Several new tax bills have been introduced in the Legislature this week. PSSB 5815 and HB 2081 would increase business and occupation (B&O) tax rates. Taxes paid by Washington businesses are already the 10^th highest in the country on a per-employee basis, and Washington businesses already pay about half of all state and local taxes.

PSSB 5815 will be heard by the Senate Ways & Means Committee this evening; HB 2081 will be heard by the House Finance Committee on Friday. Fiscal notes are not yet available for the bills.

First, the bills would permanently increase B&O tax rates for manufacturers and wholesalers from 0.484% to 0.5%, for retailers from 0.471% to 0.5%, for contests of chance from 1.5% to 1.8%, and for services and other activities from 1.75% to 2.1%. (Under current law, 14.3% of the revenues from the 1.75% tax on services and other activities businesses is deposited in the workforce education investment account, or WEIA. The same percentage would continue to go to the WEIA under the bills.)

Second, under current law, a surcharge of 1.2% is imposed on financial institutions with annual net income of at least $1 billion. The bills would permanently increase the surcharge to 1.5% beginning Oct. 1, 2025.

Third, under current law, the WEIA surcharge for advanced computing businesses is 1.22% and the amount of the surcharge paid per affiliated group is capped at $9 million a year. The bills would increase the surcharge to 5% beginning Jan. 1, 2026. PSSB 5815 would also increase the cap to $50 million a year. (HB 2081 would not change the cap.)

Fourth, the bills would impose a temporary B&O surcharge on businesses with Washington taxable income over $250 million a year. Such businesses would pay a surcharge of 0.5% of the amount over $250 million, in addition to other B&O taxes owed. The surcharge would be in effect from Jan. 1, 2026 through Dec. 31, 2030.

Income subject to various manufacturing B&O tax rates or subject to the additional tax on financial institutions would be exempt from the temporary surcharge, as would income that is attributable to sales of manufactured products and sales of goods exempt from the sales tax. The temporary surcharge would not apply to farmers.

Finally, the bills would make some changes related to the state Supreme Court’s Antio decision about the B&O deduction for investment income. Under PSSB 5815 and HB 2081, investment income would be considered incidental (and thus deductible) if the income is less than 5% of the business’s total income. Any amount of investment income would be deductible for nonprofits and collective investment vehicles.