Washington Senate Democrats unveil $78B budget with tax hikes on wealthy, corporations; property tax cap raised

Washington lawmakers are gearing up for another big-budget cycle and the latest proposal from Senate Democrats shows billions in new spending, tax increases and major shifts in state funding.

Senator June Robinson (D-Everett), Chair of the Senate Ways and Means Committee, introduced Proposed Substitute Senate Bill (PSSB) 5167, the 2025-27 biennial operating budget, on Monday, which outlines a $78.5 billion operating budget to fund education, healthcare, social services and state employee pay increases.  The entire proposal can be found here.

The proposal also includes adjustments to the current 2023-25 budget and sets the groundwork for the following cycle in 2027-29.

The budget doesn’t come without controversy. To pay for increased spending, Democrats propose $16 billion in new taxes over the next four years, including a financial assets tax and a payroll expense tax. Meanwhile, the plan includes $6.2 billion in tax cuts, most notably a state sales tax reduction — a move that could give some financial relief to everyday Washingtonians.

Where’s the money going?

Under the proposed budget, $6.5 billion more will be spent in 2025-27 than in the current cycle, with another $9.2 billion increase planned for 2027-29. Here’s how the spending breaks down:

• Education: $3.1 billion more for K-12 schools, including a major expansion of special education funding.
• Social services and healthcare: Billions more are allocated to programs supporting children, families and low-income healthcare, including Medicaid and behavioral health services.
• State employee pay and benefits: Nearly $2 billion will go toward increasing wages and healthcare benefits for state workers.

Robinson argues these investments are necessary to keep pace with inflation and ensure critical services remain funded.

Who pays?

To finance this ambitious budget, lawmakers are turning to new revenue streams over the next four years:

• Financial intangible assets tax ($12.2 billion) — A proposed tax on high-value financial assets like stocks and bonds.
• Payroll expense tax ($6.6 billion) – A tax on large employers based on total payroll costs.
• Property tax reform ($800 million) – Changes to property tax calculations aimed at raising more revenue.

At the same time, the proposal cuts $3.2 billion from the state sales tax over the next four years, a move designed to help lower-income households that bear the brunt of sales tax costs.

Where lawmakers stand

Democrats argue the proposal keeps Washington on a stable financial path while investing in key services

“Crafting this budget required tough choices, thoughtful conversations, and a strong commitment to the people of Washington,” Senator Robinson said in a statement. “An all-cuts approach was never on the table — not when it meant turning our backs on schools, health care and the basic services people depend on.”

Senate Republicans released a budget proposal two weeks ago without raising any new taxes. Their proposal has $75.6 billion in spending over the next two years using excess funding through the Working Families Tax Credit that is tied to the Climate Commitment Act. It also suspends $4 billion in pay raises to state workers that were part of negotiated collective bargaining agreements.

The Senate budget will be voted on by the entire Chamber on Saturday and will then go through negotiations with the House and Governor’s Office before a final version is passed.

This is a developing story and will be updated throughout the day.

Matt Markovich is the KIRO Newsradio political analyst. Follow him on X.

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