Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Tax Policy topic
No spam. Unsubscribe anytime.
Lawmaker urges margins tax to replace Washington's regressive B&O burden
Summary
Representative April Berg outlined a draft margins tax to replace Washington's business-and-occupation (B&O) tax, saying it would exempt the first $1,000,000 in receipts, target profits rather than gross receipts and impose a rate near 1.75%; supporters said the change could make the tax code less regressive for small businesses, while owners warned about broader tax and regulatory costs.
Representative April Berg, chair of the House Finance Committee, urged a shift away from Washington's business-and-occupation (B&O) model to a margins-style tax she said would reduce the regressive impact on many small and midsize businesses.
"What I would do differently with our tax code is focus now on B and O...we are the only state in the Union with a B and O tax," Berg said, describing a draft that would behave more like Texas's margins tax and exempt the first $1,000,000 in receipts. "Taking a $1,000,000 business, you wouldn't be paying anything except for corporate activity tax...lowering that rate to about 1.75%...becomes a lot more fair for the majority of our businesses in this state," she said.
Berg told the audience the lawmaking process that produced the state's recent income-tax changes also built safeguards into the millionaire's tax, including indexing the $1,000,000 threshold to inflation and an implementation committee to work out details. "This bill will go into effect in 2029," she said, adding the committee will include representatives of large and small business, CPAs and bipartisan legal and policy experts.
Small-business owners and former lawmakers on the panel said Berg's approach could help some companies but warned that overall predictability and other costs remain a concern. "From my personal business, it reduces the overall B&O tax burden," said Mark Armstrong, a small managed-services owner and former state representative. But he cautioned about licensing fees, carbon-related costs and other regulatory charges that can erode trust and raise operating costs.
Panelist Elizabeth New of the Washington Policy Center said payroll levies and some recent benefit programs have also affected wages and business decisions. She voiced support for reforms that reduce the administrative burden on employers while preserving worker protections.
Berg said the margins proposal is in draft form and the Legislature will need further discussion to produce a workable, revenue-neutral package. "I'm looking forward to further conversations with folks on this panel, as well as my colleagues about how can we get there," she said.
Next steps: Berg said the law's implementation committee is intended to resolve technical questions before the tax takes effect in 2029; lawmakers and business groups will continue negotiations on rates, exemptions and administrative details.
