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Dear Friends and Neighbors,
The 2025 legislative session is heading into the final weeks, but we still have several important tasks to complete. The Legislature’s top priority is to pass the state’s three budgets: operating, transportation, and capital.
Washington is facing a budget deficit of anywhere between $7 to $15 billion, depending on which report you believe. So, how did we get here? Click here to see a detailed explanation. You can also click on the image below to hear me discuss my experience in the Legislature, including some of my thoughts on the budget and government spending.
The economy is growing, and so are state tax collections. We’ll collect more tax revenue this year than last and more the year after that. State tax revenue is growing year-over-year. Tax revenue is increasing by $5 billion this biennium, representing a 7.6% increase over 2023-25. Additionally, tax revenue has grown by $18 billion since 2019, a 34% increase. However, state government hasn’t controlled its spending, as detailed in the chart below.
Billions in New Taxes to Fund the Operating Budget
With that background in mind, this week, the majority party in both the House and Senate passed an operating budget (Senate Bill 5167) that relies heavily on new taxes, including:
House Bill 2045 would impose a new Business and Occupation (B&O) tax surcharge on large businesses and financial institutions, which would negatively impact approximately 400 businesses statewide.
House Bill 2046 would create a new tax on unrealized capital gains for individuals, such as stocks, bonds, mutual funds, and index funds with an assessed value over $50 million.
House Bill 2049 would increase property taxes by lifting the annual growth cap from 1% up to 3%, based on inflation and population changes.
Senate Bill 5796 would establish a new payroll tax for employers with annual payroll expenses exceeding $7 million.
These new taxes will affect everyone in Washington, hurting job growth, slowing business, making housing more expensive, increasing the cost of goods, and overall making life less affordable. State government needs to learn to live within its means like the rest of us.
Governor Ferguson Has Different Plans
Like many of you, I’m very concerned about how these new taxes would affect us. The cost of living continues to rise, and many people in Washington can’t afford their basic needs. For some, these new taxes would be devastating.
However, there is some good news. On Tuesday, Gov. Bob Ferguson held a news conference regarding the operating budget passed by the Legislature. Click here to watch his press conference.
Ferguson was very clear that these budgets rely too heavily on taxes, especially the wealth tax, which was assumed to fund the underlying budget. He said relying on a legally untested and difficult-to-implement wealth tax to fund essential services was a bad idea. He also pointed out that we need to live within our means. Ferguson said he will only sign a budget that does the following:
- Does not base future tax revenues on the 4.5% revenue growth assumption.
- Does not raid the rainy-day fund (BSA Account).
- Minimizes new investments and new policy spending (the current House proposal had over $4 Billion).
- Demonstrates billions in efficiencies and savings.
- Does not rely on the wealth tax that could be overturned in court.
The governor’s message means there are plenty of negotiations still to come. I will provide further updates as this process moves forward.
Transportation Budget Also Includes New Taxes
In addition to the new taxes in the operating budget, the Legislature is also pushing a transportation budget (House Bill 2043) with more than $4 billion in new taxes and fees, including:
- 9-cent fuel tax increase, raising the current 49.4-cent tax starting July 1, 2025, with annual adjustments for inflation.
- 12-cent diesel, propane, and biodiesel tax increase beginning July 1, 2025, followed by another 3-cent increase on July 1, 2027.
- Increased vehicle registration fees that would add $4.50 in new registration fees, a $10 weight fee, and $31.44 in a new highway user fee (HUF), totaling $124.19 for a passenger car.
- A $4 increase per tire on the existing $1 replacement tire fee.
- New vehicle sales tax increases.
Click here for more details about all the new transportation taxes and fees. The House passed Senate Bill 5161 on Wednesday, but amended it with the House version (House Bill 2043). It remains to be seen what happens with this budget between now and the end of session, but I will keep you posted.
House Capital Budget Offers Good News for the 17th District
Unlike the operating budget, the capital budget is primarily funded through bond sales—not general fund state (GFS) revenue—and focuses on long-term physical investments such as public schools, water systems, and community facilities.
The capital budget has a set amount of funding, meaning this money does not affect the deficit in the operating budget or require new taxes. Like all bills, this budget is not final until it’s signed into law, so it could still change. However, as the House version currently stands, the 17th District did very well with $25.7 million in total allocations. Here are a few highlights.
- $6.6 million for the Medically Tailored Meals Coalition of WA.
- $1 million for Skyline Health critical hospital infrastructure.
- $940,000 for Western Skamania County public safety complex.
- $618,000 for Klickitat County Courthouse rehabilitation.
- $300,000 for Shipherd Falls Fishway access improvement.
- $155,000 for safety equipment for Camas/Washougal firefighters.
For a complete list of our local projects included in the House version, click here and select House Chair in the “version” menu and the 17th Legislative District in the “district” menu. Then, hit the “view report” button.
My seatmates and I in the 17th will continue to push for all these projects to remain in the final budget, and I will keep you updated.
Please Continue Reaching Out
As always, I’m here to listen. Please continue reaching out. Thank you for your support. It’s an honor to serve you.
Sincerely,
David Stuebe
