OLYMPIA – Sen. Maralyn Chase, D-Edmonds, is working on a set of bills focused on limits to the state’s property tax rates and removing the tax exemptions on intangible property, like stocks and bonds.

“These bills show that there are additional sources of revenue out there that we haven’t even begun to consider,” said Chase. “We need to have a real conversation about our state’s unfair tax system. To have a multi-billion dollar property tax hike pushed through the legislative process at the last possible second by the Senate Republicans is no way to govern. The Senate Republican plan to increase property taxes to fund our schools is irresponsible. We already know that our state is dead last in the nation when it comes to our tax structure, so why would we even consider placing the majority of the tax burden on our low-income and working families with an increase in property tax?”

Chase’s slate of bills include:

  • Senate Bill 5948, Restoring intangible property taxation;
  • Senate Bill 5959, Establishing a capital gains tax;
  • Senate Bill 5960, Taxing intangible personal property;
  • Senate Bill 5961, Changing the business and occupation tax from a gross receipts tax to a net receipts tax; and,
  • Senate Bill 5962, Lowering the property tax levy limit from one percent to zero to prohibit certain annual property tax increases.

The Institute on Taxation and Economic Policy has consistently ranked Washington state as having the most upside down tax system in the United States. This means that the lowest 60 percent of earners pay the highest percentage of their income in overall taxes. How did our state develop this unfair tax system? Over time, the legislature has allowed exemptions of certain types of property, by removing some property from the tax base, and from confusing types of tax procedures. For example:

  1. Property taxation:
    1. The State of Washington taxes all property unless the Legislature or the State Constitution specifically exempts the property. (Currently stocks and bonds are exempted by the Legislature but there are many more examples of these exemptions such as, churches, non-profits, etc. are exempted by the Constitution.)
  2. Tax Shifts:
    1. An exemption means some owners of property are not required to pay property taxes, which results in a tax shift to people who do not have an exemption.
    2. The Legislature has created two classes of people: people who pay property tax and people who do not pay property tax.
    3. This has been accomplished by simply removing some property from the tax base.

All taxpayers are permitted to own property but the Legislature is not always going to tax it: Taxpayers can buy all the stocks and bonds and other intangible property they want: it will no longer be taxed as called for in the State Constitution, Article 7, Section 1: Taxation

  1. When the Legislature repeals the intangible property tax exemption, the total property value in the tax base increases causing the property tax rate to decrease. This shifts taxes back to the exempt property owner causing other taxpayers to pay less but usually results in no potential revenue gains for the state. This is a more equitable model for taxpayers.

“This debate matters right now,” said Chase. “Our state has an opportunity to not only make our tax system fairer, but also pay for our kid’s education as is our state’s paramount duty. The people who don’t currently have a property tax exemption should not have to shoulder the tax burden for the entire state. We would not be making progress if that’s the only option we are presented.”