The Senate and House Democrats have released their revenue proposals for the 2025-27 operating budgets. The Senate would raise $17 billion by imposing a wealth tax, payroll tax paid by employers, and changes to how property taxes are calculated. They will also repeal several tax exemptions and reduce the state’s
portion of the sales tax by .5%.
In the House, they would raise $15 billion by imposing a wealth tax, property taxes, and B&O tax on high-grossing corporations and financial institutions. The wealth tax and property tax proposals in the Senate and House are different. Click on the tax title to see the legislation on each proposal.
AGC’s Government Affairs Team in Olympia would like to hear how the Senate Payroll tax and Property tax proposals would impact your business as well as the House’s B&O tax proposal, and their version of the property tax. Also, if you have any concerns regarding any of the tax preferences that the Senate is considering repealing? The title of each proposal is a link to the bill. Please send any comments to AGC’s Michele Willms.
Senate Proposals
Wealth Tax (AGC is opposed)
- 1% tax on the assessed value of certain financial assets held by individuals with more than $50 million of these assets.
- Estimated to impact 4,300 taxpayers.
- Applies to both financial intangible assets and nonfinancial intangible assets.
- “Financial intangible assets” include cash, cash equivalents, and various financial investments like bonds, stocks, mutual funds, options, futures, commodities, and ownership units in business entities.
- “Nonfinancial intangible assets” cover intangible property beyond financial assets, such as trademarks, patents, copyrights, trade secrets, licenses, customer lists, goodwill, reputation, and private service or sports contracts.
- Would generate approximately $4 billion per year starting in fiscal year 2027
Payroll Tax Paid by Employers (AGC is opposed)
- 5% tax on payroll expenses above the Social Security threshold — currently $176,100 per year.
- Limited only to companies with $7 million or more in payroll expenses.
- Estimated to impact about 5,300 taxpayers.
- Includes full credit for businesses already paying Seattle’s “JumpStart” tax.
- Raises about $2.3 billion per year once fully implemented.
Removing the Property Tax Levy Lid of 1% (AGC is opposed)
- Removes the 1% cap on the property tax growth limit for the state’s common schools levy and for cities and counties, as well as special purpose districts.
- The updated definition of “limit factor” allows taxing districts to use the greater of 100% plus population change and inflation or 101% for their growth rate.
- Changes the definition of “Inflation” to the annual percentage increase in the CPI for all urban consumers in the western region, based on the most recent 12-month data from the U.S. Bureau of Labor Statistics, as of July 25th of the year before taxes are due.
- Adds a definition for “population change”: The annual percentage increase in a taxing district’s population based on the latest two years of official estimates from the Office of Financial Management as of April 1st of the year before taxes are due. For counties, this includes both incorporated and unincorporated areas, except for county road funds, which only consider unincorporated areas. If a taxing district spans multiple areas, its population change is determined by the city, county, or county with the highest taxable assessed value. Population change is rounded to the nearest 0.1%.
- Would bring in an additional $779 million over the four-year budget cycle
Cutting the Sales Tax (AGC is opposed)
- Reduces the sales tax from 6.5% to 6%
- Would decrease revenue approximately by $1.3 billion per year
Repealing Tax Preferences (Under review for impacts on construction)
- Repeals various tax preferences, deductions, and exemptions across multiple industries, including transportation, agriculture, international commerce, healthcare, energy, and nonprofits, while updating job creation tax credits and clarifying public policy objectives for certain tax benefits.
- These preferences were identified by JLARC as failing to meet their public policy objectives, having unclear outcomes, or being legally obsolete.
- Generates over $1 billion over the four-year budget cycle.
House Proposals
Wealth Tax (AGC is opposed)
- 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 $50 million in assessed value exempt from the tax to best ensure tax fairness. Other exemptions include pensions, retirement accounts, and education savings accounts.
- Impacts around 4,300 people, generating approximately $2 billion per year, beginning in fiscal year 2027.
Property Tax (AGC is opposed)
- Modifies 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.
- Adjusts levy equalization methods to ensure equitable funding for underinvested school districts. The Department of Revenue estimates the change will increase funding for state investment in K-12 schools by $50 million in fiscal year 2026 and $150 million in fiscal year 2027.
B&O Tax – High-Grossing Corporations & Financial Institutions (AGC is opposed)
- Imposing a 1% B&O tax surcharge on businesses with taxable income over $250 million. Applies to the wealthiest corporations—approximately 400 businesses statewide.
- Includes an increase to the surcharge on specified financial institutions (approximately 200) with annual net income of $1 billion or more from 1.2% to 1.9%.
- Will generate nearly $600 million in fiscal year 2026 and nearly $2 billion in fiscal year 2027.
Don’t forget to send the impact these proposals would have on your business to Michele as we anticipate these bills will start having hearings next week. If you have any questions regarding these proposals, contact AGC’s Michele Willms.