WA Research Council looks at striking growth in state property taxes

It seems like a long time since Washington lawmakers struggled with the state Supreme Court’s order to fully fund basic education. In fact, it’s not been so long. The court agreed that the state was had achieved compliance in June 2018. And a big part of the state’s compliance involved raising the state property tax.

The Washington Research Council looks at just how much that decision has affected state property tax collections. The accompanying graphic, reproduced below, is striking.


That spike in property tax collections is remarkable. The WRC writes,

The chart shows the growth in revenues from FY 2000 from each of these sources. Revenues from the state property tax grew slowly but steadily through FY 2017. Then, they jumped by 31.4% in FY 2018, 21.8% in 2019, and 6.2% in 2020. Now, state property tax revenue growth since 2000 is 168.5%—that’s higher than the other two top tax sources, and higher than the growth of all state tax revenues. (Growth in B&O tax revenues is a still high 149.8%.)

As alluded to in our opening, the WRC points out the McCleary effect.

The substantial property tax growth is due to the changes to the tax that were made as part of the state’s response to the McCleary decision on school funding. We described the changes in our 2020 report on McCleary. The state property tax increased to $2.70 per $1,000 of assessed value in calendar year (CY) 2018, decreased to $2.40/$1,000 in CY 2019, and increased to $2.70/$1,000 for CY 2020 and 2021. The Legislature also suspended the statutory property tax growth limit of 101% from CY 2019 through CY 2021.

In another post, we reported the Tax Foundation analysis that found Washington’s effective property tax rate on residential property was 0.84%, ranking the state 27th in the nation. That was for 2019. Notably, that was for the combined state and local property tax. The WRC post focuses on the state-only property tax. Also, we’d add that, even before the McCleary response, Washington relied on property taxes to support the state budget to a far greater extent than most other states. In 2016, property taxes made up 9.3% of state tax revenues; for all states combined, property taxes amounted to just 2.0%.