Policy Blog – April 21, 2025 – The End Game is Here?

We added a question mark at the end of this week’s blog title because an air of uncertainty hangs over the legislature’s final week in session. Can policymakers find a budget solution that meets Governor Ferguson’s stated desire to balance any increases in tax revenue with meaningful spending reductions and avoiding new taxes that may be untested, difficult to implement, and risk falling to court challenges?

In response to Ferguson’s April 1st announcement that he will not sign a budget that relies on a wealth tax, Democratic lawmakers began exploring several new tax proposals aimed at generating revenue for public services, education, and healthcare.

But on Thursday afternoon, just hours before the $12B tax package was set to be advanced by the Senate Ways & Means Committee, Governor Ferguson voiced concerns in a press release, calling it “too risky.” However, Ferguson did not present any level of tax revenue policy he would sign, nor specific programmatic cuts he would recommend. 

While the cumulative impact on Washington’s life science industry remains concerning—especially given the state’s long-standing, founder-friendly tax climate—recent changes reflect advocacy efforts led by Life Science Washington. The package no longer includes a payroll tax proposal and a bill to repeal “obsolete” exemptions no longer eliminates the preferential B&O rate for nonprofit research.

Here are the key measures Democrats have proposed:

• Capital Gains and Estate Taxes – SB 5813 (Wilson) / HB 2082 (Street)
  • Adds a 2.9% excise tax on capital gains over $1M, on top of the current 7% tax applied to gains over $270,000 (adjusted annually for inflation). Increases estate tax rates for individuals who pass away after January 1, 2025.Raises the estate tax exclusion from $2.1M to $3M. Revenue from this bill would go to the Education Legacy Trust Account. 
  • SB 5813 passed the Senate  on 4/19 by a vote of 27-21-1 and is scheduled for a hearing in House Finance on 4/21

• Business and Occupation (B&O) Tax Surcharges – SB 5815 (Saldaña) / HB 2081 (Fitzgibbon)
  • Increases B&O tax rates on sectors such as manufacturing, retail, child care, and gambling. Imposes a 0.5% surcharge on businesses with state income over $250M. Raises rates on existing B&O surcharges. Funds would support public schools, higher education, healthcare, and social services. 
  • HB 2081 passed House Finance on 4/19.

• Property Tax Cap Adjustment – SB 5812 (Wellman) / HB 2049 (Bergquist)
  • Adjusts the annual 1% cap on property tax increases to allow for growth tied to inflation and population, capped at 3%.
  • Revenue would support K–12 education, including special education. 
  • HB 2049 passed House Finance on 4/19.

• Sales Tax on Services and Nicotine Products – SB 5814 (Frame) / HB 2083 (Stonier)
  • Expands the state’s sales and use tax to cover services like IT consulting, temporary staffing, and advertising.
  • Includes all nicotine products, whether synthetic or tobacco-derived, under the tobacco products tax.
  • Imposed a tax of $.10/cigarette
  • Requires a one-time prepayment of state sales tax from businesses with $3 million+ in taxable retail sales in 2026. The revenue would support education, healthcare, social services, and other programs.
  • SB 5814 passed the Senate on 4/19 by a vote of 27-22.

• Closing Ineffective & Obsolete Tax Preferences – SB 5794 (Salomon)
  • Repeals, modifies, or clarifies the legislative intent of certain tax preferences.
  • SB 5794 passed the Senate on 4/19 by a vote of 26-21-1.
  • Following LSW advocacy, the bill no longer repeals the preferential rate for nonprofit research and development.

• Financial Assets Tax – SB 5797 (Frame)
  • Establishes a tax at a rate of $0.34 per $1,000 of the true and fair value on certain financial intangible assets on the portion of assets owned by a Washington resident in excess of $50M.
  • SB 5797 passed the Senate Ways & Means Committee on 4/18.

• Repealing or Modifying Tax Preferences — HB 2084 (Ramel)
  • Eliminates tax preferences for the sale of precious metals and bullion.
  • Imposes the business and occupation tax on gross receipts derived from the rental of individual self-service storage units.
  • Restores the B&O preferential tax rate of 0.138 percent for warehousing and reselling prescription drugs.
  • HB 2084 passed the House Appropriations Committee on 4/19.

• The House concurred in the Senate amendments to the Right to repair bill, ESHB 1483 as amended.  It now heads to the governor for his signature. 
• SB 5455, technical amendments relating to the Andy Hill Cancer fund, passed the House and is on its way to the governor for his signature. 
• HB 2068 is the bill relating to regulating and taxing tobacco and nicotine products.  It’s known as the “kids flavored tobacco bill” and it would provide some funding for the Andy Hill Cancer fund.  It was heard on April 7^th but no executive session scheduled yet.

Have questions, comments, or concerns about these bills or any other pending legislation? Get in touch with LSW’s Public Affairs Manager, Curtis Knapp.