Panelists at Rewire urge tax-code overhaul, call for fixes to sales‑tax-on‑services law

Moderators and panelists at the Rewire conference in Tacoma urged lawmakers to consider structural changes to Washington’s tax code after the state’s largest recent tax package and the rollout of sales taxes on services.

Libby Denkman, host of Sound Side on KUOW, moderated the discussion. Panelists included April Berg, chair of the state House Finance Committee; Jo Winn, director of the Washington Department of Commerce (introduced onstage as Jo Winn); Rachel Smith, president of the Washington Roundtable; and Dana Ralph, mayor of Kent.

"We did pass the largest tax increase in state history last year, and that affects everything," Rachel Smith said, arguing that higher taxes are already being felt by employers and consumers. She cited a recent AWB employer survey and said, "65% of employers say taxes are the most important challenge facing their business this year."

Rep. April Berg, who chairs the House Finance Committee, said the state needs better ways to assess incentives and fiscal notes. Berg noted that fiscal scoring currently treats some job‑creation incentives as upfront revenue losses even when they generate significant long‑term economic activity: "We have to get better at tracking," she said, urging dynamic accounting for "but‑for" investments that firms cite as reasons to locate and expand in Washington.

The panel singled out 58‑14, the recent extension of sales tax to certain services, as a source of uncertainty and complexity. Berg said the bill produced "unintended consequences" around sourcing and taxability of services such as digital advertising and IT consulting and that lawmakers are drafting clarifying legislation to specify who and what is taxed.

Panelists also addressed proposals under discussion to tax high incomes or wealth. Rachel Smith warned that taxing wealth is difficult because capital is mobile, while the commerce director cautioned that even aggressive new revenue proposals would not, by themselves, close the state’s near‑term budget shortfall. "There are very few levers that you can turn to raise revenue quickly," Jo Winn said.

Speakers repeatedly raised the equity question: current revenue relies heavily on regressive taxes, including sales tax and the B&O structure, which panelists said disproportionately affect lower‑income households and small businesses. April Berg, speaking in her capacity as a policymaker, said Washington needs to move toward a broader, lower‑rate structure: "Good tax policy is broad based, low rate," she said.

Panelists did not propose a single replacement plan. Instead, they urged a bipartisan, data‑driven review of the tax code, better fiscal scoring for incentives and targeted fixes to 58‑14’s sourcing rules. Berg said changes are likely to be incremental in the short session but emphasized the need for structural reform ahead of budget crunches.

The session closed with audience questions about whether the state should attempt to recapture job growth leaving Seattle; panelists stressed the interconnectedness of regional job centers and cautioned against quick fixes. The panel said lawmakers will continue work on clarifications to 58‑14 and broader revenue options in the coming legislative sessions.