tour operators from 0.275 percent to 0.9 percent (the original bill had increased it to 1.5 percent);
• It would exempt from B&O taxes hospitals owned by a county with a population over two million and managed by a state university (King County has more than two million residents and owns Harborview Medical Center, which is managed by UW);
• It would change the property tax exemption for seniors so that the income eligibility threshold would be adjusted by inflation; and
• It would require that an expert in federal Indian tax law be a part of the technical advisory groups that would assist the tax structure work group.

There is not yet an updated fiscal note for SHB 2157.

Finally, HB 2158 would impose a “workforce education investment” surcharge in addition to B&O taxes on businesses in certain sectors. Revenues would be directed to a dedicated account, and the bill would appropriate $389.6 million from that account for higher education and career connected learning in 2019–21. The Finance Committee approved a substitute bill. Among the changes: The original bill would have appropriated $20.4 million from the account to increase nurse educator salaries by 26.5 percent. The substitute would still provide $20.4 million for nurse educator raises, but it no longer specifies that the raises be 26.5 percent. Additionally, the substitute specifies that appropriations for the Washington College Grant (which would replace the State Need Grant) would fund the first half of the backlog of unserved students in FY 2020.