On Monday, Jan. 12, the state legislature kicked off the 2026 supplemental session. The week started with both the House and Senate holding opening ceremonies. On Tuesday, Governor Bob Ferguson presented his State of the State address in a joint legislative session. Gov. Ferguson opened by acknowledging historic flooding in late 2025 and praised Washingtonians’ response, saying the “state of our state remains strong.”
Governor Ferguson called on lawmakers to take bold action on core issues this session, including investing in infrastructure, addressing the housing crisis, and reforming the state’s tax system to make it more equitable. One tax proposal he outlined was the “millionaires’ tax,” which would apply to income above $1 million. Following Ferguson’s remarks, Keith Wagoner (R-39) provided a response and the republican perspective on the 2026 legislative session. Republican leaders argued that the state’s budget challenges are the result of overspending, not a lack of revenue, and warned against new taxes on families and employers. They called for a session focused on affordability, public safety, and accountability.
This year, legislators must pass a Supplemental Operating, Capital, and Transportation budget for the 2025–27 biennium. While the legislature enacted the largest tax increase in Washington state history last session, the state continues to face a budget deficit for the current biennium and beyond. As a result, several lawmakers have proposed new revenue, most notably the income tax on millionaires mentioned above. You can read more here. The proposed income tax is not expected to generate revenue during this biennium due to anticipated legal challenges and potential efforts to refer the measure to voters. As a result, the Legislature is exploring a range of alternative revenue sources and possible spending cuts to balance the budget. Proposals to date include increases on certain alcohol taxes, additional hikes to tobacco and nicotine taxes, a statewide sugar-sweetened beverage tax, and more.
In addition to budget and revenue discussions, there has also been a focus on regulating artificial intelligence across many sectors. There are already over a dozen pieces of legislation addressing topics such as disclosures for AI-generated material, child online safety, chatbots, and the use of AI in the workplace. You can read more about this topic here.
This week, committee hearings and executive action will continue. The first major deadline is the Policy Committee Cutoff on February 4, followed by the Fiscal Committee Cutoff on February 9.
Economic Development
HB 1184 seeks to provide an overtime exemption for certain nonprofit and small business employees by exempting employees of qualifying nonprofits and small businesses from overtime requirements if they meet specific salary and duties-related criteria.
HB 2144 seeks to require employers to provide written notice to current employees and new hires at the time of a job offer when using electronic monitoring, including AI-enabled tools, in performance evaluations, and authorizes enforcement and civil remedies for violations. The bill would grant the Department of Labor and Industries the authority to investigate and make rules, and would penalize noncompliance. It does establish an appeal process for both employers and employees. The bill had a public hearing in the House Labor & Workplace Standards Committee on Jan. 14 and is scheduled for executive session in the same committee on Friday, Jan. 23, at 10:30 a.m.
Housing
SB 5222 seeks to establish rent stabilization measures and tenant protections under Washington’s landlord-tenant laws. Key provisions include capping combined annual rent and fee increases at 7% (with specified exemptions), requiring 180-day advance notice for significant rent hikes, and limiting fees and deposits.
HB 2480 would require larger Growth Management Act (GMA) jurisdictions (population of 30,000 or more) to allow standalone residential development in commercial and mixed-use zones, limits local mandates for ground-floor commercial or mixed-use components and related special permitting or design departures, and establishes state preemption if local codes are not updated within a year with specified exceptions for industrial, refinery-adjacent, historic, shoreline, and critical areas. The bill has not yet received a hearing, action, or amendments this session.
SB 6026 seeks to mandate that certain GMA planning jurisdictions allow residential development in commercial and mixed-use zones without requiring mixed-use configurations, ground-floor commercial, or special permits or departures. The bill does carve out comparable exceptions and preempts conflicting local regulations where implementation lags by more than a year. SB 6026 was heard in the Senate Housing Committee on Jan. 16, where SMCC testified in support, and is scheduled for executive session in the same committee on Jan. 21.
Taxes/Budget
HB 1480 would allow all counties to implement a voter-approved Real Estate Excise Tax (REET) of up to 0.5% to fund affordable housing initiatives. The bill aims to eliminate previous restrictions tied to a 2003 deadline and expand tax authority to all counties in Washington State.
HB 1867 seeks to allow counties and cities to impose a voter-approved REET of up to 0.5% for affordable housing development, with cities authorized to impose the tax only if their county declines to do so or fails to act by Jan. 1, 2027.
HB 2038 seeks to establish a new 0.4% business and occupation tax on social media platforms to fund youth behavioral health initiatives. The law would take effect on Jan. 1, 2026, and any revenue generated would be deposited into a dedicated account to support programs for youth behavioral health programs individuals prenatal through age 25.
