2025 legislative review
estate tax structure. Starting Jan. 1, 2025, high earners with over $ 1 million in longterm capital gains will pay an additional 2.9 % surtax – on top of the existing 7 % rate – raising the effective rate to 9.9 %. The change is retroactive and could impact sales that occurred earlier in the year. Separately, starting July 1, 2025, the state’ s estate tax exemption will increase from $ 2.193 million to $ 3 million. Estates over $ 9 million will now face a top rate of 35 %, the highest in the country. These changes will primarily impact high-net-worth individuals and families with significant generational wealth transfers. As with other major tax changes this session, the bill raises implementation and compliance questions that have yet to be fully addressed.
SB 5796 statewide payroll tax
Failed / AWB opposed sponsor: Sen. Rebecca Saldaña, D-Seattle
Senate Democrats proposed a new payroll tax on Washington employers with at least $ 7 million in payroll expenses – about 5,300 businesses. These employers would have seen a 5 % tax on payroll expenses above the Social Security threshold, which is currently $ 176,100 a year. The business community widely criticized the proposal, modeled after Seattle’ s“ JumpStart” tax, warning the bill could drive businesses out of state. This proposal did not move forward.
SB 5794 multiple tax preference repeals
Passed / AWB opposed sponsor: Sen. Jesse Salomon, D-Shoreline
The Legislature passed a sweeping tax bill disguised as technical cleanup. Effective Jan. 1, 2026, Senate Bill 5794 eliminates or reduces longstanding B & O tax preferences that have helped maintain fairness and reduce tax pyramiding in Washington’ s
Sen. Chris Gildon, R-Puyallup, the ranking member, operating, of the Senate Ways & Means Committee, walks into AWB’ s Legislative Day budget discussion with Max Martin, AWB’ s government affairs director for tax & fiscal policy.
system. The bill ends exemptions for industries including precious metal sales, self-storage rentals, and title insurance, while also repealing targeted credits for international job creation, public safety testing, and low-income utility assistance. A new 1.2 % B & O tax will also apply to credit unions that merge with or acquire banks. These changes will raise costs across sectors like finance, utilities, insurance, and storage, and could have ripple effects for consumers. While pitched as housekeeping, this bill represents a major tax shift with real economic consequences.
HB 2049 property tax changes
Passed / AWB opposed sponsor: Rep. Steve Bergquist, D-Renton
The Legislature approved changes to local school funding that expand enrichment levy authority and launch a broader review of K-12 funding equity. Starting in 2026, school districts can collect $ 500 more per student above inflation, with smaller districts seeing annual increases of 3.3 % above inflation through 2030. By 2031, a statewide per-pupil cap of $ 5,035 will apply, adjusted annually by inflation. Importantly, an earlier proposal to raise the 1 % property tax growth limit to 3 % was removed before final passage. Still, the final bill gives local governments more tools to raise property taxes.
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