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“Ballpark” margin tax rates coming next week

“Ballpark margin tax rates” coming next week – At their November 14 meeting, Washington’s Tax Structure Work Group (TSWG) will provide a general “ballpark” idea on what they believe the margin tax rate could be based on preliminary modeling. 

After TSWG receives feedback from the business community and others regarding those rates being “in the ballpark,” they would move forward to the actual modeling which would be used to draft legislation for their December meeting and the 2023 legislative session.

As the TSWG members are developing the Washington margin tax proposal, they continue to refer to the Texas model, but the TSWG is only considering parts of the Texas model. Texas also had to raise their margin tax rate early on, since it wasn’t bringing in predicted revenue. Also, in Texas, businesses with total revenue of $20 million or less can opt to pay a tax of 0.0331% on total revenue. (Yes, they can choose to pay a B&O tax rather than the margins tax. About 20% of businesses owing tax made that choice in 2017.) The Dept. of Revenue pointed this out to the TSWG and questioned if the DOR should include this computation in their modeling.

Because this is theoretically a revenue-neutral exercise, including the EZ Computation model would alter the rates. We have not heard back if this option will be included in what they present at their November meeting. AGC has heard from several members who have concerns about the margin tax and the impact it will have on smaller businesses and low-margin industries such as construction.

If you have any questions, contact Michele Willms.

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