Big year for tax bills being introduced but not much to show

2023 may be notable for the number of bills introduced dealing with tax changes. There was the AWC priority bill around local and state REET authority for affordable housing. There were three different bills introduced to revise the local property tax cap from the current arbitrary 1%. There were bills to move from the State’s business and occupation (B&O) tax to a new margins tax, a recommendation of the State Tax Structure Work Group. There was a bill introducing a wealth tax. And finally, while not a bill, the State Supreme Court upheld the constitutionality of the capital gains tax created a couple of years ago.

In the end, none of these tax bills ended up passing. But, there was some glimmer of hope – this was the most interest we have seen in revising the property tax cap in recent years. Three separate bills (HB 1670, SB 5618, SB 5770) – two of which were heard in committees – and one, HB 1670, actually passed out of the House Finance Committee. This counts as progress and poses an opportunity to keep this important conversation going in future sessions.

Additionally, there was broad interest in the REET legislation, HB 1628, as a way to create an ongoing source of funding for affordable housing. The Realtors association came out in strong opposition to the proposal spending $400,000 on TV ads opposing the bill.

That opposition highlights the intense opposition any tax proposal typically faces.

However, sometimes things surprise us like in 2021 when the Legislature finally embraced tax increment financing (TIF) after years of skepticism. This year the legislature passed some needed technical fixes to that authority to make it work better, particularly for port districts (HB 1527). The Legislature also restored the annexation sales tax credit as one of several bills intended to increase the availability of affordable housing (HB 1425).

Finally, a quick word about the budgets. This session they adopted the new 2023-25 biennial operating, capital, and transportation budgets. For the most part this was a year with little drama in the budget arena, and the budget writers adopted a conservative approach in recognition of some slowing of revenue growth and hedging against the possibility of a recession in the next few years. Overall, these were strong budgets for cities and city priorities largely were funded.

The most notable win for cities was the return to full funding for the Public Works Assistance Account (PWAA). We are excited to celebrate this big achievement and appreciate the work that cities have put into advocating for this critical infrastructure funding program.