The Washington legislature’s Tax Structure Work Group (TSWG) met yesterday. Under a proviso in the 2021-23 state budget, TSWG is to develop revenue neutral state tax reform legislation for the 2023 session of the legislature. At its March 30 meeting, TSWG selected 5 reform concepts tor further elaboration and analysis by staff at the Department of Revenue (DOR):

• Replace the B&O tax with a margin tax that yields the same amount of revenue
• Establish a wealth tax
• Establish a primary residence property tax exemption
• Expand/increase the working families tax credit
• Increase the annual growth limit factor for either the state property tax or for local property taxes

At yesterday’s meeting, TSWG reviewed DOR’s further work on these proposals and decided which of them would advance for final consideration at TSWG’s December 13 meeting. Seven of TSWG’s nine voting members were present at this meeting: Senators Keith Wagoner, Phil Fortunato and Lisa Wellman; Representatives Noel Frame, Ed Orcutt and Amy Walen; and Scott Merriman, representing the Governor’s Office. Two members were not present: Senator Joe Nguyen and Representative Jesse Young. Senator Nguyen was said to be travelling out of country. Representative Young lost his bid for the 26th district’s Senate seat in the recent election.

To move forward a proposal needed five affirmative votes. As was the case at the March meeting, voting was conducted anonymously using Mentimeter. The committee chairs justify the anonymity of votes by claiming that the results are not formal legislative decisions but rather guidance to DOR staff. Voting at TSWG’s December meeting as to which proposals TSWG actually forwards to the Legislature will not be anonymous.

The members first considered replacing the B&O tax with a margin tax and voted 7-0 that this proposal should advance for consideration at the December meeting.

The members next considered as a group (1) establishing a wealth tax, (2) establishing a primary residence property tax exemption and (3) increasing the working families tax credit tax exemption. (The revenue gain from the wealth tax would just offset the revenue loss from property tax exemption and the working families tax credit.) Only four of the members present voted in favor of this group, and therefore none of these concepts advanced for consideration at the December meeting. Had Senator Nguyen been present, the result might have been different: he cosponsored a wealth tax bill (SB 5426) that had a Senate Ways and Means Committee hearing during the 2022 session.

Finally, members considered increasing the property tax growth limit factor. (Currently annual growth in regular property tax revenue is capped at the lesser of inflation or 1%, plus the percentage increase in assessed value due to new construction.) Two members supported increasing the state limit only, while five members supported increasing the local limit only. Therefore, increasing the local limit advances for consideration at TSWG’s December meeting.

TVW video of the meeting is available here. The meeting packet is available here. Meeting sides and polling results are available here.