Changes made to WA tax plan: What’s still in play as end of session nears

OLYMPIA — With just days left to go in the 2025 legislative session, Washington lawmakers are still mulling over new tax proposals to balance a multibillion-dollar hole in the state’s budget while details of their final spending plan remain under wraps.

Those proposals are moving fast and changing quickly as the Sunday deadline approaches.

Contentious proposals to adjust the 1% cap on property taxes from Democrats this year appeared mostly dead in the water Monday, although an amended version of its counterpart in the House passed off the debate floor later in the evening. The latest version eliminates the option for local governments to raise the 1% cap but still allows for an increase in the local school levy cap for education funding. The proposal passed 50-48, with several Democrats voting against the measure. 

And a “wealth tax” is back on the table, adding additional intrigue in the session’s waning days. Democrats have homed in on a smaller wealth tax as a “test,” in the case it is challenged in court. It’s a proposal Gov. Bob Ferguson said he would be “open to a conversation” about when he warned he would veto a budget that relied on an initial larger, broader wealth tax.

House lawmakers also debated and passed two bills Monday evening that include new taxes on businesses and electric vehicle credits. 

House Bill 2077 imposes an excise tax on the sale and banking of Zero-Emission Vehicle credits by manufacturers, a measure seen as taking aim at Tesla. It passed with a 52-45 vote. Thirty percent of the revenue will go to the Electric Vehicle Incentive Account with the remaining 70% into the general fund until June 30, 2027, and then to the Carbon Emissions Reduction Account.

House Bill 2081 increases the state’s business and occupation tax to 0.5% on varying industries including retail, manufacturing and wholesaling. Businesses with gross incomes over $5 million per year will see business and occupation tax rates increased to 2.1%. An additional B&O tax would be levied on businesses with at least $250 million in taxable income. The proposal passed 50-48.

Those bills now head to the Senate and a possible vote from the Senate Ways and Means Committee on Friday.

Democratic leaders continue to work toward a final operating budget, which needs to be posted publicly at least 24 hours before they take a final vote.

They initially proposed a revenue package to the tune of $16 billion to $21 billion, which drew criticism from Ferguson, particularly for the wealth tax. That sent lawmakers back to the drawing board, where they then crafted a plan that would have added $12 billion in new taxes. Ferguson, still not satisfied, called the plan “too risky” last week without offering any fix.

Other Senate proposals still remain in play, including increasing the rate structure for the capital gains tax and estate tax and extending retail sales and use tax to services such as information technology consulting services, temporary staffing services and advertising services. And lawmakers are still seeking to repeal or tweak certain obsolete tax breaks.

It is unclear which of the revenue proposals still in play, if any, have Ferguson’s approval. He refused to answer specific questions from reporters on the matter after a bill signing Tuesday.

The Legislature is also looking at possible fee increases to shore up the budget hole.

House Democrats voted Tuesday to increase the cost of an annual Discover Pass from $30 to $45. It now goes back to the Senate for concurrence on changes made on the House debate floor.

Annual fees for hunting and fishing could also go up, like an increase from $29.50 to $34.50 for freshwater fishing for residents between 16 and 69, for example. Nonresident fees would increase from $84.50 to $103.50, while senior residents would see a slight drop from $7.50 to $6.90.

Additionally, Senate Bill 5786 would increase the cost of most liquor licenses, permits and endorsements by 50%. The bill is up for a possible vote in the House Appropriations Committee on Wednesday.

Lawmakers need to pass a transportation and capital budget before the session adjourns, as well. And there remains a chance that lawmakers will not agree on an operating budget by Sunday, which would trigger Ferguson to call a special session to continue hammering out details to pass a final budget for the 2025-27 biennium. 

Ferguson said Monday that he is hopeful the Legislature can get it done on time, but that “if it takes a few more days, it takes a few more days.” 

Correction: An initial version of this article was updated to reflect that Gov. Bob Ferguson is “open to a conversation” about a relatively small wealth tax. He has not said he would support it.