Washington’s tax system has been identified as the most regressive in the nation. To address this, in 2019 the State Legislature established a bipartisan Tax Structure Work Group to identify options to make Washington’s tax code more equitable, adequate, stable, and transparent.
The Work Group has been conducting research, collecting feedback, and working through policy options. Their work will result in legislation to overhaul the tax code, expected to be considered by the Legislature in 2023.
Currently, the Work Group is conducting town halls across the state to hear feedback from members of the public. More info on these is available here.
The Work Group has identified six potential scenarios for revamping the state’s tax system. These include various combinations of adjusting or eliminating the state’s current taxes as well as adding new ones. You can view those scenarios here.
Impact to Architecture Firms
Architecture Firms currently pay the B&O tax. AIA WA has long argued for the B&O to be replaced because it taxes revenue rather than net income and double taxes money passed on to subcontractors.
Among the six new tax system scenarios offered by the Work Group, two would make no changes to the existing B&O. The other four scenarios would replace the B&O with one or more new taxes. These include:
- Value Added Tax: Tax on the difference between the value of a business’ sales and how much it costs to create the product
- Employer compensation tax: Imposed on compensation that exceeds $150,000 per year paid to an employee located in Washington; applies only to employers with annual worldwide compensation payments of $7 million or more.
- Margins Tax (modified Texas model): Modified gross receipts tax; margin = total revenues minus the greatest of the cost of the goods sold. Allows businesses to subtract certain expenses from the total amount the business makes and pay tax on the remaining amount.
- Corporate income-net receipts tax (CINR): Taxes revenue after expenses are deducted. Could be flat or progressive.
B&O Replacement by Scenario (view complete scenarios here)
A. B&O tax is unchanged
B. B&O tax is unchanged
C. B&O replaced with VAT & Employer Compensation Tax
D. B&O replaced with Margins Tax (modified Texas model) & Employer Compensation Tax
E. Replace the B&O tax with a corporate income-net receipts tax (CINR)
F. Replace the B&O tax with a corporate income-net receipts tax (CINR)
Your Input Needed
Let us know what you think! Possible questions to answer:
- Would each of these alternatives improve on current tax treatment (B&O) or make it worse?
- Do you have a preference among these alternatives?
- Would you consider any of these alternatives unacceptable?
- What concerns do you have about any of these alternatives?
- What questions would you need answered to better evaluate these alternatives?
AIA Task Force: AIA is putting together a work group of architects and firms willing to review the tax proposals and identify a preferred alternative(s) for architects. If you or your firm is interested in participating, please contact Kirsten.
Tax Town Halls: the state’s Tax Structure Work Group is conducting listening sessions across the state – and input from architects is critical.
Questions and comments:
Manager of Policy and Advocacy
AIA Washington Council