Over a 105-day session, Washington lawmakers approved a nearly $78 billion two-year budget to address a multibillion-dollar shortfall. To fund the package, they raised the capital gains tax, increased the estate tax, and made targeted business tax increases—a total of $9.3 billion projected in new taxes over the next four years and $5.9 billion in cuts for the two-year budget. The Legislature scrapped proposals for a statewide payroll tax and a wealth tax, both of which faced significant opposition from the business community and concerns about their impact on Washington’s innovation economy.
Other notable legislation included a rent cap limiting annual increases (with exemptions for buildings less than 12 years old), a 6-cent per gallon gas tax hike to sustain transportation projects, and a new requirement for certified firearms training for most gun buyers.
The Seattle Times covered highlights of the new state budget and tax package:
- WA Legislature Passes $78B Budget, Rent Cap, Gun Permits as it Adjourns: https://www.seattletimes.com/seattle-news/politics/wa-legislature-passes-78b-budget-rent-cap-gun-permits-as-it-adjourns/
- WA Lawmakers Sprint to Finish Line with Final $9B Tax Plan: https://www.seattletimes.com/seattle-news/politics/wa-lawmakers-sprint-to-finish-line-with-final-9-billion-tax-plan/
Life Science Washington’s Advocacy and Key Issues
Now that the legislature has passed the budgets and tax plans, Governor Ferguson has 20 days to review the plans and sign, veto, or partially veto any of the bills. At this point it remains unclear whether he may veto any of the tax plans. While he is certain to sign the budgets, he may choose to veto individual sections. Ferguson said he is “carefully reviewing the budgets line by line over the next few weeks,” and that he will “carefully review all revenue increases.” LSW worked closely with legislators throughout the session to protect critical investments and safeguard the state’s environment for life sciences innovation:
- Career Connect Washington: LSW opposed proposed cuts to this vital workforce development initiative, emphasizing its role in creating sustainable pipelines of life sciences talent. While advocacy helped mitigate the deepest cuts, the program will still see a reduction in funding, and we are actively evaluating the full implications for the life sciences workforce pipeline.
- Tax Policy: LSW successfully advocated to preserve the nonprofit research preferential Business & Occupation (B&O) tax rate, maintaining critical support for the state’s research institutions. After sustained advocacy from LSW and other business groups, the final B&O tax increase changed significantly from early proposals. Lawmakers ultimately adopted a broader, less targeted, and overall smaller increase — avoiding some of the most harmful impacts on Washington’s innovation economy.
Through sustained advocacy alongside other business allies, Life Science Washington helped mitigate major risks and preserve key drivers of industry growth during a complex and consequential legislative session. We will soon publish a full overview summarizing the outcomes for each of the policy, budget, and tax issues we tracked and advocated for throughout the session.
Here are the measures that passed:
- Capital Gains and Estate Taxes – SB 5813 (Wilson) / HB 2082 (Street)
- Adds a 2.9% excise tax on capital gains over $1 million, 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 July 1, 2025 (changed from January 1, 2025).
- 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 $250 million.
- Raises rates on existing B&O surcharges. Funds would support public schools, higher education, healthcare, and social services.
- 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.
- 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.
Through sustained advocacy alongside other business allies, Life Science Washington helped mitigate major risks and preserve key drivers of industry growth during a complex and consequential legislative session. We will soon publish a full overview summarizing the outcomes for each of the policy, budget, and tax issues we tracked and advocated for throughout the session.
Have questions, comments, or concerns about these bills or any other pending legislation? Get in touch with LSW’s Public Affairs Manager, Curtis Knapp.