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© 2007 TaxSanity.org
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The following provides detailed information regarding HB 1744, the Property Tax Homestead Exemption for Washington State.

What is the Property Tax Homestead Exemption?

The Property Tax Homestead Exemption is legislation that would shield from all local property tax a portion of a household's primary residence, equal to 20% of the local county's median property value, and from the state property tax an amount equal to 20% of median state property value.

For the purposes of public discussion, the Property Tax Homestead Exemption was originally proposed using $30,000 as the exempt value, an amount typical for similar exemptions in other states. However, to assure that the benefits of the exemption would be uniform across a state with median valuations that vary widely by county, and that the impact would not diminish as values rise over time, a static dollar exemption has been replaced with the formula described above.

The suggested 20% figure equals $32,400 on the state median property value of $162,000.

Has a bill been introduced and a number assigned?

Yes! A bipartisan group of 13 representatives led by Rep. Sharon Santos (D) and Rep. Toby Nixon (R) have sponsored HB 1744 in the 2005 legislative session, "An Act Relating to Property Tax Relief."

Is the Property Tax Homestead Exemption revenue neutral?

Yes. Property tax exemptions are not tax cuts, but rather result in a shifting of tax burden. The Homestead Exemption shifts burden from less expensive homes to more expensive homes, as well as to non-residential property. For regular levies in districts that are at or near their statutory aggregate limits, the amount of the exemption is reduced so as to always remain revenue neutral.

Is the Property Tax Homestead Exemption constitutional?

Tim Eyman, of all people, has attacked our proposal as being unconstitutional. The issue at hand is whether a Homestead Exemption would violate the uniformity requirement of Article VII, Section 2. The Bill Analysis states the following:

"The state constitution requires all property taxes to be applied "uniformly." However, the constitution also gives the Legislature the power to exempt property from taxation. There is a certain logical inconsistency between the uniformity clause and the exemption clause. This inconsistency has not been completely reconciled by court interpretations. Thus, questions remain about how far the Legislature can go under the exemption clause without violating the uniformity clause."

In Belas v. Kiga, the AG defended “value averaging” by claiming it was an exemption, and arguing that exemptions are independent of the uniformity requirement. The court ruled that “value averaging” was not an exemption, and specifically left the broader issue unanswered.

There is strong precedence supporting the AG’s arguments, but it would be foolish to speculate as to how the court might rule if the statute were challenged.

Do other states offer a Property Tax Homestead Exemption?

Yes. Thirty-seven other states offer a Property Tax Homestead Exemption, or some other tax credit or circuit-breaker to help offset the tax impact of rising property values on middle and low income homeowners.

Washington has the most regressive tax structure in the nation, and a generous Homestead Exemption would target tax relief to those families who need it most.

What would be the impact of the exemption on homeowners?

Based on a $30,000 exemption, the Department of Revenue estimated the following impact on Washington homeowners:

















The vast majority of homeowners would pay lower taxes, with only a modest 4% increase on homes over $500,000. Since as much as 82% of wealthy homeowners itemize their federal tax returns, their net tax increase could be as much as 40% lower, as a portion of the state’s tax bill is exported to the federal government.

Exploding the Myth about Exploding Taxes 

In promoting his recent tax cutting initiatives, Tim Eyman has highlighted the growth in state and local property tax revenues from about $1 billion in 1980 to $6.25 billion in 2003, calling the expansion “obscene.” However, without taking into account growth in population, personal income, and inflation, these numbers are meaningless.

When viewed in the proper historic and economic context, the numbers reveal that average tax burden has remained remarkably stable over the past twenty years despite rising tax revenues. Indeed, tax rates have been declining since before the current spate of tax cutting initiatives.

TaxSanity.org is compiling historical data of state and local tax burden, and is pleased to offer a preliminary report for download.