Alternative proposals to the B&O tax, Part II

Last time, we talked about some of the alternatives to the B&O tax that were discussed in the Gates Commission report (if you’d like to read that please click here). A couple more recent examples of alternatives that were discussed, and one that was even voted on, was Initiative 1098 (I-1098) and a proposal made by the Washington Policy Center regarding a single business tax rate.

Bill Gates Sr.

Bill Gates Sr., who chaired the tax commission that I’ve mentioned a few times, was the driving force behind I-1098, which was actually made to implement a state income tax on folks who made over $200,000 or joint incomes over $400,000.  I won’t go into this in detail since other contributors will discuss the income tax at length, but the reason I brought this up is that I-1098 included a section that would increase the B&O tax credit to small businesses to the amount to $4,800, which would equal around 80 percent of small businesses in Washington State. It was said that this was included to sell the idea to small businesses to gain their support for the initiative; however, the effort was soundly defeated in November 2010 by a margin of 2 to 1.

While this was going on, the Washington Policy Center released their proposal on streamlining the B&O tax system. The Washington Policy Center describes their organization as “an independent, non-partisan think tank promoting sound public policy based on free-market solutions,”. They described their Single Business Tax proposal as revenue neutral (meaning that there was no increase or decrease in money received by the State), treating all business owners equally by using one flat rate, eliminating loopholes and special treatment, and simplifying administration of the tax to reduce compliance costs for business.

One can’t argue that this proposal would be much more simplistic than the current B&O system, but it looks like this idea wasn’t popular enough to survive during the last two legislative sessions since it was initially discussed. Looking through the bills that Governor Gregoire signed, there is only a handful during this time regarding the B&O tax and none of them included this idea. Bills passed related to clarifying or enacting deductions for certain industries. 

I hope that after these last few posts you have a better understanding of the B&O system in Washington State and the various ideas that have been discussed to modify or replace it. Before moving on to reviewing other taxes, I’d like to conclude this thread by looking at how cities implement B&O taxes and a recent effort by the State to streamline that process.