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Governor Gregoire. Photo by Studio 8.

Governor Gregoire. Photo by Studio 8.


Proposed State Takeover Of B&O Tax

Joshua McNichols

Washington Governor Chris Gregoire wants the state to take over collection of local Business and Occupation Taxes. But Seattle officials say the plan could cost the city of Seattle up to $43 million a year. KUOW's Joshua McNichols reports.


Ron Bueing is a Seattle tax attorney with a dream. A dream that one day Washington state's patchwork quilt of local business taxes could be replaced by a single statewide business tax.

Bueing: "From a business perspective the dream of simplicity is, really, one place to go. One place to go to find out the answers, which is completely the opposite of what we have now."

Bueing says businesses that do work in multiple cities have to make lots of phone calls just to find out what taxes they owe. And even then, sometimes they miss one.

Bueing: "It might be 10 years down the line before finally they find out about it and they get hit with ten years of back taxes and everything else. They didn't even know – why didn't somebody tell me that we had a Seattle city B&O tax? Why didn't somebody tell me that we had a tax in Tacoma?"

Washington Governor Chris Gregoire wants the dream of a simpler tax system to come true. She's supporting a bill that would task the state with collecting all those local B&O taxes. Then the state would divvy them up and send them back to cities.

But shifting B&O taxes to the state level means giving up local control. Some cities would lose money, others could get more.

Seattle City Councilmember Sally Clark says Olympia doesn't have the incentive to make sure big cities get their fair share.

Clark: "When larger cities that are more service–job–centers — do the math and look at this particular proposal — cities lose. Cities lose revenue."

Here's how:

Say an architect works in Seattle to design a house that's built in Bremerton. Under the current system, Seattle and Bremerton each collect a portion of B&O tax from that work.

The governor's plan would change that. Bremerton would get all the B&O taxes and Seattle would collect nothing.

Tax lawyer Ron Bueing will come out OK either way.

Bueing: "I actually thrive when everybody has different rules, and nobody can understand what the rules are and they have to come to me to get the answers. It works out a lot better for me."

Seattle and four other cities are working with state legislators to rewrite the bill.

State Representative Reuven Carlyle says he hopes these changes could protect cities from any financial loss.

For KUOW, I'm Joshua McNichols.

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