Last week, several new tax proposals were introduced in both the Senate and House to fund the state’s Operating Budget, and they are moving fast. Hearings were held on these bills, and many were passed out of either the Senate Ways and Means Committee and the House Finance Committee. The Senate even passed a few of them off the floor on Saturday.
One of the most notable proposals is the Wealth Tax (SHB 5797). Before the committee passed the bill, it was amended to reduce the proposed rate from $10 to 34 cents per $1,000 of wealth. Additionally, the revenue from the tax would now be directed to the Education Legacy Trust Fund instead of the General Fund. The bill also exempts the first $50 million in intangible assets. Governor Ferguson has stated that he would not support a budget relying heavily on a wealth tax, but he is open to a lower-yield version that wouldn’t jeopardize the budget if challenged in court. It is anticipated that the full Senate will vote on this bill the next day or so.
Also, early this morning, the State House passed their version of the property tax bill, but not before amending the bill to remove the growth factor increase from 1% to 3% among other changes. Governor Ferguson opposed that change, which led the House and Senate to drop that language. Engrossed Substitute House Bill 2049 now focuses on education funding and revised guidelines for districts seeking to collect revenue from voter-approved local levies, which could still increase your property tax bill. The amended bill removes the inflation enhancement added to local effort assistance (LEA) calculations and changes inflation for LEA from the Seattle Consumer Price Index to the Implicit Price Deflator. The new version of the bill also requires the K-12 Funding Equity Workgroup to analyze and report on economic disparities in communities’ access to resources and modifications to state and local tax authority for schools. The
On Saturday, the Senate passed ESSB 5813, a bill that would increase both the capital gains and estate tax rates. The House Finance Committee held a hearing on the bill Monday morning. Currently, Washington taxes long-term capital gains above $270,000 at 7%. ESSB 5813 would add an additional 2.9% tax on gains exceeding $1 million, raising the effective rate to 9.9%, placing Washington among the top five states for capital gains tax rates.
The bill also proposes increasing estate tax rates. Currently, the rate ranges from 10% to 20%, depending on estate size. The new proposal would increase that range to 10%–35%. However, one positive element of the bill is the correction of a longstanding issue that reinstates the automatic inflation adjustment for the estate tax exemption, which had been inadvertently removed years ago. The exemption threshold would increase from $2.193 million to $3 million and be adjusted annually for inflation moving forward.
Additionally, the Senate passed ESSB 5814, which imposes a one-time sales tax prepayment requirement. Taxpayers who file monthly combined excise tax returns and report $3 million or more in sales tax in calendar year 2026 would be required to prepay 80% of their June 2027 state sales tax by June 25, 2027. The remaining balance would be due by July 26, 2027. Taxpayers must reconcile the final amount on their July return. Failure to submit the required prepayment—or underpayment—would result in a one-time penalty equal to 10% of the amount due.
AGC opposes all of these tax proposals and has communicated this to the Legislature. If you have any questions on any of these proposals, contact AGC’s Lobbyist, Michele Willms.