Policy Blog – March 25, 2025 – Budgets and Taxes Week in the Legislature

Regular legislative activity resumed last week, with committees reviewing and debating bills that have advanced from the opposite chamber. Some of these include high profile bills like Unemployment Insurance for Striking Workers (5041), Waste Management (5284), Firearm Restrictions in Sensitive Places (5098) and Rent Stabilization (1217). These hearings are part of the lead up to the April 2 deadline for bills to be passed out of policy committees, including these priorities from our legislative agenda:

• HB 1483, the right to repair bill is scheduled for a hearing on Wednesday in the Senate Environment, Energy & Technology Committee.  We will be working with the committee for a technical amendment to the exemption for medical devices.
• SB 5455, the making technical changes to the Andy Hill CARE Fund is scheduled for a hearing on Tuesday in the House Health Care & Wellness Committee with LSW’s support
• SB 5594, Biosimilar Medicines, is scheduled for a hearing on Wednesday in the House Health Care & Wellness Committee. LSW and BIO worked previously to amend the bill, alleviating concerns about prescribing and pharmacy practices.

Also last week, LSW CEO Marc Cummings participated in a work session in the House Postsecondary Education & Workforce Committee on the impact of Career Connect Washington in driving industry-supported degree and certificate programs to help meet the workforce needs of Washington’s life science industry. Watch the video here.

This Friday, LSW will present at a work session on the state’s life sciences ecosystem in the House Technology, Economic Development & Veterans Committee. With so many new legislators and emerging policy issues like potential regulation of artificial intelligence, we are grateful for this opportunity to share a positive message on the impact of our industry in the state. The University of Washington will also be part of the panel. You can watch the work session here.

Legislative budget writers received bad news last Tuesday with the latest state revenue forecast. In the upcoming two-year budget beginning July 1, projections indicate a decline of $479M, bringing the total revenue collection to just under $71B. For the 2027-2029 biennium, the latest forecast anticipates a $420M decrease, with revenue expected to reach $76.4B. Washington’s chief economist noted that the state’s revenue collections have yet to fully stabilize since the pandemic.

Majority Democrats released their proposed budgets on Monday and will vote them out of committee on Thursday. The budgets will then move to the floor, with Senate action likely on Saturday the 29^th, and House floor action likely on March 31^st.

The House and Senate Democrats also released their respective revenue proposals last week. These proposals identify their revenue solutions to address the state’s substantial budget deficit. Collectively, the tax increases would more than cover the state’s $15B shortfall, but it remains unclear which proposals may advance, and whether any have Governor Ferguson’s support. Life Science Washington is working to educate lawmakers on the impact to life science companies, particularly early state companies engaged in R&D without bringing in revenue.

We were glad to see that our highest-priority budget item, the CARE Fund, was funded; however, other important programs, such as Sector Leads and CCW, remain at risk. The real work ahead will focus on the evolving revenue proposals, and we will keep you updated as we learn which proposals begin to gain traction.

The Senate proposals include:

• SB 5797 (Frame, D-36) Financial Intangibles Tax — a tax of $10 on every $1,000 of assessed value of certain financial assets (stocks, bonds, exchange-traded funds, and mutual funds) held by individuals with more than $50M of these assets, paid by about 4,300 individuals. It would generate approximately $4B per year starting in fiscal year 2027 for public schools.
  
• SB 5796 (Saldana, D-37) Removing the Cap on Employer Payroll Taxes — a 5% tax on large employers on the amount of payroll expenses above the Social Security threshold — currently $176,100 per year. This tax is limited only to companies with $7M or more in payroll expenses— about 5,289 companies. The proposal is similar to the city of Seattle’s “JumpStart” tax and includes a full credit for businesses already paying that tax. It would raise about $2.3B per year once fully implemented, going to public schools, health care, basic needs assistance for seniors and those with developmental disabilities.
  
• SB 5798 (Pedersen, D-43) Allowing Property Tax to Grow by Population and Inflation — raising the property tax growth limit for the state’s common schools levy and for cities and counties, as well as special purpose districts, from the current 1% cap to the combined rate of population growth plus inflation. Local governments have the option to take a lower growth rate if they choose. The proposal also completely exempts participants in the “Property Tax Exemption for Senior Citizens and People with Disabilities” program from paying the state property tax. The state property tax is dedicated to public schools, with about $779M in additional funding over the full four-year budget cycle, while increased funding in cities and counties would go to public safety, criminal justice, and community protection.
  
• SB 5794 (Salomon, D-32) Repealing Tax Preferences — repealing 20 tax exemptions where the public policy objective was not met, it is unclear whether the policy objective was met, or the exemption is legally obsolete, according to nonpartisan auditors at the Joint Legislative Audit & Review Committee, including for in-state hauling, gold bullion, prescription drug wholesalers, and more. This would generate just over $1B over the full four-year budget cycle for public schools, health care, and social services.
  
• SB 5795 (Krishnadasan, D-26) Cutting Sales Tax – a half-point sales tax reduction, from 6.5% to 6% – a decrease in revenue of approximately $1.3B per year.

House proposals include:

• HB 2046 (Berg, D-44) – Financial Intangibles Tax– imposes a property tax of $8 on every $1000 of assessed value on certain financial intangible assets, such as stocks, bonds, mutual funds, and index funds, with the first $50M in assessed value exempt from the tax. Other exemptions include pensions, retirement accounts, and education savings accounts. The Department of Revenue estimates around 4,300 Washingtonians would pay the tax, generating approximately $2B per year, beginning in fiscal year 2027, which will be dedicated to the Education Legacy Trust Account.
  
• HB 2049 (Bergquist, D-11)– Increasing State and Local Flexibility to Fund Schools and Public Safety – would modify the state and local property tax authority and adjust the school funding formula. The bill maintains the 1 percent cap on property tax growth but allows for increases based on inflation and population changes, not to exceed 3 percent. The bill also adjusts levy equalization methods. The Department of Revenue estimates the change would increase funding for state investment in K-12 schools by $50M in fiscal year 2026 and $150M in fiscal year 2027.
  
• HB 2045 – (Fitzgibbon, D-34) – Surcharge on High-Grossing Corporations and Financial Institutions – would impose a 1% Business & Occupation (B&O) tax surcharge on businesses with taxable income over $250M. This surcharge applies to approximately 400 businesses statewide. The bill also includes an increase to the surcharge on specified financial institutions (approximately 200) with annual net income of $1B or more from 1.2% to 1.9%. Under this proposal, Washington would generate nearly $600M in fiscal year 2026 and nearly $2B in fiscal year 2027.

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