State Legislature Update April 2025
Raising revenue has been the talk of Olympia for the 2025 session. The House and Budget have passed budgets, but they are still far away from each other. Governor Ferguson issued a statement that the proposed $12B in revenue that is currently being proposed is too much. However, the Governor did not give an alternative budget number for the House and Senate to consider.
Usually, the budget is in three buckets - the Capital Budget, the Operating Budget, and the Transportation Budget - and they are fairly distinct. However this year, in an unprecedented move, the proposed budgets have funds transferring between these buckets to try and make the budget balance.
If there the house and senate do not present a budget to the Governor by Saturday, the session will likely go into a 30-day special session.
Here is the current state of play on revenue:
Budget & Revenue
House and Senate Democrats announced a new/updated revenue package on Tuesday. The revenue package includes the following bills (bolded indicates the assumed vehicle):
Capital Gains & Estate Tax (SB 5813 / HB 2082)
- Imposes an additional 2.9% tax on capital gains over $1 million
- Increases tax on estates of those who died after January 1, 2025
- Raises estate tax exclusion from $2.1 million to $3 million
Property Tax (SB 5812 / HB 2049)
- Allows property tax growth beyond 1%, up to the combined rate of population growth + inflation, capped at 3%
- Increases business and occupation taxes for sectors including manufacturing, retail, wholesaling and childcare
- Raises surcharges on large businesses with taxable income over $250
- Raises surcharges on big banks and advance computer services
Sales & Tobacco Tax (SB 5814 / HB 2083)
- Expands the sales tax to include computer-related businesses, temporary staffing services, and advertising services
- Broadens the tobacco tax to cover products that contain nicotine
- Requires a one-time prepayment of retail sales tax collections for businesses with $3 million or more in taxable sales during 2026
While it’s not listed with the revenue package above, the Senate Ways & Means committee did amend and pass out of committee the intangible assets (aka wealth tax) bill, SB 5797. The bill was amended to reduce the tax rate from $10 per $1,000 of the true and fair value of the financial intangible assets to 34 cents per $1,000 and redirects tax revenues to the education legacy trust account instead of the general fund. The modified version essentially establishes a smaller version of the intangible assets tax with the assumed aim of getting it tested in court, which Governor Ferguson previously indicated he was open to.