Today, Governor Ferguson (D) signed the largest tax increase into state law with the passage of the bi-annual budget (Senate Bill 5167) and several other bills that increase taxes for Washington residents. This is despite multiple statements to the press over the last few months from the Governor, that he would be willing to compromise on taxes. At the beginning of April, Governor Ferugson told My Northwest, “We cannot adopt a budget with anywhere near the levels of taxes currently proposed by the House and Senate”

As Washington Policy Centers report card for Washingtons Future indicates, Washington is currently ranked 45 in the nation for its business tax climate.

The bills signed into law include,

• Senate Bill 5194 and 5195, relating to the capital budget and bonds
• Senate Bill 5161, 5801 and 5802, relating to the transportation budget
• House Bill 2077, relating to taxes on zero-emission vehicles
• House Bill 2081, relating to Business and Occupation tax increases
• Senate Bill 5813, relating to capital gains and estate tax increases
• Senate Bill 5814, adds sales to services
• Senate Bill 5794, relating to eliminating tax preferences
• Senate Bill 5167, the bi-annual budget.

Senate Bill 5161, the transportation budget, increases the gas tax by 6c per gallon on gas and 12c per gallon on diesel. This will drive up transportation and delivery costs for all products and services in Washington.

House Bill 2081 will increase the Business and Occupation (B&O) Tax which is assessed on gross revenue of a business. Even if a business makes a loss, a business still pays B&O taxes on all received revenue. The rate increase is dependent on the type and income of the business and ranges from 0.03% to 0.35%. The increase in B&O taxes will be passed on to the consumer in the form of higher prices for goods and services.

There is a new B&O surcharge of 0.5 percent on taxpayers with a taxable income over $250 million which will expire on December 31, 2029.

Senate Bill 5814 is a massive sales tax expansion, adding sales taxes for the first time to many service-related activities. As examples, IT services, custom website development, custom software, security services and advertising services will all now need to charge customers sales tax on every transaction.

Senate Bill 5794 repeals and revises several tax preferences. The Governor vetoed the removal of the tax preferences for community banks. It adds a new B&O (gross) tax on storage units up to 1.75%. The increase in B&O taxes and the removal of the tax preferences will be passed on to the consumer in the form of higher prices for goods and services.

Senate Bill 5813 increases the capital gains on assets sold valued at over $1 million from 7% to 9.9%. This adds a significant cost to selling a home, investment or other asset valued over $1 million. In Washington, with median home prices on the rise, this will begin to affect more and more homeowners as they move or downsize their homes. For larger estates of $9 million and up, the tax rate is increasing from 20% to 35%.

Overall, the budget (Senate Bill 5167), totaling approximately $77.8 billion in appropriations, reflects a 6.5% increase over the $71.9 billion appropriated in the 2023-25 biennium, and a $9.3 billion increase in spending over the next four years, far outpacing inflation and population growth.

Governor Ferguson mentioned some vetoed items in the budget but did not elaborate during the bill signing.

While investments in education, health care, and climate programs address pressing issues, their scale and structure raise concerns about affordability, efficiency, and long-term consequences. Taxpayers, already grappling with high costs of living, deserve a budget that maximizes value through competition, innovation, and accountability and not massive tax increases.

The 2025-27 budget, while comprehensive, misses the mark on these principles, leaving taxpayers to question whether the largest tax increase in state history is really worth it.