Dear friends and neighbors,
I hope this newsletter finds you in good health and good spirits! As we navigate the ever-changing landscape of the legislative session, I am excited to share some encouraging developments in our ongoing efforts to reform Washington’s tax code for the benefit of working families across the state.
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A Progressive Tax Trajectory
As Chair of the Finance Committee, I am proud to lead a dedicated team working towards a more equitable tax system that addresses the needs of everyday families. The recent years, compounded by the challenges of the pandemic, have underscored the urgency of these reforms: inequity has disproportionately harmed everyday families who work hard and are just trying to pay the bills.
I’m excited to share significant strides in our ongoing efforts to reform Washington’s tax code—a journey from once being the most regressive to a progressive trajectory that benefits working families across our state.
Reflecting on our recent progress, it’s essential to acknowledge Washington’s history of having the most regressive tax code in the country. Our collective efforts are making a tangible difference, moving us from the undesirable title of the most regressive to now being second, signaling a positive shift.
The enactment of initiatives like the capital gains excise tax, aimed at funding childcare and early learning, coupled with the expansion of the Working Families Tax Credit, has played a pivotal role in gradually reforming Washington’s tax code. These measures are essential steps toward building a more progressive system that prioritizes the needs of working families.
Our approach has been recognized as working. The Institute on Taxation and Economic Policy stated in their latest “Who Pays” Report: “… Washington was able to shed its title as the nation’s most regressive tax jurisdiction with enactment of a new tax on capital gains and the creation of a tax credit for low- and moderate-income families.”
Although we have made progress, Washington remains second to most regressive, additional tax reform measures are being considered to further prioritize working families, vulnerable populations, and essential services like affordable housing and poverty reduction.
We are committed to building a tax code that generates revenue in a way that is fair and equitable, gradually transforming Washington’s tax landscape, ensuring a brighter and more progressive future for every corner of our great state.
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Real Estate Transfer Tax: Building a More Affordable Washington
Together, we are making strides in reshaping our tax landscape. Over the years, we have seen Washington transform from having the most regressive tax code in the country to now being second, and we are not stopping there. I want to shed light on the Real Estate Transfer Tax, which I introduced as a strategic and essential step towards creating a more progressive and equitable tax system.
In a nutshell, Real Estate Transfer Tax is a tax on property sales. The proposed changes ensure the first $750,000 of a property sale is exempt, while adding a modest 1% tax on high-end property sales over $3.025 million. The funds generated from this surcharge are dedicated to critical affordable housing initiatives—supporting the state Housing Trust Fund, farmworker housing, supportive housing, services, and programs for populations with developmental disabilities.
Worried about the impact on affordable rental options? Rest assured, affordable properties are exempt, safeguarding these crucial rentals for our community and the majority of Washington state. Concerned about potential rent increases? The extra tax applies only to the portion of property sales that exceeds $3.025 million, not the entire transaction. Studies show landlords set rents based on the market, not taxes.
We need to consider the broader tax landscape: presently, Washington is in the middle of the pack for real estate excise taxes among the 50 states. The proposed changes must be seen in context, including other exemptions like B&O tax for property rentals and the exemption from the state capital gains tax for real estate transactions.
You might wonder why tax housing when we need more of it. This proposal will not increase the tax burden on affordable housing. This approach is progressive and tax-neutral, or even a tax cut for over 98% of taxpayers who would pay REET when they sell their property.
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Understanding the pressing need for housing solutions in our state is crucial. The housing affordability crisis disproportionately impacts low-income populations, and decisive action is required to prevent it from worsening. Washington needs over a million additional housing units in the next 20 years, with nearly 500,000 earmarked for those at 50% of the Area Median Income (AMI) or below.
A 1% tax on high value homes will allow us to create a dedicated revenue source for affordable housing. This robust revenue proposal will generate funds to confront our housing crisis head-on, creating homes for families earning less, ensuring everyone in our state has a safe and affordable place to live.
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Thank you so much for reading! I really appreciate your interest and engagement. This legislative session is moving fast—please don’t hesitate to reach out to my office to find a time to connect.
Warmly,
Rep. April Berg