Washington State Property Tax 101 – Overview

State property taxes account for approximately 13% of all state general fund revenue, making it the third largest revenue stream in the state.  Think of Washington’s tax structure as a three-legged stool (a reference made by former State Forecaster, Arun Raha, during a revenue forecast in 2011); the three legs (taxes) hold up the entire stool (Washington’s revenue sources).  To put things in perspective, the following chart shows you what our property tax collections look like relative to all other sources of revenue.  No surprise that the “three legs” account for nearly 80% of state general fund revenues.

In 2011, $8.9 billion in property taxes was paid by Washingtonians to state and local governments and school districts.  Of that, just under 55% (approximately $5 billion) was collected to support K-12 education.  Local governments rely heavily on property tax collections as well.  In fact, property taxes make up the largest revenue stream in tax collections for the locals, generating approximately $4 billion in 2011.  Clearly in times of economic downturn (especially The Great Recession with the huge hit to home ownership levels), K-12 education funding is directly at risk.  For further discussion on this, see this article.

As I briefly mentioned in the property tax history  post, the definition of taxable property has changed over the years and will undoubtedly continue to change as our technology evolves.  At its most basic level, it is defined in Article 7, Section 1 of our state constitution as tangible and intangible goods that can be owned.  Real property – land, structures, etc - and tangible property – generally everything else - are the two major classifications the state uses to define property.  The legislature has granted some exemptions; for instance, motor vehicles and household goods are not included in property tax assessments.

The same uniformity clause in the state constitution that prevents Washington from implementing a state income tax applies to property tax too.  According to the Legislative Guide to Washington State Property Taxes, “many other states have differential tax rates or different value standards that depend upon the separate classification of property.”  This type of system would be deemed unconstitutional in Washington and has been multiple times throughout state history.

Stay tuned for more posts about property taxes including a discussion on exemptions and how your property is assessed.

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