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Implicit Price Deflator

This page provides information on the implicit price deflator (IPD) and how it affects property tax rate setting for local governments in Washington State, as well as recent IPD data and sample resolutions/ordinances of "substantial need" if the IPD falls below 1%.

IPD Rate for Setting 2021 Property Taxes: The inflation rate for 2019-2020 as of August 27, 2020 (the final IPD data release before the September 25 statutory deadline) was 0.60152%, which means local governments with populations 10,000 or greater must adopt a resolution/ordinance of "substantial need" in order to receive the full 1% levy increase in 2021 as allowed by statute. See below for more information and examples.

Jurisdictions under 10,000 population are not affected and do not have to adopt a substantial need finding to take the full 1% increase.


The implicit price deflator for personal consumption expenditures is a figure used to measure inflation, and it can impact how much property tax revenue a jurisdiction can collect in any year.

Under state law, no local government may increase its property tax levy more than 1% in a given year, and local governments with a population of 10,000 or more are limited to the lesser of 1% or the annual rate of inflation as measured by the IPD (RCW 84.55.005 - .010). However, if inflation falls below 1%, a jurisdiction with a population of 10,000 or more may adopt a resolution of "substantial need" allowing it to increase the levy (or bank the excess capacity) up to the full 1 percent.

A few jurisdictions also use the implicit price deflator as an inflation index for certain fees or benefits, although it is more common to use the Consumer Price Index.

How is the IPD Calculated?

The definition of "inflation" for setting a property tax levy (RCW 84.55.005) is:

"Inflation" means the percentage change in the implicit price deflator for personal consumption expenditures for the United States as published for the most recent twelve-month period by the bureau of economic analysis of the federal department of commerce by September 25th of the year before the taxes are payable.

The state Department of Revenue (DOR) calculates the IPD using the most recent quarterly numbers reported by the federal Bureau of Economic Analysis (BEA).

Near the end of every month, BEA publishes an estimate of the gross domestic product and IPD numbers from the previous calendar year quarter. For instance, every January BEA releases the first estimate, or "advance estimate," of the numbers for the preceding fourth quarter (October-December). In February, BEA releases a revised "second estimate" of the numbers for Q4, and in March BEA publishes the revised "third estimate" for Q4. In April, BEA publishes the advance estimate for Q1 (January-March), and so on.

These quarterly numbers are seasonally adjusted each year in July, and these seasonal numbers form the basis for the prior year IPD personal consumption expenditure number that is used by DOR to calculate inflation.

The most recent publication available on September 25 is typically the August publication, or the "second estimate" for Q2. This means that, for property tax purposes, the rate of change in the IPD is typically calculated by comparing the "second estimate" for Q2 to the revised Q2 data from the previous year.

Note that BEA uses anywhere from one to three decimal places.

Resolution or Ordinance of Substantial Need

If the IPD falls below one percent, local governments with a population of 10,000 or more may not increase their property tax levies above the rate of inflation (or bank the excess capacity) unless they adopt a resolution or ordinance of substantial need (RCW 84.55.0101).

This resolution or ordinance of substantial need is separate from the property tax levy ordinance, and separate resolutions/ordinances must be adopted for each individual levy. For instance, if the IPD falls below 1% and your county has a current expense levy, a road levy, and a conservation futures levy, and assuming you want to levy the full 1% increase for all three levies, you would need to adopt three separate substantial need findings. Likewise, if a city or a fire district has a separate EMS levy on top of its regular/general fund levy, it would need to adopt findings of substantial need for both levies.

If the local legislative body has five or more members, the resolution must be approved by a "majority plus one" supermajority for passage. If the legislative body has four members or less, it must be approved by a simple majority. The statute does not require a separate public hearing for the finding of substantial need, but presumably the substantial need finding would be established during the public hearing on revenue sources and property tax increases required by RCW 84.55.120.

Practice Tip: There is no clear definition of "substantial need," and it depends on the needs and requirements of each individual jurisdiction. Each jurisdiction should document its evidence to support those needs in written findings that are included within the ordinance/resolution (such as a documented increase in the costs of services in excess of current inflation factors). See the examples below.

Local governments with a population under 10,000 may increase their property tax levies up to 1% regardless of the latest inflation data, so they do not need to adopt a resolution or ordinance of substantial need.

Examples of Substantial Need Resolutions/Ordinances

Below are examples of resolutions and ordinances of substantial need from a variety of local governments in Washington.

General Template

City Regular/General Fund Levies

  • Anacortes Resolution No. 1935 (2015) – Reasons cited include labor contracts, utility tax decrease, and depletion of general fund reserves
  • Covington Resolution No. 15-13 (2015) – Reasons cited include increased costs and declining and unstable revenues from utility taxes, REET, and other sources
  • Issaquah Resolution No. 2020-15 (2020) – Reasons cited include the fiscal impacts of the COVID-19 pandemic and increases in employee compensation costs
  • Kirkland Resolution No. R-5167 (2015) – Reasons cited include previously adopted budget assumptions, short-term and long-term revenue losses, and addition of new firefighter position
  • Lynden Resolution No. 933 (2015) – Reasons cited include 3% labor contract increases and increases in health care costs and retirement benefits

Counties - General Fund/Current Expense

Counties - Road District/Fund

Counties - Flood Control

Counties - Conservation Futures Fund

EMS Levies

Special Purpose Districts

Current Quarterly IPD Data (Base Year 2012)

The top row of data in the following table represents the preliminary and revised implicit price deflator for personal consumption expenditures published by BEA. The second row represents the cumulative percentage change in the preliminary or revised index from the second quarter. The third row represents the actual percentage change of the IPD over the preceding 12 months.

Recent Quarterly Index and Cumulative Percentage Change
Year 2018 2019 2020
Quarter Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Index 108.498 108.885 109.039 109.722 110.104 110.525 110.878 110.431 111.426 111.831
% Change Over Previous Quarter 0.390 0.357 0.141 0.626 0.348 0.382 0.319 -0.403 0.901 0.363
% Change Over Previous 12 Months 2.32861 2.02007 1.44956 1.52206 1.48021 1.50618 1.68655 0.64618 1.20068 1.18163

Source: BLS National Income and Product Accounts (NIPA) Table 1.1.9: Implicit Price Deflators for Gross Domestic Product. See Line 2, Personal Consumption Expenditures. Last revised on March 25, 2021. Next release date: April 29, 2021.

Historical IPD Increases

Below are the recent historical percentage changes in the implicit price deflator for personal consumption expenditures. Red indicates when the IPD fell below 1%, affecting the ability of local governments with a population of 10,000 or more to increase their property tax levies for the following year.

Please note that these percentage changes are the official calculations used for property tax levy setting, as declared by the Washington Department of Revenue on September 25 of each year. These inflation rates are never revised and do not reflect any adjustments to the IPD that may have been made after September 25 of each year.

Dates Percent
Q2 2019 to Q2 2020 0.60512
Q2 2018 to Q2 2019 1.396
Q2 2017 to Q2 2018 2.169
Q2 2016 to Q2 2017 1.553
Q2 2015 to Q2 2016 0.953
June 2014 to June 2015 0.251
June 2013 to June 2014 1.591
July 2012 to July 2013 1.314
July 2011 to July 2012 1.295
July 2010 to July 2011 2.755
July 2009 to July 2010 1.539
July 2008 to July 2009 -0.848
July 2007 to July 2008 4.527

Source: Table B-1 for years up to 2013 and NIPA Table 1.1.9 for 2014 and beyond published by the Bureau of Economic Analysis.

Last Modified: April 02, 2021