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This week, Washington state’s budget proposals are sparking fierce debate—not only over transportation funding but, more critically, over a sweeping overhaul of business taxes. For many in the business community, these proposals raise a red flag: Washington already shoulders one of the heaviest tax burdens in the nation, and new measures could further stifle growth and raise costs for everyone.
💸 Business Taxes: A Heavy Burden on the Private Sector
Critics argue that Washington doesn’t need more revenue from its businesses—it needs lower costs. The proposals include several new and expanded business taxes that could have far-reaching consequences:
Wealth Tax on Financial Assets
Both the House and Senate proposals call for a tax on financial intangible assets for individuals holding over $50 million.
- The House plan suggests a rate of 0.8%, while the Senate pushes for 1%.
The difference is subtle but important—the House would tax only the amount over the $50 million threshold, whereas the Senate intends to tax the entire amount, potentially affecting around 4,300 high-net-worth taxpayers.
This tax would hit everything from cash and bonds to stocks and mutual funds.
B&O Surcharges on Large Corporations and Financial Institutions
The proposals would also impose new surcharges.
- Starting January 1, 2026, businesses with taxable incomes over $250 million could face a 1% B&O surcharge.
- Financial institutions with annual net incomes exceeding $1 billion may see their surcharge increase as well from 1.2% to 1.9% as early as July 1, 2025.
While exemptions exist for key industries like manufacturing and alternative energy, these changes could impact several hundred taxpayers, further burdening a sector already contributing nearly 50% of all state and local taxes.
Property Tax Reforms
The proposals would eliminate the current 1% cap on property tax growth, replacing it with a formula that could allow increases based on inflation and population growth—potentially up to a 3% levy.
This change threatens to raise taxes on property owners significantly, fueling concerns among both businesses and homeowners.
Payroll Tax Increases
For companies with payroll expenses over $7 million, a new 5% tax on wages above $176,100 is on the table.
- This measure, which could translate into a combined state and local tax rate of up to 10% for high earners, would affect roughly 5,300 taxpayers.
For businesses, this means even higher employment costs in a state where workers already enjoy some of the highest wages and benefits in the country.
Repeal of Tax Preferences and Adjustments to Sales Tax
In a bid to broaden the tax base, lawmakers propose repealing various long-standing tax deductions and exemptions across multiple industries.
- While one proposal even suggests a slight reduction in the sales tax—from 6.5% to 6%—many see this as a token measure that won’t offset the overall increase in the tax burden.
Together, these business-centric measures are set to increase revenue by nearly $10 billion over the next four years. However, many critics argue that these changes do not address the root of the problem: Washington’s budget woes stem not from a lack of revenue, but from runaway spending. The message from business leaders is loud and clear: if costs continue to rise, the state’s competitive edge will erode, potentially driving jobs and investments out of Washington.
🚧 Transportation Tax Changes: More Costs on the Road
After the business tax proposals, attention quickly turns to the transportation budget—another area facing a significant funding gap. To address shortfalls in transportation funding, lawmakers are proposing a series of tax changes that will affect every driver in the state.
Gas Tax Hikes
At the forefront of the transportation proposals are steep gas tax increases. The Senate plan calls for a 6‑cent increase on the current 49.4‑cent rate, with the new rate indexed upward by 2% annually to keep pace with inflation.
Meanwhile, the House is proposing an even more aggressive 9‑cent increase. These hikes are designed to generate between $1.5 billion and $1.8 billion over the next six years, but they also mean that drivers will face higher fuel costs at the pump.
Diesel Fuel Tax Increase
In recognition of the unique challenges faced by heavy duty vehicles, there’s a proposed 3‑cent increase specifically for diesel fuel—a move that could disproportionately affect commercial transport companies and, ultimately, consumer prices.
Vehicle Registration and Weight Fees
Adjustments to vehicle registration fees and weight-based charges are being considered, potentially leading to significant increases for heavier vehicles like trucks, which could raise the cost of commercial transportation and affect the profitability of businesses reliant on road freight.
Highway Use Fee
The House is considering reintroducing a road usage charge that would levy fees based on a vehicle’s fuel efficiency, potentially leading to higher costs for drivers of efficient vehicles due to a fee structure aimed at generating revenue from every mile driven.
🖼️ The Broader Implications
In Washington state, where the cost of living is already high, proposed increases in business and transportation fees threaten to further burden taxpayers and businesses.
- Critics argue that the state’s financial woes stem from overspending rather than a lack of revenue, warning that higher taxes and fees could escalate the cost of living, from groceries to housing.
This comes at a time when business confidence is low, exacerbated by rising interest rates, decreased consumer spending, and a sluggish housing market.
The call from business leaders is clear: Washington needs to control its spending instead of imposing new taxes, which could worsen the economic climate.
📣 A Call to Action
As public debate on these proposals begins and the legislative process moves forward, it’s crucial for voters and business owners to engage with their lawmakers.
- The state’s future economic health depends on a smarter, more sustainable approach to budgeting—one that prioritizes fiscal discipline over sweeping tax increases.
- For those who believe that lower costs are essential to maintaining Washington’s competitive edge, now is the time to demand change.
If you’re concerned about the rising tax burden and its impact on the cost of living and doing business in Washington, join the conversation, share your views, and support initiatives that push for responsible spending. Consider subscribing to our GAC email list to get the latest updates year-round from our team.
