Tax fight crescendos in Washington Legislature

Yahoo

20-04-2025

The Washington state Capitol on April 18, 2025. (Photo by Jacquelyn Jimenez Romero/Washington State Standard)
Major pieces of a $12 billion tax package passed the Washington state Senate on Saturday without a clear sign that Gov. Bob Ferguson supports them.
Democratic senators used their near supermajority to override Republican opposition, approving bills to expand the capital gains tax, increase tax rates on large corporations and big banks, and begin collecting sales tax on an array of services.
Collectively, the legislation would raise around $3.2 billion in the next two-year budget and $5.5 billion over four years, money Democrats are counting on to erase a multibillion-dollar shortfall and enact a balanced budget before the regular session ends next weekend.
The most heated debate Saturday centered on Senate Bill 5814, which produces the most dollars — a projected $2.9 billion in the next budget and $4.7 billion over four years. It would affect an estimated 35,000 firms, according to a Department of Revenue fiscal analysis.
Meanwhile, the House Finance Committee on Saturday advanced the tax package's other significant components.
Those measures — expected to receive floor votes Monday in the House — would permanently increase the state's business tax rate, impose a new sales tax on rented self-storage units, and add a new levy on the sale of electric vehicle credits between automakers.
The committee also voted out a bill to lift the cap on annual increases in property tax growth.
Democrats plowed ahead on these multiple fronts without clarity on how Ferguson would respond if the bills reached his desk.
The first-term governor on Thursday called their $12 billion package 'unsustainable' and 'too risky,' citing unknowns about the economy and the flow of federal funding with the Trump Administration. Ferguson insisted again that a mix of progressive revenue and spending reductions is needed to resolve the budget issue, but stopped short of specifics.
He met virtually with Democratic leaders Thursday, but did not cite any specific taxes in the package he dislikes.
Senate Majority Leader Jamie Pedersen, D-Seattle, who took part in the meeting, didn't speculate on whether the bills passed Saturday would get signed.
'I can't speak for the governor,' he said. 'This is consistent with what we have talked with him about in terms of our approach on revenue.'
When the session began, Democrats forecast the need for new and higher taxes to sustain public services at or near or existing levels. Saturday marked the first time any significant tax measure made it to the floor of either chamber.
Senate Bill 5814, which passed 27-22, produces the most dollars, an estimated $2.9 billion in the next budget and $4.7 billion over four years. It applies the retail sales tax to more services, such as temporary staffing, advertising, security and lobbying.
Sen. Noel Frame, D-Seattle, the caucus leader on finance legislation, described the bill as making the state's tax code 'more appropriate for the 21st Century.'
'Our taxes fund core public services,' she said. 'That's what this is about.'
Sen. Nikki Torres, R-Pasco, assistant budget leader for the Republican caucus, said there is 'nothing modern about this bill.'
'This would be an unprecedented increase in the sales tax,' she said. 'We were told that the wealthy need to pay what they owe but this bill hurts everyone.'
Democrats also pushed through Senate Bill 5813 to squeeze more money from the capital gains tax. In addition to the existing 7% tax on gains over $270,000 from the sale or exchange of long-term assets like stocks, bonds and business interests, the bill tacks on another 2.9% for gains exceeding $1 million. It would bring in $282 million in the coming budget and $561 million over four years, a fiscal analysis found. The bill passed 27-21.
Senate Bill 5794 advanced on a 26-22 vote. It revises or repeals a number of tax breaks. Republicans tried without success to preserve some, including exempting operators of self-service storage facilities from paying a business and occupation tax on the renting or leasing of individual units. Most storage unit users are not homeowners, they argued.
'This is a tax on renters,' said Senate Minority Leader John Braun, R-Centralia.
Pedersen said budget writers 'have scrubbed and scrubbed' and come up with $7 billion in savings through cuts, delays and deferrals. He said bills like those Senate Democrats approved are needed for crucial programs related to health care, housing, child care and schools.
Republicans pushed back hard.
'There's no need for any of the tax increases,' said Sen. Chris Gildon, R-Puyallup, who led a GOP effort to craft an alternative budget proposal that doesn't rely on tax hikes.
He lambasted a provision that requires businesses with $3 million or more in taxable retail sales next year to make a one-time pre-payment of sales tax to the state. This maneuver would pull more tax revenue into the 2025-27 budget that otherwise would have been due the month after it ends.
'This is completely a budget gimmick that should not be tolerated,' Gildon said.
In mid-afternoon, Senate Republicans attempted to pull their budget bill to the floor through a parliamentary move, but failed.
'It doesn't play games and use ghost money,' Gildon said. 'It is the only budget proposal that lives within its means.'