{"id":2805,"date":"2023-01-25T09:43:45","date_gmt":"2023-01-25T17:43:45","guid":{"rendered":"https:\/\/senatedemocrats.wa.gov\/frame\/?p=2805"},"modified":"2023-01-25T10:06:09","modified_gmt":"2023-01-25T18:06:09","slug":"bipartisan-tax-reform-proposal-to-replace-the-bo-tax-gets-a-hearing-tomorrow","status":"publish","type":"post","link":"https:\/\/senatedemocrats.wa.gov\/frame\/2023\/01\/25\/bipartisan-tax-reform-proposal-to-replace-the-bo-tax-gets-a-hearing-tomorrow\/","title":{"rendered":"Bipartisan tax reform proposal to replace the B&O tax gets a hearing tomorrow"},"content":{"rendered":"

On Thursday, Jan. 26, the Senate Business, Financial Services, Gaming & Trade Committee will hold a hearing on SB 5482<\/a>, a bipartisan bill to reform Washington state\u2019s business tax system recommended by the state Tax Structure Work Group.<\/p>\n

The bill, sponsored by work group co-chairs Sen. Noel Frame (D-Seattle) and Sen. Keith Wagoner (R-Sedro Woolley), would replace Washington\u2019s current business and occupation (B&O) tax with a margin tax, modeled after Texas\u2019 franchise tax.<\/p>\n

\u201cThis tax reform proposal is the culmination of years of hard work, analysis, and public input,\u201d said Frame. \u201cThank you to the thousands of Washington residents and business owners who shared their feedback on how to improve the state\u2019s tax structure. This bill is the result of a thoughtful and bipartisan process to make much-needed changes to Washington\u2019s taxes.\u201d<\/p>\n

\u201cWe greatly appreciate the valuable input received from the public in considering a variety of ideas for the full Legislature to consider during its 2023 session,\u201d said Wagoner. \u201cWhile not everyone will agree with the final recommendations, I personally want to thank my fellow work group members for working in a bipartisan and collaborative manner and to commend the Department of Revenue for their hard work.\u201d<\/p>\n

The Tax Structure Work Group\u2019s recommendation for the margin tax resulted from five years of studies and community engagement. The group conducted 14 town hall events, six focus groups held in Spanish, Vietnamese, Korean, Russian, Cantonese, and Mandarin, and connected with more than 5,000 Washingtonians for their feedback and input. The group examined many alternatives to make the state\u2019s taxes more transparent, stable, and fair in a revenue neutral manner.<\/p>\n

The proposed margin tax would replace Washington State\u2019s current B&O tax, which is calculated using businesses\u2019 gross receipts. Previous economic studies<\/a> found that the B&O tax can disadvantage small, start-up, and low-margin companies like restaurants and grocery stores.<\/p>\n

To address these disadvantages and other issues with the B&O tax, the Work Group recommended that the Legislature consider replacing the B&O tax with a modified gross receipts tax called a \u201cmargin tax,\u201d modeled after the Texas franchise tax. In the margin tax, a business starts with its gross receipts and then subtracts the greatest of four possible deductions:<\/p>\n