Research Council analyzes proposed fix to workforce education investment account

Legislators last year created a workforce education investment account funded by increased business and occupation taxes on certain businesses. This year, they are trying to fix problems in the legislation, as the Washington Research Council explains in a new policy brief

One of the major new taxes adopted last year was the workforce education investment business and occupation (B&O) tax surcharge. Appropriations were also made last year from the new workforce education investment account (WEIA) to fund higher education programs.

The Legislature is now working to overhaul the surcharge to address three issues: (1) Administrative and compliance complexities that may make revenue collection difficult; (2) a late amendment last year reduced the 2021–23 revenue estimate so much that a significant shortfall is expected in the account in the biennium; and (3) caseload increases may create a shortfall in 2019–21—depending on what account those increases are charged to.

The Senate has passed a bill that would repeal the surcharge (except for advanced computing) and apply a 1.75 percent tax rate to a broader category of businesses while exempting those with less than $1 million in gross income. Unfortunately, the Senate did not act to include the WEIA in the four-year balanced budget requirement as we have previously recommended.

Fixing the problems in the account are a priority, even in this short legislative session. While many businesses supported and continue to support the objectives of the programs funded in the account, the tax increases were controversial. And they continue to pose a problem for both taxpayers and the state revenue department.  The WRC brief provides a good primer on the issues involved.