OLYMPIA — The Legislature has passed a bill changing the business-and-occupation tax to increase funding for a new program to make college more affordable to students across Washington.
Democratic House lawmakers Wednesday night approved Senate Bill 6492, 52 to 45. No Republicans voted in favor of the bill; five Democrats from swing districts around the Puget Sound voted against it.
The measure, which has passed the Senate, now heads to Gov. Jay Inslee. If he signs it, the law would take effect April 1.
The legislation comes in response to higher-than-expected costs for Washington College Grant, which lawmakers passed last year. That program has been projected to provide up to 110,000 low- or median-income students with reduced or free tuition.
The new bill, sponsored by Sen. Jamie Pedersen, D-Seattle, replaces the business-and-occupation tax lawmakers approved last year with a different version of that tax. In addition to worries there wouldn’t be enough funding, lawmakers were concerned that last year’s version was so complicated, there could be trouble collecting it.
“But most importantly, the bill will protect our historic investments in higher education that the Legislature made in 2019,” Pedersen wrote Thursday night in an email. “Every student in our state will have access to an affordable higher education.”
Republicans, who opposed last year’s version of the tax, also opposed this new one. Rep. Brandon Vick, R-Vancouver, said lawmakers should instead use the higher-than-projected revenue from existing taxes to fund college affordability.
“Our projected revenue increases alone since we left last year are enough to fund all of these college slots,” Vick said during the House debate.
SB 6492 repeals last year’s three-tiered set of surcharges for business-and-occupation taxes on services. It replaces those with a 1.75% rate in that category for most of those services — such as architectural, legal and medical firms — for businesses grossing more than $1 million annually.
It also sets a 1.5% business-and-occupation tax rate — which was the rate before last year’s tax plan — for hospitals and some other categories, like services with less than $1 million in gross receipts annually, according to a legislative analysis.
And it levies an “advanced computing surcharge” of 1.22% for some large tech businesses, such as Microsoft. That surcharge would tax those companies up to $9 million per year.
The new version would raise about $234 million over the 2021-23 budget cycle to fund the Washington College Grant.
