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OLYMPIA — A bill recently passed in the state Legislature would make college tuition free for students with families that make less than $50,000 a year.

Microsoft and Amazon, some of Washington's biggest corporations, will pay higher taxes to fund higher education in the state. The two companies welcomed the legislation.

Under the new law, a three-tiered Workforce Education Investment surcharge is created. The first tier of the surcharge is imposed on selected businesses based on their primary business activity.

The legislature says an activity is considered to be a business' primary activity if more than 50 percent of the business' cumulative gross income was generated from engaging in that activity in the entire current or preceding calendar year.

Selected business activities include 43 categories of service and other activities, including, but not limited to, architecture and engineering services, legal services, insurance carriers, financial services, medical services, software publishing, scientific research, electronic shopping, telecommunications services, and others.

According to the first tier of the Workforce Education Investment surcharge, if a business is primarily engaged in one or more of the activities described, the surcharge is 20 percent of the total amount of taxes payable by the business on activities taxed under the B&O tax rate for services.

The second tier of the surcharge is imposed on advanced computing businesses that have worldwide gross revenue of more than $25 billion but less than $100 billion. The surcharge is 33.33 percent of the total amount of taxes payable by the business on activities taxed under the B&O tax rate for services.

The third tier of the surcharge is imposed on advanced computing businesses that have worldwide gross revenue of more than $100 billion. The surcharge is 66.66 percent of the total amount of taxes payable by the business on activities taxed under the B&O tax rate for services.

The total amount of surcharge paid by an affiliated advanced computing group must be at least $4 million, but not more than $7 million per year.

The legislation states an advanced computing business is one that designs or develops software or computer hardware, including modifications thereto, or provides cloud computing services, operates an online marketplace, an online search engine, or an online social networking platform.

The bill would create The Workforce Education Investment Account (WEIA). All revenues from the Workforce Education Investment surcharges are to be deposited in the WEIA account.

The account may be used only for higher education programs, higher education operations, higher education compensation, and state-funded student aid programs except for the 2019-21 biennium in which funds can be used for K-12 CCL. Expenditures from the WEIA must be used to supplement, not supplant, other federal, state, and local funding for higher education.

Appropriations from the WEIA are provided, totaling $374.7 million for the 2019-21 biennium. Some of the larger WEIA appropriations for the biennium include:

  • $160.3 million for the Washington College Grant.
  • $65.5 million in foundational support for the public higher education institutions.
  • $60.8 million for increasing nurse educator salaries and high-demand program faculty salaries at the community and technical colleges.
  • $32.1 million for implementing Guided Pathways at the community and technical colleges.
  • $17.1 million for new degrees and expanded enrollments in high-demand programs.
  • $14.4 million for the Washington State University Elson S. Floyd College of Medicine.
  • $11.5 million for a career connected learning initiatives.
  • $4.2 million for WCCC.

Supporters of the bill said the Washington College Grant would ensure that every Washington student could achieve their dream of a college education regardless of their income. Students would also be less likely to take on student loans. Without the State Need Grant, some individuals would not be able to go to college.

"The grant is needed for community members to improve themselves, but it is also needed for Washington to keep exemplary students in the

state. Businesses should pay this tax because it is an investment in the state and these businesses can afford it. An account dedicated to higher education opens doors to families by making college and apprenticeships more affordable. This bill will directly benefit 20,000 plus students through the expansion of the Washington College Grant.

Faculty positions go unfilled for years and the appropriations related to salary increases would help recruit and retain faculty. This bill is a long overdue investment in the community and technical college students and will help maintain and respond to employer needs," supporters told lawmakers.

However, opponents argued the tax would disproportionately impact small businesses and working families.

"The way this bill is structured would increase medical costs because the tax is applied to small medical practices, but not hospitals," opponents told lawmakers.

"This bill would also increase the costs of housing at a time when homelessness is rampant across the state. The bill would also increase costs for small businesses that have to contract with other small businesses for services. If this bill passes, it will further contribute to the regressive and selective form of taxation on selected industries. The service industry already pays a much higher rate of B&O tax. The recently passed federal tax break did not benefit many industries that will now be taxed at a higher level. If the B&O tax increases this could become a very volatile tax because the surcharge is not fixed." 

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