HOUSE BILL REPORT

HB 2036

BYRepresentatives Appelwick, Taylor, Grimm, Haugen, Ferguson and Basich

Revising provisions on county sales and use tax equalization.

House Committe on Ways & Means/Revenue

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (9)

      Signed by Representatives Appelwick, Chair; Basich, Bristow, Dellwo, Holland, Rust, Schoon, Valle and Winsley.

House Staff:Rick Wickman (786-7136)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/REVENUE

FEBRUARY 27, 1988

BACKGROUND:

A county sales and use tax equalization program is authorized in RCW 82.14.200.  Monies for the equalization program are funded from two percent of motor vehicle excise tax revenues provided in RCW 82.44.150.

The sales tax equalization program has two parts.  First, monies are distributed from the county sales and use tax equalization account to any county that receives less than $150,000 annually in sales tax revenues.  The $150,000 "minimum" is annually adjusted by the governmental price index.  Distributions for calendar 1988 are based on a $190,257 "minimum."  The actual amount distributed is the $190,257 "minimum" minus the county's actual receipts (if less than the "minimum").

Example:  County "A" received $100,000 in actual sales and use tax revenues.  The distribution would equal $90,257 to meet the threshold of $190,257.

The second part of the program distributes monies to any county that receives less than 70 percent of the statewide per capita average sales and use tax receipts for all counties.  Monies are distributed to raise the eligible county up to 70 percent of the statewide per capita average.

Example:  County "B" has a population of 10,000 and received $200,000 or $20.00 per capita.  The 70 percent statewide per capita for that year was $21.50.  County "B" would receive $1.50 multiplied by its unincorporated population for an amount of $15,000.

An eligible county which has levied the maximum local option sales and use tax rate of 1 percent, automatically receives a distribution that is double the amount under examples "A" or "B" above.  Counties with tax rates of less than 1 percent do not receive double the distribution amount.

Currently, there are 9 counties which receive the "minimum" amount distribution and 11 that receive the 70 percent distribution.  All distributions are made on a calendar quarter basis.  The department of revenue administers the program.  The state treasurer distributes monies quarterly.

SUMMARY:

SUBSTITUTE BILL:  The "minimum" equalization threshold is increased to $250,000 effective January 1, 1989, and to $300,000 effective January 1, 1990.  The governmental price index is temporarily eliminated during 1989 and 1990 and reimposed effective January 1, 1991.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The current two percent allocation from the motor vehicle excise tax fund is increased to two and seventy-five one hundredths percent to fund the county sales tax equalization program changes.

Revenue:    The bill has a revenue impact.

Fiscal Note:      Requested February 19, 1988.

Effective Date:This act shall take effect December 31, 1988.

House Committee ‑ Testified For:    Jim Metcalf, Washington Association of Counties.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    An increase in the minimum floor sales tax equalization program for counties is necessary to provide additional funding for smaller, financially distressed counties that do not have adequate tax bases.

House Committee - Testimony Against:      None Presented.