Rejigging real estate excise tax

House Democrats may have divined an approach to achieve some of the dividends they’ve been seeking

  • Thursday, April 13, 2017 8:30am
  • Opinion

By Jerry Cornfield

After years of futility in targeting the wealthy, House Democrats may have divined an approach to achieve some of the political and financial dividends they’ve been seeking.

The concept is simple: buyers of expensive properties would pay a tad more tax on the purchase and buyers of cheaper properties a tad less.

To do that, House Democrats want to rejigger the real estate excise tax, a vital stream of money for cities, counties and the state and one that is growing in this period of booming sales of homes and commercial properties.

What they propose is replacing the current flat rate of 1.28 percent imposed on each sale of property with a four-tier graduated rate that starts with a lower rate of 0.75 percent on any sale of property valued at less than $250,000.

The other tiers would be:

• 1.28 percent on properties valued between $250,000 and $999,999;

• 2.0 percent on properties valued between $1 million and $5 million;

• 2.5 percent on properties valued above $5 million.

Democrats predict this change will generate an additional $419.7 million in the next two-year budget for public schools, early learning, health care and social service programs for lower-income families.

And they contend this will be accomplished with 97 percent of sales occurring at the existing or lower excise tax rate.

In other words, they argue a lot of people will pay a little less, a few will pay more and state coffers will be enriched in the process. For Democrats, who’ve been clamoring for years for a more progressive tax system, this change seems to meet the test.

Here’s how it appears to pencil out for a buyer of a $200,000 home. Today, the current tax rate results in $2,560 in real estate excise taxes. That sum would drop to $1,500, for a savings of $1,060, under the Democrats’ proposal.

For buyers of an $8 million home — like one sold in Woodway last year — their tally of excise tax would climb from $102,400 to $160,000.

This proposed revision is currently embedded in a package of tax changes pushed by Democrats that GOP leaders have summarily rejected. But it can be yanked out and considered separately.

Conservative Republican Rep. Matt Manweller of Ellensburg may have signalled his interest in such a conversation when he described the proposal as “one little piece of ripe fruit on a rotten tree.” Around here that’s darn near a compliment.

It’s worth recalling two years ago Senate Republicans delivered a policy touche with their call for reducing tuition for university students. House Democrats resisted until the GOP agreed to extend the savings to community college students.

This time Democrats may have landed on an idea middle-class families on both sides of the Cascades can embrace. Republicans are dismissive now but their mood could change.

Political reporter Jerry Cornfield’s blog, The Petri Dish, is at www.heraldnet.com. Contact him at 360-352-8623; jcornfield@heraldnet.com. Twitter: @dospueblos.

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