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Washington’s 2021-23 budget is balanced, there are billions in reserves, and state revenues have grown substantially over the past year. In response to this strong fiscal outlook, two major bipartisan tax relief bills have been filed in the Senate. They are SB 5932 (Reducing the state sales and use tax rate) and SB 5769 (Reforming the state tax system by providing tax relief to residents, employees, and employers). Adoption of either proposal would provide Washingtonians significant tax relief.

SB 5932 is prime sponsored by Senate Democratic Majority Caucus Vice Chair Mona Das and has bipartisan co-sponsors. The bill would reduce the state’s sales tax by a full 1%, taking the tax rate down from 6.5% to 5.5%. Based on previous estimates, this would provide approximately $2 billion in tax relief per year for Washingtonians. Washington Policy Center has been making the case for a broad-based sales tax cut for several months.

Sen. Das said about SB 5932 in a press release:

“Thanks to our federal, state and local leaders’ careful stewardship during this pandemic – and the public resilience throughout our communities – we are in a strong place financially. We should seize this opportunity to live up to our values of a full, equitable recovery and reduce the sales-and-use tax that burdens lower- and middle-income families . . . We need to take a serious look at tax relief for all working Washingtonians. And this is the year to do it.”

When the sales tax was first imposed in 1935, Washington’s sales tax rate was 2.0%. Now it’s 6.5%. The last time lawmakers and a governor cut the sales tax was in 1982, nearly 40 years ago.

In a press release, Sen. Lynda Wilson, Republican leader on the Senate Ways and Means Committee, and Rep. Drew Stokesbary, Republican leader on the House Appropriations Committee said about SB 5932 and the need to provide tax relief:

“It’s great to see bipartisan recognition that now is the time for major tax relief, in one form or another. We welcome this proposal and look forward to having serious discussions about how to best let families and employers keep more of their own money . . . Living in Washington has become unaffordable for many. It’s time for the people to get a break.”

The other major tax-cutting proposal under consideration is SB 5769 and is prime sponsored by Republican Senator Lynda Wilson and has bipartisan co-sponsors. Here is the intent section for SB 5769 (in-part):

“The legislature intends with this act to reform Washington state’s tax system to provide tax relief to residents and businesses. This tax relief is intended to reduce the property tax burden for homeowners by providing over $1,000,000,000 a year in progressive property tax relief; improve the competitiveness of Washington’s manufacturing industry, which has suffered over 70,000 job losses during the 21st century; keep Washington income tax free, in accordance with long-standing court precedent and voter preferences, by eliminating the capital gains income tax; and eliminate the flawed and financially unsound long-term care payroll tax and program.”

A summary of the bill provided by Sen. Wilson said:

“SB 5769 would provide tax relief in four parts:

• Part 1: Provides a property tax ‘homestead’ exemption, which exempts the first $250,000 of a primary residence from the state property tax. This is an anti-shift exemption, meaning the tax burden is not shifted onto others, but it is simply a reduction in state property tax collections.

• Part 2: Eliminates the manufacturing B&O tax, as this is a sector of the economy that has lost over 75,000 jobs since the turn of the 21st century.

• Part 3: Eliminates the capital gains income tax, as Washington voters have rejected an income tax 11 straight times.

• Part 4: Eliminates the Long-Term Care payroll tax and program, as it is financially unsound – and voters have twice rejected measures related to the tax.”

The state’s current fiscal outlook provides the perfect opportunity for lawmakers to provide broad-based tax relief for Washingtonians. Here are the state revenue forecast number changes since the 2021-23 budget was adopted last year:

• March 2021 revenue forecast (current budget based on this forecast)

-2021-23: $56.615 billion

-2023-25: $59.906 billion

• June 2021 forecast increase over four years – $4.043 billion increase

-2021-23: $58.413 billion - $1.798 billion increase

-2023-25: $62.151 billion - $2.245 billion increase

• September 2021 forecast increase over four years – $1.859 billion increase

-2021-23: $59.341 billion - $928 million increase-2023-25: $63.082 billion - $931 million increase

• November 2021 forecast increase over four years -$1.862 billion increase

2021-23: $60.238 billion – $897 million increase

2023-25: $64.047 billion – $965 million increase

This means the total four-year increase in projected revenue since lawmakers adopted the 2021-23 budget is at least $7.764 billion. Monthly tax collections continue to exceed those forecast expectations. According to the state’s January 14, 2022, monthly tax collections update:

“Major General Fund-State (GF-S) revenue collections for the December 11, 2021 - January 10, 2022 collection period came in $260.9 million (12.7%) higher than forecasted in November . . . Cumulatively, collections are now $349.8 million (6.4%) higher than forecasted.”

If this monthly trend continues, the state’s February 16 revenue forecast could show another big increase in projected revenue.

With a balanced budget, billions in reserves, and revenue projections continuing to exceed expectations, the case for broad-based tax relief is overwhelming. By adopting either SB 5932 or SB 5769, the legislature would put in place substantial tax relief to help Washingtonians deal with the rising cost of living in the state.

Mercier is the Center for Government Reform Director for the Washington Policy Center at the Tri-Cities office.