issue area reports | budget and taxation
Budget and Taxation
Emily Shay : Tax & Fiscal Policy
Coming into the 2024 legislative session , it quickly became clear that lawmakers would not be facing a budget deficit . A revenue forecast showed the state bringing in $ 3.1 billion more than expected , giving legislators no reason to raise taxes . Legislators passed no general tax increases , though they used up time debating several tax hikes .
Unfortunately , legislators did not replenish the state ’ s rainy-day fund to pre-pandemic levels , despite the budget surplus . They also drained a separate reserve account created during the pandemic .
The Legislature adopted a supplemental operating budget that adds $ 2.1 billion in new spending , bringing the 2023-2025 budget to $ 71.95 billion . That ’ s about 3 % higher than the budget lawmakers adopted in spring 2023 , and 15.8 % higher than state spending between 2021 and 2023 . AWB appreciates the slower pace of budget growth after several years of doubledigit increases ; however , the 2024 budget does not put
AWB Government Affairs Director Emily Shay is lead on tax and fiscal policy . enough money into reserves to help the state weather a future downturn . Thankfully , a recession has not yet materialized , but economic uncertainty remains high .
Total reserves will be about $ 2.6 billion at the end of the 2025 – 2027 biennium , which is 7.1 % of total state revenues — below the minimum 10 % level the Washington State Department of Treasury recommends .
Given the budget surplus , lawmakers missed an opportunity to provide meaningful tax relief for residents and employers . They did pass some helpful incentives , including a set of tax preferences to boost the state ’ s semiconductor manufacturing industry .
For the second year in a row , AWB and a broad coalition successfully opposed a proposal to raise the real estate excise tax , or REET . The bill would have given Washington the second-highest REET rate in the nation and primarily impacted multifamily and commercial properties , increasing housing costs .
AWB also opposed a pair of bills to regulate gift cards . Combined , the two bills would have mandated businesses forward unspent gift card funds to the state after three years , and provide cash on-demand for gift card balances under $ 50 , creating administrative burdens and increasing fraud risks . Dozens of AWB members helped ensure these bills failed to move forward .
An initiative to repeal the state ’ s capital gains tax loomed over the 2024 session . Lawmakers rejected calls to hold hearings on the initiative and opted to send the measure directly to voters . The capital budget avoids spending capital gains tax revenue until after the election .
The Legislature passed a capital budget that adds $ 1.3 billion in new construction spending . Notable projects include $ 127.5 million for the state ’ s Housing Trust Fund ; $ 105 million for community electric vehicle charging ; $ 68 million for career and technical education projects ; and $ 25 million for Energy Northwest to develop nextgeneration nuclear reactors . special edition 2024 29