Community Government

Legislature wraps up 2025 session with increases in business, gas taxes

This year’s 105-day Washington state legislative session was in many ways a trudge.

There was a multibillion-dollar budget deficit to solve. Sharp debate on parental rights and capping rent increases. Clashes over tax policy. Tensions between the new Democratic governor and legislators in his own party. And the unexpected deaths of a sitting senator and a former House speaker.

“I’ll say certainly today, it feels like the toughest one that I’ve been through,” House Majority Leader Joe Fitzgibbon, D-West Seattle, said at a post-session news conference.

Washington lawmakers wrapped up around 6 p.m. Sunday. They spent their final day approving new two-year budgets for the state’s day-to-day operations, transportation system and capital construction.

They also put the finishing touches on two of the year’s most hotly debated pieces of legislation, one to cap residential rent increases and another delaying closure of the Rainier School, a rehabilitation center in Pierce County for people with intellectual and developmental disabilities.

Gov. Bob Ferguson, who took office in January, applauded moves from state lawmakers to increase education funding, provide his demanded $100 million to hire more police, preserve the state’s rainy day fund, narrow their tax platform, and accept many of his proposed budget savings.

But Ferguson, who did not speak to reporters after the session adjourned, stopped short of a full-throated endorsement.

“I look forward to carefully reviewing the budgets line by line over the next few weeks,” the Democratic governor said in a statement late Sunday. “When that review is complete, I will share my thoughts with the public in greater detail.”

Budget troubles

The largest hurdle lawmakers faced entering the session was writing the next two-year budget. They knew months of lower-than-expected tax collections and an inflation-driven surge in costs were going to leave less money than needed to maintain existing levels of service.

What emerged, and cleared the House and Senate on partisan votes, is a two-year $77.8 billion budget that is balanced with spending cuts and billions of dollars in new and higher taxes.

“Reductions are hard. Revenue is hard. This budget is a combination of hard and difficult choices,” Fitzgibbon said ahead of its passage in the House.

The tax package Democrats assembled totals around $9.4 billion over four years. Much of that money — around $5.6 billion — will come from increases in the state’s main business tax. There’s also a higher rate added to the state’s capital gains tax for gains above $1 million.

Republicans in both chambers assailed the tax hikes and insisted Democrats could have written a balanced budget without them.

“When we started this session, all I heard about was making the wealthy pay their fair share,” said Rep. April Connors, R-Kennewick. “This budget spreads taxes across all working Washington residents in a manner that is going to make this state more and more and more unaffordable to live in. This budget does not fix Washington, it hurts Washington.”

A coalition of business groups also slammed Democrats over taxes, saying they were “deeply disappointed.”

“These costs simply can’t be absorbed by businesses — they will be passed on to consumers in the form of higher prices for everyday goods and services,” said Kris Johnson, president and CEO of the Association of Washington Business.

State employee unions scored wins, with lawmakers foregoing plans for furloughs floated earlier in the session and commitments in the budget to support new collective bargaining agreements that will provide 5% pay raises over two years.

Roads, rent and guns

On a bipartisan note, the House and Senate easily passed a $15.5 billion, two-year transportation funding plan, earmarking money for state ferries, highway megaprojects and much more. That plan hinges in part on a 6-cent increase in the state’s gas tax that would take effect July 1, and a raft of other tax and fee hikes.

More than one-third of the overall sum is set aside for road improvements, allowing the state to finish some of its biggest undertakings, like the North Spokane Corridor and State Route 520. Another $895 million is set to pay for new state ferries, terminal improvements and existing vessel preservation. And the court-ordered removal of barriers to fish migration gets $1.1 billion.

“This budget keeps Washington’s roads, bridges and highways remaining safe and functional,” said House Transportation Committee Chair Jake Fey, D-Tacoma. “It supports the state ferry system and improves reliability. It makes commitments to repair culverts and protect Washington waterways.”

The funding plan is a leap from $13.2 billion for transportation in the current biennium set to end June 30.

In his statement, Ferguson applauded the transportation investments, but was silent on the new revenue that would help pay for them.

And in unanimous votes, lawmakers approved a separate $7.5 billion capital budget for infrastructure projects, including record investments in affordable housing as well as money for K-12 school construction, salmon recovery and behavioral health facilities.

Progressive Democrats chalked up some long-sought victories, pushing through the bill that will limit annual rent increases for many tenants across Washington, capping hikes at 7% plus inflation or 10%, whichever is lower. A bill to provide up to six weeks of unemployment insurance benefits for striking workers also made it through.

Legislation to require a new state permit to buy guns is poised for action from the governor, too. The state would join about a dozen others with similar gun control laws.

One of the more fiery conflicts had to do with the rights of public school students and their parents. Democrats led an effort to overhaul a citizen initiative on parental rights the Legislature approved last year. They said this was needed to clarify language in the earlier measure and align it with other federal and state laws. Republicans said it was an attempt to gut the initiative.

Wealth tax fizzles out, but gets a vote

Progressives in the Senate got their long-awaited opportunity to argue for and pass legislation to tax the financial assets of wealthy individuals — knowing full well the bill would not reach the governor, who is not a fan.

The legislation to establish a wealth tax passed the Senate on a 26-21 vote. The House did not debate it.

Sen. Noel Frame, D-Seattle, the bill’s sponsor, said taxing those with more than $50 million in certain assets like stocks and bonds “is constitutionally compliant and a sound policy,” a seeming swipe at Ferguson, who has questioned the novel tax’s ability to withstand a legal challenge.

Ferguson’s opposition forced Democrats to axe the wealth tax from their tax package.

“I think we have shown the people of Washington state what is possible,” Frame said. “I hope we will return to that soon.”

Solemn ending

This year’s session was enveloped in sadness.

Two political legends, former Secretary of State Ralph Munro, a Republican, and former House Speaker Frank Chopp, a Democrat, died days apart in late March.

Then, on April 19, Bill Ramos, a first-term Democratic state senator, died while on a run near his Issaquah home.

And Saturday afternoon, the wife of state Sen. Chris Gildon, R-Puyallup, died following a medical emergency at her workplace.

On Sunday, senators honored Ramos in an hourlong, emotion-packed tribute as House members watched from the gallery. Ramos had served in the House before winning his Senate seat in November. The tribute ended with a special roll call including his name.