2025 legislative review
Budget and Taxation
Max Martin: Tax & Fiscal Policy
The most pressing issue facing state legislators in 2025 was addressing a multibillion-dollar budget deficit – a shortfall driven not by declining revenues, but by a fundamental spending problem. Despite record-high tax collections in recent years, the state’ s spending trajectory had far outpaced sustainable growth, creating a significant structural imbalance heading into the session.
Rather than slowing spending growth, lawmakers passed a $ 77.9 billion operating budget, an 8.2 % increase over the last biennium. The budget, spanning 1,366 pages, was released and approved in less than 30 hours, with limited opportunity for public scrutiny, stakeholder engagement, or fiscal due diligence.
To pay for this rapid expansion, the Legislature approved a nearly $ 9.4 billion revenue package, which includes the single largest tax increase in Washington’ s history. This package— which includes sweeping changes to business and occupation taxes and a sales tax expansion— fundamentally reshapes key areas of the state’ s tax code with impacts on employers of all sizes.
Max Martin is AWB’ s lead on tax and fiscal policy.
And just as striking as the size of the tax package was the speed: the major revenue components cleared the Legislature in just 10 days. That’ s an astonishing timeline for legislation with such sweeping fiscal and operational consequences for employers across nearly every sector.
While the legislative session has ended, our work is far from over. Given the speed and scope of these changes, unintended consequences are inevitable. Whether through rulemaking, agency interpretation, or on-the-ground implementation, the true impact of this legislation will continue to unfold in the months ahead.
The business community must remain vigilant and engaged. We’ ll need to identify issues as they arise, elevate concerns, and work collaboratively to ensure the regulatory fallout doesn’ t destabilize the very economic engine this state depends on.
This wasn’ t just a budget; it was a turning point. And what comes next will define Washington’ s business climate for years to come.
32 association of washington business