By Mark Harmsworth
In 2001, Initiative 747, which limited property tax increases to 1% per year, was passed (58% to 42%) by Washington voters. Prior to its passage, cities and counties were able to raise property taxes by 6% per year and many did. After the Washington state Supreme Court struck the initiative down, the Legislature was called into special session by Gov. Chris Gregoire and subsequently reinstated the cap with 85% of both chambers voting in the affirmative.
Now, lawmakers in Olympia want to increase the cap to 3%. Senate Bill 5770, introduced by Sen. Jamie Pedersen last year, would not only triple the 1% cap, but would also change the calculation used to define how the 3% cap is reached, making it much easier for local officials to justify tax increases each year.
The Association of Washington Cities, which is funded in part with taxpayer dollars, is advocating for the tax increase.
Washington property owners struggling with massive property tax increases driven by high property values and tax increases over the last few years will see their taxes go up even further. Estimates place the increase at $12 billion over the next 10 years.
The sponsors of the bill cite many things that they could buy with the money they collect, but ultimately, the inevitable tax increases they would enable would make housing even less affordable.
Speaking of things that make Washington less affordable, there is a proposal ostensibly designed to aid renters by hiding bad credit and mandating expenses on landlords.
House Bill 2323, introduced by Rep. Strom Peterson, D-Edmonds, would require rental property owners to report rental payment history to a nationwide consumer credit agency, but only for on-time rent payments. Additionally, the proposal would require a rental property owner to stop reporting once a tenant is late on a rental payment.
Credit background checks allow property owners to make educated decisions on who the prospective renter is and evaluate the risk and cost of having that renter in the property. While most renters pay rent on time and take care of the home, there are some that do not. The history of a tenant who does not pay on time would not appear on the credit reporting background check under HB 2323.
The bill also creates an unfunded government mandate on the rental property owner, who now has to take time each month to report rental payments to the credit agencies. This can be cost prohibitive and the credit reporting setup fees can be several thousand dollars, plus a monthly fee. There is also a risk to the property owner that misreporting rental payments could open the door for a tenant to sue the property owner and place them in violation of the fair credit reporting act.
Now, just for good measure, let’s take a look at SB 6064, the proposal that would not only jack up rental rates but could leave you without your pet. Under the proposal, a property owner could only collect a damage deposit for pets, capped at $150, starting this July.
Capping the deposit at $150, which is barely enough to cover the cost of a carpet cleaning, will force the property owner to choose between $150 to clean and repair or to not allow pets at all. Anyone who has seen the damage animals can do to a home, is going to look very seriously at taking on this risk. In other words, SB 6064 would not provide relief for renters but increased rates.
If we want Washington state to be more affordable, we could start by adopting the maxim, “First do no harm” in the realm of taxes.
The 2024 the estimate for state tax revenue is $71 billion per bi-annum which is an increase of $27 billion over the last five years. The state does not need to increase property taxes or taxes of any kind. An evenly applied property tax cut would help with affordability in the rental and homeowner real estate markets. We could also cut the state sales tax rate for the first time since 1982 and rethink how state rules add to the cost of housing.
Solutions to making Washington more affordable now are on the table. Unfortunately, they’re not yet on the legislative agenda.
Mark Harmsworth is director of the Center for Small Business at the Washington Policy Center. He is based out of Mill Creek, Washington. Members of the Cowles family, owners of The Spokesman-Review, have previously hosted fundraisers for the Washington Policy Center and sit on the organization’s board.