By Kenneth Corbin

Lawmakers in Washington state have passed legislation that would increase taxes on capital gains, create a surcharge on income for large businesses, and impose other measures to boost revenue in the state, which has no income tax.

Advisors with wealthy clients in the state will be watching closely to see if Gov. Bob Ferguson signs the measures into law, particularly one that would hike taxes on long-term capital gains of more than $one million. The bill would impose an excise tax of 2.9% on investment earnings over that threshold, using the revenue for education funding and school construction.

The various tax provisions included in a series of bills shepherded through the state legislature together are projected to add $9.4 billion to the state's coffers over the next four fiscal years, taking a chunk out of the $16 billion deficit the state expects to run over the same period.

Ferguson's office didn't immediately respond to a request for comment on whether he intends to sign or veto the measures, which were passed last week and reached his desk on April 27.

The bill that hikes capital-gains taxes would also sharply increase the estate tax exemption, setting that figure at $3 million for estates of people who die between July 1 and the end of the year and calibrating future increases to the consumer price index. The state's current estate-tax exemption is $2,193,000.

Another bill would impose a 0.5% surcharge on companies in the state whose taxable income exceeds $250 million, taking effect Jan. 1, 2026.

That bill includes a number of other business tax increases. One is an increase on the rate paid by financial institutions with $1 billion or more in annual net income that do business in the state, including national banks such as Wells Fargo and JPMorgan Chase. The bill would also impose a so-called "advanced computing surcharge" on technology companies with gross revenue of more than $25 billion. Amazon and Microsoft, both based in the state with annual revenue in the hundreds of billions, would clearly be affected.

That bill accounts for the bulk of the projected revenue -- nearly $5.6 billion over the next four years -- and would be the state's "largest tax increase going back over 30 years at least," according to Emily Makings, an analyst at the Washington Research Council.

Wealthy Washingtonians caught a break when the legislature backed away from a bill that would have levied a wealth tax on the state's richest residents, according to the Seattle Times. However, the paper reports that the proposal "is sure to be back in play next session, or even sooner if there's a special session or an initiative."

Another tax measure the legislature did adopt imposes a surcharge on the sale of zero-emission vehicle credits, a practice that currently only Tesla engages in within Washington, according to the Washington State Standard.

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April 30, 2025 14:39 ET (18:39 GMT)

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