(The Center Square) – Instead of implementing an income tax in Washington, the Washington Center for Housing Studies (WCHS) recommends unleashing Washington’s housing productivity to raise revenue and at the same time address the housing shortage.
As reported by The Center Square, SB 6346 will impose a 9.9% tax on income above one million dollars a year or on combined household income above that threshold.
“We were just thinking if we built more houses, would it solve part of what we are calling a budget crisis or budget gap and it turns out yes, it would make a significant impact” said Building Industry Association of Washington (BIAW) Managing Director for External Affairs Jan Himebaugh in an interview Friday with The Center Square. BIAW cooperated in publishing the report.
The WCHS report says, “closing Washington’s housing production gap by constructing an additional 20,000 homes annually would generate an estimated $603,217,200 in state revenue directly via real estate excise taxes and state sales taxes.”
That translates into nearly a quarter of the revenue projected from the proposed personal income tax in its first year of implementation.
The report says the roughly 30,000 units permitted statewide through October 2025 represented a 48% decline from the recent peak of nearly 57,000 units in 2021, suggesting regulations are standing in the way of builders keeping up with demand.
Himebaugh said their members at BIAW are expressing a lot of concern about the income tax.
“It’s going to hit a lot of my members because though they’re not taking home a million dollars in their own income, just the amount of cash that you have to have to even start to build one house, let alone a subdivision of houses or an apartment complex, requires capital to be around,” Himebaugh said.
The report noted that, “Homebuilding often relies on one-time or cyclical income. A strong year, partial sale, refinancing, or catch-up payment can push a construction company past $1M, creating significant personal tax liability.”
Himebaugh said if more builders move their business out of Washington it is only going to disincentivize stable tax revenue the state gets already from home construction.
“If you just actually did the opposite and made it better and easier to build homes, then we’re addressing the thing that people can’t afford right now, and there’s not enough of, and we’re addressing the revenue issue that so many claim that we have in the state,” she said. “And it’s not just at the state level, but at our local government levels as well, because new home construction and home improvement, home construction, residential construction, helps both the state and local governments fund their services.”
In 2023, Washington policymakers estimated the state needs approximately 50,000 new housing units annually to meet population growth and affordability needs.
The analysis in the WCHS report assumes a projected annual housing production shortfall of roughly 20,000 units at current permitting levels.
According to Realtor.com Washington’s median home sale price is $615,000, with more than 38,000 homes listed for sale.
Renters-many of them priced out of the home buying market-are facing an average monthly rent of $2,200 for a 1-bedroom, with median rents up 4.52% year-over-year.
