Home prices in Washington State have risen steadily over the last few years, and at a faster pace than almost every state in the country. And the property tax rate has gone up as well. But a recently passed budget plan should lower the rate used for property taxes in Washington State, staring in 2019.
Why Washington Property Taxes Rose in 2017
State and local governments have long leaned on homeowners as a source for revenue. According to an analysis conducted by the Tax Foundation, property taxes in particular accounted for around 35% of the total revenue earned by state and local governments.
In Washington, as in most states, the money generated through property taxes is applied to all sorts of government costs. It flows into the public school system, emergency services, utilities and more. It’s a vital revenue source that states couldn’t do without.
In 2017, property taxes in Washington State were increased to generate funds needed for a court-ordered school funding requirement. This is partly what accounts for the rate increase from 2017 to 2018.
Of course, our state isn’t the only one experiencing a rate hike. In 2017, property taxes collected by local and state governments across the country rose by 6% on average, producing $293.4 billion in total revenue. That 6% increase was “almost three times the annual rate of inflation,” according to an April 2018 report by The Washington Post.
Why They Will Likely Go Down in 2019
Now for the good news. Many homeowners in Washington State could get a bit of a tax break starting in 2019. A budget and spending plan passed by the state’s legislature should result in a lower property tax rate in 2019.
According to the legislature’s website, Senate Bill 6614 cleared the state senate and house in March of 2018, and was later signed by Governor Jay Inslee.
Here’s what the final bill report says about real estate taxes in Washington:
“In calendar year 2019, the state property tax is lowered from $2.70 to $2.40 per $1,000 AV. This corresponds to a property tax reduction of approximately $390 million in calendar year 2019.”
So essentially, this budget plan is intended to ease the burden of the state property-tax increase that lawmakers approved back in 2017 (in order to fund Washington’s schools).
Senator Christine Rolfes, one of the bill’s sponsors, has previously stated that the property tax increase for Washington homeowners was a mistake. Speaking on the Senate floor during previous debates over the bill, Rolfes said:
“It was unprecedented that we raised the property taxes so high last year, and I think all of us regret that. What is also unprecedented in this underlying bill is that we’re giving some of it back.”
Keep in mind the reduction from this bill will not equal a 21% reduction in your tax rate as going from $2.70 to $2.40 per $1,000 assessed value would suggest. This is because there are additional county and city taxes as well as voter-approved special levies.
While the decrease in state property tax will help, it likely won’t do much more than help offset the increase in property taxes resulting from increasing property values.
Part of the ‘PITI’ Monthly Payment Formula
For homeowners with mortgage loans, property taxes are typically included within the monthly mortgage payments. The acronym “PITI” is often used to described the four common components of a monthly payment:
- Principal. This is the outstanding balance of the loan, from the actual amount borrowed.
- Interest. The first ‘I’ in PITI refers to the interest assigned to the loan.
- Taxes. Real estate taxes are typically collected as part of the monthly mortgage payment.
- Insurance. The second ‘I’ stands for insurance. Specifically, this is the homeowners or hazard insurance policy that protects the home.