Two bills (SB 5998 and SB 5997) that create new state taxes for the Senate-proposed budget are scheduled for a hearing in the Senate Ways & Means Committee. In addition, SB 5961, a bill similar to the extraordinary profits capital gains tax proposed in the House operating budget is also scheduled for a hearing the same day.

SB 5998, like HB 2156, would implement a graduated real estate excise tax (REET), but it uses different thresholds for the rates. The Senate budget assumes that this tax would provide $518 million in new revenues to the state.

The graduated REET would change the current state rate of 1.28 percent by lowering rates for property sales under $250,000 and raise rates for sales over $1 million. The rates would be as follows based on the value of the sale:

• $250,000 or less: Rate reduced to 0.75 percent
• $250,000 to $1 million: Rate remains at 1.28 percent (current law)
• $1 million to $5 million: Rate increases to 2 percent
• More than $5 million: Rate increases to 2.5 percent

SB 5997 would repeal or change a number of state tax preferences or preferential tax rates for education funding and other essential public services.

The changes include:

• Replacing the non-resident sales tax exemption with a refund process.
• Repealing the preferential rate for B&O taxes on travel agents.

In addition, while not assumed in the Senate operating budget, SB 5961 proposes changes to address equity of the state’s tax structure and would implement a new capital gains tax. SB 5961 is scheduled to be heard in the Senate Ways & Means Committee on Monday, April 8 at 1:30 pm.

The bill would:

• Impose an 8.9 percent capital gains excise tax on sales of long-term assets more than $250,000, calculated at total capital gains minus a standard deduction of $250,000;
• Provide a working families sales tax exemption through a refund process to low income taxpayers;
• Increase small business deductions for state B&O taxes;
• Provide sales tax exemptions for certain products like diapers and over-the-counter medications; and
• Expand the senior property tax exemption.

Meanwhile, the tax proposals assumed in the House-proposed operating budget were scheduled to pass out of the House Finance Committee but are still waiting on committee action:

• HB 2156, the House version of a graduated REET;
• HB 2157, the House proposal with changes to tax preferences; and
• HB 2158, imposes a 20 percent B&O surcharge on service and other activities of select businesses, including sewer treatment (to the extent subject to the service B&O tax under RCW 82.04.290 and not the state public utility tax RCW 82.16), and additional surcharges for high income technology businesses directed to workforce education. The bill was heard in the House Finance Committee on March 29.

The final mix of new revenues for the operating budget will be negotiated as part of the conference negotiations once both chambers pass their versions of the budget.

Dates to remember

SB 5998, SB 5997, and SB 5961 are scheduled for a hearing on Monday, April 8 at 1:30 pm in the Senate Ways & Means Committee.