On Monday, January 19, both the House and Senate honored the late civil rights leader Dr. Martin Luther King Jr. by adopting resolutions on the floor. Following those ceremonies, the second week of session brought public hearings on several high-profile issues, including legislation related to data centers, artificial intelligence, and medical debt. The week also marked the first floor action of the session, with lawmakers voting on bills that remained in Rules from last year.

Last week, the House Finance Committee held a public hearing on a proposal from Rep. Scott that would implement a new payroll expense tax on employers across the state. The proposed bill would impose a 5% tax on payroll expenses for companies meeting certain size thresholds, targeting employers with  workers making more than $125,000 annually,  with the goal of raising billions in revenue for the state budget. Supporters say it’s needed to protect state services from federal cuts, while critics warn it would discourage business investment and hurt the job market. You can read more about the proposal here. Democratic leadership has said that while last year the payroll expense tax was under serious consideration, they have since shifted their focus to other options. A hearing will be scheduled  so members can carefully review different revenue tools.

Informal discussions continue around a range of revenue options, including ending certain tax exemptions, increasing nicotine taxes, and raising beer and wine taxes. While not yet formally introduced, the most significant new tax under consideration is still the proposed statewide income tax on households earning more than $1 million annually.

Economic Development

SB 5492 would create an advisory group to evaluate a self-supported, industry-funded assessment model for statewide tourism promotion and updates provisions related to the Tourism Marketing Authority Board, including removal of outdated appointment language and clarification of board governance.

HB 1437 seeks to establish an advisory group to explore an industry-funded mechanism for statewide tourism promotion and update governance provisions for the Tourism Marketing Authority.

HB 1515 would modernize regulations for alcohol service in public spaces in Washington State, with temporary authorizations expiring on Dec. 31, 2027.

Employment Law

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 electronic monitoring, including AI-enabled tools, is used for performance evaluations, and authorize enforcement and civil remedies for violations. The bill would grant the Department of Labor and Industries investigative and rule-making authority, with penalties for noncompliance and an appeal process for both employers and employees. In addition, it requires employers intending to begin using electronic monitoring in performance evaluations to notify employees 30 days before starting such practices and requires employers already using such monitoring before the bill’s effective date to notify employees within 60 days. The bill is scheduled for a public hearing in the House Labor & Workplace Standards Committee on Jan. 28.

Housing

SB 5222 proposes rent stabilization measures and tenant protections under Washington’s Residential Landlord-Tenant Act and Manufactured/Mobile Home Landlord-Tenant Act. 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 and SB 6026 would require larger Growth Management Act (GMA) jurisdictions with populations of 30,000 or more that are planning under the act to allow standalone residential development in commercial and mixed-use zones. The bill does not restrict ground floor commercial, it simply removes the mandate so other uses can be considered where they make sense. SB 6026 was heard in the Senate Housing Committee on Jan. 16, and the committee will consider the bill again on Jan. 28.  HB 2480 is scheduled for a public hearing in the House Local Government Committee on Jan. 28.  SMCC has been working in coalition to support this legislation.

Taxes/Budget

HB 1480 would broaden the authority of counties to impose a real estate excise tax (REET) for affordable housing by allowing all counties to implement a voter-approved REET of up to 0.5% to fund affordable housing initiatives. The bill would end earlier restrictions tied to a 2003 deadline and expand eligibility to all counties in Washington State.

HB 1867 seeks to allow counties and cities authority 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 or does not act by Jan. 1, 2027.
HB 2038 and SB 5799 would establish a new 0.4 percent business and occupation tax on social media platforms to fund youth behavioral health initiatives, beginning January 1, 2026. Both bills create a dedicated youth behavioral health account in the state treasury and direct revenue from the tax to support behavioral health services for individuals prenatal through age 25, HB 2038 is scheduled for a public hearing in the House Finance Committee on Jan. 30.

HB 2045 proposes changes to Washington State’s business and occupation tax structure by introducing 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 to fund K-12 education, public safety, health care, and other human services.

HB 2046 seeks to establish a tax on financial intangible assets exceeding $50 million to fund education programs. The tax, effective Jan. 1, 2026 (with taxes first due in 2027), would apply 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.

HB 2100 and SB 6093, would establish a new 5 percent payroll excise tax on large operating companies’ payroll above the federal additional Medicare tax threshold (effectively $125,000 per employee), with revenues split between the state general fund and a new Well Washington Fund to backfill anticipated federal cuts to health care, higher education, food assistance, energy, and related services. HB 2100 had a public hearing in the House Finance Committee on Jan. 22. SB 6093 has not yet received a hearing or other action in the Senate. Seattle Metro Chamber President Joe Nguyen testified in opposition to the bill along with our partners from the Bellevue Chamber, AWB, and the Washington Roundtable.

SB 5791 proposes increasing the general B&O tax rate from 1.75% to 1.8% and raising 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 would take effect on October 1, 2025.

SB 5796 proposes a statewide payroll expense tax on large employers to fund public services and address the regressivity of Washington’s tax system. The 5% tax would apply to wages above the Social Security taxable maximum and take effect on July 1, 2026. The bill would exempt employers with annual payrolls of $7 million or less and prohibits employers from deducting the tax from employee wages. Funds collected would support education, healthcare, and social services andreduce reliance on the business and occupation tax.

SB 5797 establishes a tax on wealth, defined as high‑value financial intangible assets owned or controlled by Washington residents, to fund public education, effective Jan. 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. All revenue collected from this proposalwould be dedicated to the Education Legacy Trust Account.

SB 5798 proposes reforms to Washington State’s property tax system by expanding tax relief for seniors, veterans, and disabled individuals, consolidating state property tax levies, and improving 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 and residents’ affordability issues  by offering targeted relief to senior citizens and other eligible homeowners, with most changes phased in beginning in 2026.

Transportation

HB 1921 seeks to 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 phased in over time, 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 would create a mileage-based road usage charge system to address declining fuel tax revenues and fund transportation projects. The bill would phase in voluntary and mandatory RUC programs, include privacy safeguards, and allocate revenues between a new highway account for preservation and maintenance and a multimodal account funded via a road usage assessment surcharge.

Helpful Links for Session:

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