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During last week’s Spokane regional fly-in to Olympia, one issue repeatedly surfaced in our conversations with lawmakers—Washington’s looming budget crisis. Budget negotiators are grappling with a projected shortfall of $12 billion to $16 billion over the next four years. The majority party sent a clear message: new revenue measures are on the table to address the fiscal gap.
House Finance Chair Berg’s Assurance and Budget Strategy
One of the most pivotal moments came when House Finance Chair April Berg underscored that the state’s fiscal challenges cannot be resolved solely by cutting spending. Rather than relying on deep austerity measures that could undermine essential services, she stressed that a balanced approach is necessary—one that introduces new revenue sources while minimizing the burden on working families and small businesses.
What’s on the Table: Majority Party’s Revenue Proposals
The majority party is considering a range of new revenue measures to close the budget gap. These proposals, which are being taken seriously rather than simply discussed as hypotheticals, include:
1. Remove the Cap on Employer Payroll Taxes
- Extend the 6.2% payroll tax to compensation above $168,600.
- One version targets larger companies (~4,000 taxpayers).
- Another version expands it to all businesses (~30,000 taxpayers).
2. Large Corporations Surcharge via B&O Tax Reform
- Impose a 1% surcharge on taxable income above $500 million for large corporations.
- An alternative approach applies the surcharge on all taxable income.
3. Modify the Advanced Computing Surcharge (ACS) Cap
- Either eliminate the current $9 million cap or raise it to $15 million.
- Expands the workforce education surcharge on tech and service sector income.
4. Capital Assets Ownership (Wealth) Tax
- Apply property tax principles to financial assets (stocks, bonds, etc.).
- Ensures wealthy Washingtonians contribute more, similar to how middle-class families are taxed on homes.
5. Reclassify Storage Unit Rentals as Retail Transactions
- Change the tax classification to generate additional retail sales tax revenue.
6. Increase Tier 1 Real Estate Excise Tax Ceiling & Introduce Luxury RETT
- Raise the Tier 1 price ceiling from $545,000 to $750,000.
- Introduce a 1% tax on home sales above $3.025 million to target high-end real estate transactions.
7. Introduce an 11% Tax on Ammunition and Firearms Sales
- Establish a dedicated tax on firearm and ammunition sales as a new revenue stream.
8. Road Usage Charge (RUC)
- Shift from traditional gas taxes to a fee based on miles driven.
- Despite privacy and fairness concerns, this proposal remains under discussion due to declining fuel tax revenues.
Transportation Funding: A Paradox in Practice
A key insight from our discussions was the paradox within Washington’s transportation funding. On one hand, the state is investing heavily in cleaner transit and electric vehicle (EV) infrastructure. On the other, these successes are reducing traditional revenue sources such as gas taxes and carbon auction proceeds.
The impact of this funding shortfall is already evident:
- Weight-restricted bridges—signs of deferred maintenance—are threatening to disrupt supply chains by impeding heavy freight.
- Major projects like the SR 520 replacement and the I-5 bridge are running over budget by as much as 70%, raising concerns about potential delays and escalating costs across industries.
Road Usage Charges: The Debate in 2025
With fuel tax revenue declining due to increased EV adoption, Washington is exploring road usage charges (RUCs)—a tax based on miles traveled rather than fuel consumption. However, this proposal faces significant public and political resistance.
A historical example illustrates the challenge:
- In 2015, a Republican-majority Senate approved an 11.7-cent per gallon gas tax increase to fund critical infrastructure, including the North Spokane Corridor (NSC).
- Nearly a decade later, the NSC remains unfinished, and its funding status is still uncertain.
- This lingering issue fuels skepticism about new taxes, with critics arguing that existing commitments should be fulfilled before introducing additional financial burdens on taxpayers.
The debate, therefore, isn’t just about finding new revenue streams—it’s about ensuring accountability and efficiency in how funds are allocated.
Economic Implications Beyond Transportation
Beyond roads and taxes, our discussions also touched on broader economic policies, particularly minimum wage proposals.
Washington’s Minimum Wage: The Road to $25
- Washington’s current minimum wage is $16.66 per hour.
- New proposals aim to increase it to $25 by 2031, with annual hikes of ~$1.50.
While intended to improve living standards, critics argue that this approach might:
- Compress wage differentials, reducing incentives for career advancement.
- Squeeze profit margins, potentially stifling business investment and local economic vibrancy.
A Regional Comparison: Washington vs. Oregon
Washington’s one-size-fits-all wage approach contrasts sharply with Oregon’s tiered minimum wage system, which:
- Differentiates wages by region, aligning pay scales with local cost-of-living.
- Offers a more nuanced way to support workers without burdening businesses in lower-cost areas.
This contrast sparked a debate on balancing worker support with economic growth, highlighting the need for fiscal pragmatism.
Conclusion: Washington Stands at a Crossroads
Our fly-in experience in Olympia was eye-opening. We witnessed firsthand the tension between ambitious policy proposals and fiscal realities.
The key takeaways from these discussions include:
- Washington’s budget crisis is serious, requiring a combination of revenue measures and fiscal responsibility.
- Transportation funding remains an unsolved challenge, with declining gas tax revenues and growing skepticism about new taxes.
- Minimum wage policy needs careful calibration to support workers without harming economic growth.
Ultimately, addressing these challenges demands innovative solutions, accountability, and a commitment to ensuring that new revenue measures are both fair and effective.
