An old idea for taxes gets new life

Gov. Jay Inslee is suggesting a new way of assessing the state’s share of the real estate excise tax.

  • Saturday, January 5, 2019 8:30am
  • Opinion

An old idea for boosting tax receipts is getting revived and repurposed for 2019.

Gov. Jay Inslee is suggesting a new way of assessing the state’s share of the real estate excise tax, a growing source of money in what’s been an extended period of good times for sales of residential and commercial properties.

He wants to replace the flat rate of 1.28 percent imposed on each sale of property with a four-tier graduated rate that starts with a lower mark of 0.75 percent on any sale of property valued at less than $250,000.

The current rate of 1.28 percent would continue to be imposed on properties valued between $250,000 and $999,999. A new 2 percent rate would be levied on sales of properties valued between $1 million and $5 million, and 2.5 percent on properties valued above $5 million.

Under state law, sellers are responsible for the tax. In practical terms, it gets passed on, thus buyers of expensive properties would pay a little more and buyers of cheaper properties a little less under this approach.

For example, on a $200,000 home, the current rate results in $2,560 owed in real estate excise taxes. That sum would drop to $1,500 under the proposal. On an $8 million home — like one sold in Woodway in 2016 — the excise tax due would climb from $102,400 to $160,000.

If this all sounds familiar, it’s because House Democrats tried to advance this reform in March 2017. It was part of a tax package intended to bring in the sum of money required to settle the state’s school funding tab under McCleary. At the time, the idea drew far less attention than the package’s larger and more controversial components, a new capital gains tax and a business tax rate hike.

Democrats squeezed the bill out of the House Finance Committee on a party-line vote but it never made it to the floor for a vote. Not every one of the 50-member Democratic caucus embraced it and House Speaker Frank Chopp, D-Seattle, needed every one of their votes to pass it. Though even if it had made it out of the House, it was destined to die in the Senate where Republicans controlled the majority and had already rejected it.

The political dynamic is going to be different this year, raising the spectre of a different outcome.

Democrats will hold a 57-41 edge in the House, so the most cautious and conservative members can vote against pretty much any tax plan without blocking it. In the Senate it will be dicier. Democrats will have a 27-22 advantage giving their cautious and conservative Democrats much more sway in its fate when budget talks turn serious in spring.

There’s real money at stake. Inslee estimates this tax change will bring in an additional $402 million in the next two-year budget.

He’s added a degree of political difficulty to getting it passed. He doesn’t want to keep that money in the general fund to be spent on public schools, early learning and mental health services. He wants to transfer it to the state’s transportation budget to pay for removing culverts and other barriers to fish passage.

Many Democratic lawmakers may warm to the tax change but not the diversion of dollars.

To the extent this old idea enjoys a successful revival in 2019 will be a matter for much negotiation.

Jerry Cornfield: 360-352-8623; jcornfield@herald net.com. Twitter: @dospueblos.

More in Opinion

A parent’s perspective | Letter

Graduation…the moment every parent looks forward to with pride and also with… Continue reading

Alternative to Sammamish River Trail | Letter

The proposed King County improvements to the Sammamish River Trail should be… Continue reading

A Senate seat is on the line and the dominos are set to fall

Rep. Stanford seems a shoo-in for the appointment. There’s a drama brewing for his job in the House.

The sustainable summer picnic

Three easy steps for an eco-conscious outing.

With Palumbo out, capital gains tax gets real for Democrats

His successor could be the vote leaders need. But with elections in 2020, tax may be off the table.

MAPS-MCRC serves people in need during Ramadan

During Ramadan, Muslims intensify their efforts to serve others, especially those in need.

‘If I can do it, they can do it’ | Windows and Mirrors

Lori Matsukawa’s lasting legacy on Asian American journalists.

An eye opener | Letter

I was quite taken by the article “Susan’s quest for justice, the… Continue reading

Start impeachment hearings | Letter

As a constituent of Rep. Suzan DelBene, I strongly support starting impeachment… Continue reading

Thank you Hiruko | Letter

Ashley Hiruko’s detailed story (“Susan’s quest for justice and the civil legal… Continue reading

Khan for Council | Letter

I am proud to support my friend Varisha Khan in her candidacy… Continue reading

Pow! Bam! Inslee delivers a one-two punch of executive power

Governor shifted $175M to culverts and vetoed a sentence he said threatened funding for transit.