On March 20 and 21, Democratic leaders in Washington State’s Senate and House of Representatives introduced separate revenue-raising proposals to help fill the expected $15 billion four-year state budget deficit.
Senate revenue. The Senate package includes a payroll tax, a wealth tax, elimination of certain tax exemptions and a lift of the property tax lid. It also proposes a state sales tax decrease from 6.5% to 6%.
A new 5% payroll tax on the amount of wages above the Social Security threshold of $176,100 in 2025 is the proposal most impactful to hospitals. We anticipate this to cost hospitals statewide at least $160 million per year. The Senate package does not include a B&O tax increase.
House revenue. The House package includes an increase on the B&O tax rate for taxable revenue above $250 million, a wealth tax and a lift of the property tax lid. It does not include a payroll tax. The B&O tax increase will impact larger hospitals. We anticipate this to cost impacted hospitals more than $70 million per year.
Next steps. The House and Senate will release their 2025-2027 budgets on Monday, March 24. The full picture of the impact to hospitals will be clearer then. We expect cuts to hospitals and health care, in addition to the tax increases described here.
Senate Revenue Package
Employer Payroll Tax
5% tax on the amount of payroll expenses above the Social Security threshold — currently $176,100 per year—for companies with $7 million or more in payroll expenses.
Annual state revenue from tax: $2.3 billion
Estimated annual hospital impact: At least $160 million
Repealing Certain Tax Preferences
Repeals 20 tax exemptions where the exemption is legally obsolete or the policy objective is not being achieved. Certain publicly owned hospitals could no longer deduct some Medicaid incentive payments associated with the 1115 waiver. This does not impact most hospitals. This bill also includes a study on hospital charity care, but it does not repeal hospital tax exemptions other than the one listed above.
Annual state revenue from tax: $250 million
Estimated annual hospital impact: Minimal
Wealth Tax
Similar to a property tax, this is a tax of $10 on every $1,000 of assessed value of certain financial assets (stocks, bonds, exchange-traded funds and mutual funds) held by individuals with more than $50 million of these assets.
Annual state revenue from tax: $4 billion
Estimated annual hospital impact: None
Removing Property Tax Cap
Raises the property tax growth limit for the state’s common schools levy and for cities and counties, as well as special purpose districts, from the current 1% cap to the combined rate of population growth plus inflation.
Annual state revenue from tax: $195 million (more potential to raise revenue at the local level)
Estimated annual hospital impact: None. (Although, public hospital districts could increase property tax levies.)
House Revenue Package
B&O Tax Increase
Adds an additional 1% B&O tax on taxable revenue above $250 million. All qualifying Washington State businesses would pay this tax. Hospitals deduct Medicare and Medicaid net revenue to calculate taxable revenue. For hospital taxable revenue below $250 million, the tax rate remains 1.5%. For hospital taxable revenue above $250 million, the tax rate becomes 2.5%. On initial evaluation, WSHA believes 21 hospitals would be subject to the tax.
Annual state revenue from tax: $2 billion
Estimated annual hospital impact: At least $70 million
Wealth Tax
Similar to the Senate proposal but at a lower rate, this is a tax of $8 on every $1,000 of assessed value of certain financial assets (stocks, bonds, exchange-traded funds and mutual funds) held by individuals with more than $50 million of these assets. The Senate version collected $10 on every $1,000 of assessed value. The House version also includes various deductions, reducing the estimated revenue collection by 50%.
Annual state revenue from tax: $2 billion
Estimated annual hospital impact: None
Removing Property Tax Cap
Maintains the 1% cap on property tax growth for the state’s common schools levy and for cities and counties, as well as special purpose districts, but allows for increases based on inflation and population changes, not to exceed 3%.
Annual total state revenue from tax: $150 million (more potential to raise revenue at the local level)
Estimated annual hospital impact: None. (Although, public hospital districts could increase property tax levies.)
No Employer Payroll Tax
The House did not introduce a payroll tax on employers.