This week the Washington State House and Senate introduced a package of tax proposals aimed at raising an estimated $12 billion over the next four years. The plan includes new taxes and increases to existing tax rates and caps, in an effort to close the state’s multibillion-dollar budget shortfall.

However, Governor Bob Ferguson signaled his opposition to the plan saying it is, “unsustainable, too risky, and failing to adequately prepare Washington for the crisis that looms ahead,” pointing to ongoing uncertainty around federal funding.

While Ferguson has previously proposed $4 billion in spending reductions—including cuts to non-essential operations and travel, state worker furloughs, and a slowdown of new program expansions—he did not specify which taxes he would support or oppose this week.

The Democratic-led Legislature’s revenue proposal unveiled this week includes:

• Capital Gains Tax: A 9.9% tax on gains over $1 million
• Sales Tax on Services: Extends sales tax to previously exempt services such as technology, advertising, and fitness
• Property Tax Cap Increase: Raises the annual cap on property tax increases from 1% to 3%
• Nicotine Tax Expansion: Applies to synthetic nicotine products and pouches
• B&O Tax Surcharge: Adds a 0.5% surcharge on businesses with revenues over $250 million

This marks the second major tax proposal from the Legislature in recent weeks. An earlier plan, which included a “wealth tax” on individuals with assets over $50 million and would have raised $21 billion, was rejected by the Governor.

Washington is facing a projected $16 billion budget shortfall over the next four years, driven by rising costs in education, health care, and housing, along with slower-than-expected revenue growth.

Sunday, April 27th is the last day of the Legislature’s regular session. If no budget is passed, a special session will need to be held to finalize a budget before the end of the current fiscal year on June 30th.