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Washington - Proposed Legislation Replaces Tax Cap

by Scott Donald, Irvine, June 2017

 

Proposals making their way through the Washington State Legislature would allow local governments to increase property taxes each year by more than the current 1% allowed. Supporters say the change is needed since tax revenues continue to lag behind the rising demand and increasing cost of providing needed services.

 

The Limit Factor

 

It has been ten years since the legislature restricted property tax increases to 1%, a restriction known as the limit factor.

 

For jurisdictions with a population of 10,000 or more, annual regular property tax revenue is limited to the lesser of inflation or 1%, plus the value of new construction. For jurisdictions with a population less than 10,000 revenue growth is limited to 1%.

 

House Bill 1764 and Senate Bill 5772 change the annual regular property tax revenue growth limit to the greater of 100% plus a change for population and inflation not to exceed 105% and 101%. Both bills are still in committee.

 

Impact on Rates and Sales

 

If this proposed legislation becomes law, it will likely impact tax rates more than property assessments. It could also affect sales prices if investors become weary of the higher potential cost of property taxes.

 

The bills apply to taxes levied for collection in 2018 and thereafter.