SB 5799 would impose a 0.4% business and occupation tax on social media platforms to fund youth behavioral health initiatives. Revenue would be directed to a newly created youth behavioral health account to support programs such as tele-behavioral health services, complex care coordination, and strategic behavioral health efforts for individuals prenatal through age 25, beginning Jan. 1, 2026.
HB 2045 proposes to change Washington State’s business and occupation (B&O) tax structure by adding a 1% surcharge on taxable income exceeding $250 million for high-grossing businesses and increasing the existing surcharge on large financial institutions from 1.2% to 1.9%. The bill aims to generate additional revenue for K-12 education, public safety, health care, and other human services.
HB 2046 establishes a tax on financial intangible assets exceeding $50 million to fund education programs. The tax, effective January 1, 2026, applies to Washington residents at a rate of $8 per $1,000 of the true and fair value of their taxable worldwide intangible assets, with specific exemptions and provisions for administration and enforcement, and revenues dedicated to the education legacy trust account supporting K-12 schools, higher education, early learning, and childcare programs.
HB 2100 creates a new 5% payroll excise tax on payroll above $125,000 per employee, with revenues split between the general fund and a new Well Washington Fund to backfill anticipated federal cuts to health, education, and related services. The bill is scheduled for a public hearing in the House Finance Committee on Thursday, January 22, at 1:30 p.m. SMCC will testify in opposition to the bill along with the executives from the Bellevue Chamber, Washington Roundtable, and AWB. Lawmakers want to hear from you. Please take action here.
SB 6093 would impose a statewide 5% payroll expense tax (PET) on compensation above $125,000 and dedicate a majority of the revenue to the “Well Washington Fund,” which aims to sustain Medicaid, higher education, and other safety net programs facing federal reductions. The measure would also create a 25-member oversight board, phase revenue allocations between the general fund and the new account, and embed comprehensive administration, enforcement, and appeal processes for employers subject to the tax.
SB 5791 would increase the general B&O tax rate from 1.75% to 1.8% and raise the allocation of revenue deposited into the Workforce Education Investment Account from 14.3% to 16.67%. These changes aim to enhance state funding for higher education and are scheduled to take effect on October 1, 2025.
SB 5796 seeks to create a statewide payroll expense tax to fund public services and address the regressivity of Washington’s tax system. The tax applies to wages exceeding the Social Security taxable maximum, with a 5% rate effective July 1, 2026, and would exempt employers with annual payrolls of $7 million or less; employers are prohibited from deducting the tax from employee wages, and may claim a limited credit for eligible city payroll expense taxes paid, subject to a cap based on taxes in effect as of January 1, 2024. Funds collected will support education, healthcare, and social services, while reducing reliance on the business and occupation tax.
SB 5797 seeks to establish a tax on high‑value financial intangible assets owned or controlled by Washington residents to fund public education, effective January 1, 2026 with taxes due starting in 2027. The tax rate is set at $5 per $1,000 of the true and fair value of taxable worldwide intangible assets, with exemptions for up to $50 million in financial intangible assets per taxpayer.
SB 5798 proposes reforms to Washington State’s property tax system that would expand tax relief for seniors, veterans, and disabled individuals, consolidate state property tax levies, and improve transparency in state property tax statements by identifying the state levy as the state school levy. The bill aims to address funding challenges for public services while offering targeted relief to senior citizens and other eligible homeowners, with most changes phased in beginning in 2026.
Transportation
HB 1921, would establish a road usage charge (RUC) system to replace declining fuel tax revenues with mileage-based fees. The bill includes voluntary and mandatory RUC programs, privacy protections, and revenue allocation for highway preservation, maintenance, and multimodal transportation, including through a separate road usage assessment on mandatory-participant vehicles.
SB 5726 creates a mileage-based road usage charge system to address declining fuel tax revenues and fund transportation projects. The bill phases in voluntary and mandatory RUC programs, includes privacy safeguards, and allocates revenues between a new highway account for preservation and maintenance and a multimodal account funded via a road usage assessment surcharge.
Important Session Dates:
- February 4, 2026: House of Origin Policy Cutoff
- February 9, 2026: House of Origin Fiscal Cutoff
- February 17, 2026: House of Origin Floor Cutoff
- February 25, 2026: Opposite House Policy Cutoff
- March 2, 2026: Opposite House Fiscal Cutoff
- March 6, 2026: Opposite House Floor Cutoff
- March 12, 2026: Last Day of Session