Boeing, other corporations would get big property tax cuts under GOP schools plan

When it comes to taxing businesses to pay for schools, state lawmakers in Olympia remain of two minds.

While Democrats are proposing business tax hikes, a Republican plan would give many of Washington’s largest corporations a sizable property tax cut.

Those breaks would include a $7.4 million annual reduction for Boeing, a $6 million cut for Puget Sound Energy and a $1.8 million break for Alaska Airlines, according to new estimates from the state Department of Revenue.

Other corporations projected to receive property tax breaks topping $1 million a year under the Republican plan include Walmart, CenturyLink, Avista, BNSF Railway Co. and Weyerhaeuser.

Some other big Washington businesses, including Microsoft and Amazon, would see their property taxes go up under the Republican plan.

Still, statewide the GOP proposal would result in a net tax decrease of $92 million a year for owners of nonresidential parcels worth $5 million or more. Costco, Comcast and the owners of the Tacoma Mall are among those that would see property tax cuts of several hundred thousand dollars a year if the Republican plan becomes law.

Democrats say the tax breaks show that the Republican plan is unfair, because it simultaneously would raise taxes for property owners in high-cost areas such as Seattle and Bellevue.

“What that means in real-people language is I have a retired grandmother in the Ballard neighborhood of Seattle who’s going to see hundreds of dollars in tax increases so that Walmart can receive millions of dollars in tax reductions,” said state Sen. Reuven Carlyle, D-Seattle.

Republicans who control the state Senate say companies in rural and suburban areas could use the extra help, and that lowering their taxes is simply a byproduct of fixing how the state pays for schools.

“It’s by no means the point of our bill, but it goes toward the inherent inequity in the levy system,” said state Sen. John Braun, R-Centralia, referring to disparities in how much money rich and poor school districts can raise in local property-tax levies.

“If we can not only fix the underlying levy system, but also bring our overall state economy closer together so we don’t have these two economies that change at the Seattle city line, then that’s a good thing for all of us,” said Braun, the lead Senate budget writer.

In the McCleary school-funding case, state lawmakers are working to comply with a court order to fully fund basic education. To do that, the state must take on the full cost of teachers’ and other school employees’ salaries, part of which now are being paid unconstitutionally through local school district property-tax levies.

Republican Senate leaders aim to solve that problem by enacting a new statewide property tax of $1.55 per $1,000 in assessed property value, while eliminating local school district levies starting in 2019.

That means property taxes in some areas, including many rural and suburban school districts, would go down, because right now their local levy rates are higher than the GOP’s proposed flat rate.

For that reason, Boeing’s facilities in and around Everett would get a cut in property taxes of about $2.9 million annually under the Republican plan, according to the Revenue Department’s estimates. The aerospace company already benefited from more than $300 million in tax breaks from the state in 2015.

At the same time, areas with high property values and low levy rates — such as Seattle, Mercer Island and Redmond — would see big tax increases under the Republican proposal.

That’s why companies in those areas, including Amazon and Microsoft, would see their taxes rise.

David Schumacher, the budget director for Democratic Gov. Jay Inslee, said others besides tech giants would have to pay more under the GOP plan.

“The problem is that in Seattle, Mercer Island and Bellevue, you don’t have to be rich to see your property taxes going up,” he said. “Every business in Seattle is not Amazon.”

The Revenue Department analysis didn’t consider the potential effects of new, more modest local levies that school districts could enact starting in 2020 under the GOP plan.

If school districts enact those additional taxes, large companies in their boundaries wouldn’t necessarily see the same tax breaks.

Democrats who control the state House are largely looking at options other than property-tax changes to solve the McCleary problem. Their budget proposal would raise about $3 billion in other taxes, without substantially altering local school-district levies.

Under the House Democrats’ proposal, businesses with a taxable revenue of more than $250,000 would see a 20 percent hike in their business and occupation tax rates, a change that would bring the state about $1.2 billion in revenue every two years.

While the Democratic plan would exempt many small businesses from paying B&O taxes and allow others a $100,000 deduction, about 72,000 companies that bring in more than $500,000 a year would feel the full brunt of the 20 percent tax increase. House leaders also want to enact a new tax on capital gains, such as income from the sales of stocks and bonds, which Republicans have sharply criticized as the first step toward enacting a general income tax in Washington.

A Boeing spokesman declined to comment on the $7.4 million property break the company would receive under the Senate GOP plan, or which approach the company favors to solve McCleary.

The Washington Roundtable, a business group, hasn’t taken a position on the House and Senate tax proposals, either, said Steve Mullin, the organization’s president.

The roundtable’s members include executives from several businesses that would see property-tax reductions under the Senate Republican plan.

Mullin said that although his group hasn’t weighed in on either tax package, he sees the Senate GOP’s plan as being more progressive than Democrats give it credit for.

In promoting some of their tax proposals this year, including the capital gains tax, Democrats have talked about the need to make wealthy individuals pay their fair share.

“When you look at the whole Washington system, this change would make it more progressive on average,” Mullin said of the GOP’s property tax plan.

“Wealthy individuals and businesses in high-value areas are going to proportionally pay more taxes.”

This story was originally published April 8, 2017 at 3:14 PM with the headline "Boeing, other corporations would get big property tax cuts under GOP schools plan."