In the upcoming election, ballot measure 1098 would possibly institute sweeping reform in Washington’s tax code by establishing a state income tax. Put simply, the measure would reduce property taxes across the state and institute an income tax on joint-filing earners with taxable income over $400,000 and individuals or couples filing separately with a taxable income over $200,000. It also increases the Business and Occupation Tax Credit, reducing the tax burden on some small businesses.
Without taking a side on the issue, I wanted to look at how the measure would impact only of the reform to property taxes. First, a simple explanation of how property taxes are calculated is required: Each year, the State Legislature imposes a Property Tax Levy. The total levy is divided by the total value of the property in the state to determine the tax rate. Both the levy and the tax rate calculation are controlled by various constitutional and statutory requirements and limitations.
State Tax Levy / Total Property Value = Tax Rate
Tax Rate * Your Property Value = State Property Tax Owed
This measure affects only the state property tax, a single component of a homeowner’s total property tax bill. The total property tax owed by an individual also includes county, city, and local school levies. In my most recent tax assessment, my home had an appraised value of $258,600. My total tax due for 2010 was $2,997.05. Of that amount, $523.53 went to the state levy.
Measure 1098 would reduce the state portion of my property tax by roughly 20%, or $105 (the reduction may not be exactly 20%, as various other mechanisms may affect the calculation). I double-checked my numbers with an online calculator provided by the Economic Opportunity Institute, an independent, non-partisan, not-for-profit organization based in Washington State, and they estimated a tax savings of $113 (http://www.eoionline.org/tax_reform/calculator.html).
Bottom Line: For a homeowner with property valued around $250,000, measure I-1098 would reduce their property tax bill by a little over $100.
The property tax component is only one aspect of this measure, and I strongly encourage all voters to carefully read and consider the arguments made by both sides of the issue (http://www.yeson1098.com/ in favor, http://www.defeat1098.com/ in opposition) before casting their ballots.
***This article is not intended to endorse or oppose I-1098, but rather to discuss a singular aspect of the measure: the impact on homeowner’s property taxes. I am not an attorney, tax or otherwise, so this explanation is my best effort to explain the rules governing and the and impact of this measure. If I have mistakenly misrepresented any details, I welcome feedback on the comments section and will promptly make any corrections needed.
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