Blog

The budget problem and the income tax

In the Seattle Times today, Paul Roberts writes about the downward revisions to Washington’s credit outlook. The credit rating agencies cited the recent trend of spending outpacing revenues and the use of reserves to balance the budget. According to the Times, Democratic state lawmakers, who control the state budget process, say they’re more than aware […]

The income tax won’t save the day for budget writers

Washington’s budget problem took root in 2023–25, when legislators appropriated substantially more than they expected to collect in revenues. Legislators have widened the gap between spending and revenues since then (despite substantial tax increases in 2025 and 2026). Will the new income tax fix the problem on its own? Officially, the 2026 supplemental balances over […]

State tax collections increased by 4.5% in FY 2025

According to the Department of Revenue, state tax collections totaled $36.072 billion in fiscal year 2025. That was an increase of $1.565 billion (4.5%) compared to FY 2024 collections. (These are total state tax collections, not just revenues that are subject to the outlook.) Since 2020, business and occupation tax collections have grown by 277.9%, […]

A timeline of the effective dates of major tax changes adopted in 2025 and 2026

The final tax package adopted last year was the largest tax increase in modern Washington history, going back to at least the early ‘90s. (Digital legislative and fiscal records are spotty before the 2000s.) As we discussed in a report last year, the package was rushed through at the end of the 2025 session, resulting […]

Income tax bill is by far the largest tax increase in the modern era

The multiple tax bills adopted by the Legislature last year collectively represented the largest tax increase going back over 30 years. For this analysis, I reviewed fiscal notes and legislative budget notes. Digital legislative and fiscal records are spotty prior to the 2000s, but some information is available online going back to the early 1990s. […]

State will retain about 70% of annual income tax revenues

Gov. Ferguson has signed ESSB 6346, which imposes an income tax. The bill additionally reduces some sales taxes and some business and occupation (B&O) taxes and expands eligibility for the Working Families Tax Credit (WFTC). (I wrote about the details of the final bill last week.) The fiscal note for the enacted bill estimates that […]

New funding for wildfires and WEIA

Interest on loans that are primarily secured by first mortgages or trust deeds on non-transient residential properties is currently subject to the service and other activities B&O tax rate if the loan originator is located in more than 10 states (RCW 82.04.29005). Otherwise, such interest is deducted from B&O tax. SHB 2089, which has been […]

Baseball stats and tax policy

This Opening Day seems like a pertinent time to discuss tax policy, as the Legislature made a major tax change that could impact Washington’s tax structure’s Wins Above Replacement. Although taxes are not the only reason businesses and individuals choose to locate in a state, they are a factor. Some tax structures are more competitive […]

Key provisions in the income tax bill as passed by the Legislature

The 2026 supplemental operating budget, as passed by the Legislature, assumes that the income tax bill (ESSB 6346) would reduce revenues to funds subject to the outlook (NGFO) by $55.4 million in 2025–27 and increase NGFO revenues by $2.292 billion in 2027–29. (The governor has not yet signed either the operating budget or the income […]

Revenue reduction from estate tax bill now estimated to be smaller than assumed in the budget

Several of the major tax bills passed by the Legislature this year were changed at the end of session in ways that could affect revenues. (For example: ESSB 6346, ESB 6228, EHB 2487, and ESB 6347.) For each of these bills, the supplemental operating budget assumes the revenues in the fiscal note available at the […]