Opinion: New bill proposes ‘excise tax’ on compensation

Date: Tuesday, April 4, 2023

Jason Mercier of the Washington Policy Center says it’s best to take away the excise tax cookie while we still can

Jason Mercier
Washington Policy Center

If you give a mouse an excise tax cookie, he’ll want a broader income tax for his milk. We all knew this was the logical, inevitable, and expected outcome of the state Supreme Court’s recent 7-2 decision saying that an excise tax could be applied to income. While expected, I thought we’d have more time before lawmakers took advantage of the court’s decision. On Monday, however, Democratic budget writers in the Senate introduced: SB 5767 (Funding health care access by imposing an excise tax on the annual compensation paid to certain highly compensated hospital employees).

According to the new bill:

“The legislature intends to expand access to affordable health care by controlling health care administrative costs through a tax on excess compensation paid by hospitals . . . Beginning January 1, 2024, for taxes due in 2025, an excess compensation tax is imposed on the hospitals that pay covered employees excess compensation. The tax equals the sum of the annual total compensation, as required to be reported to the department of health under RCW 43.70.052(3) during the tax year, of any covered employee that is paid excess compensation during the tax year, multiplied by 7.5 percent.”

Expect this to be the first of many excise taxes on income introduced in Washington.

We should remember that chances are when the mouse wants his milk, the broader income tax rates will eventually increase, and bases expand. A bill has already been proposed this year to do just that for the capital gains tax.

Best to take away the excise tax cookie while we still can.

Jason Mercier is the director of the Center for Government Reform at the Washington Policy Center.