Washington Committees Shift from Hearings to Action as Tax Proposals Surface

The second full week of session marked the Legislature’s transition from mass bill introductions - 1,355 new bills were introduced in the first two weeks - to substantive policy debate and early committee action. Several major proposals advanced from public hearing to executive session, while fiscal committees began turning their attention from the Governor’s budget to a growing slate of tax measures. With the first policy cutoff deadline approaching on February 4th, the pace of activity accelerated noticeably across labor, legal, technology, insurance, and tax policy.

Below are selected highlights from the week, with a look ahead to key issues now moving through committees. Additional bills under tracking, along with upcoming hearings and executive sessions, are detailed in the attached bill report.

Taxes

Tax policy began to move from speculation to formal legislative consideration this week, with the House Finance Committee and Senate fiscal committees starting to hear new proposals. These proposals show continued legislative interest in structural tax changes and industry-specific revenue measures, which will be central themes for the remainder of the session.

• Income Tax. While it has not been formally introduced yet, language surfaced this week for the “Millionaire’s Tax” supported by Governor Ferguson and Democratic leaders in the House and Senate. Starting in 2029, the draft proposal would impose a 9.9 percent tax on Washington taxable income, subject to a $1 million standard deduction, with various credits and adjustments to income. It would not directly tax corporations or pass-through entities, such as LLCs and partnerships, but would tax owners for any pass-through income that pushes them above the income threshold. While this draft circulates, the House and Senate majority leaders indicated they plan to have a formal proposal introduced by the end of this week.     
• HB 2100, the proposal to create a statewide payroll tax on employers, was heard in the Finance Committee on Thursday. It does not have a committee vote scheduled, but is exempt from cutoff deadlines. As a reminder, it imposes an excise tax on the portion of a Washington employer’s payroll encompassing employees earning $125,000 or more annually. Under a planned amendment, it now applies to employers of 250 or more (as opposed to 20 or more), with gross annual volume of $5 million or more, and a total payroll of $7 million or more. It contains a deduction for Seattle companies subject to the city’s similar JumpStart tax. The hearing was lively, with a wide cast of business organizations opposing the measure. In the committee sign-ins, 12,843 individuals signed in “con” on the proposal, to 2,544 “pro.”
• HB 2487, the House companion to SB 5949, is scheduled for public hearing in House Finance on Friday. Its Senate companion, meanwhile, had a public hearing in the Ways & Means Committee this past Monday. The bill restricts the definition of “insurance business” in order to broaden the B&O tax to insurance-affiliated activities historically considered subject to the state’s insurance premium tax. Given its direct implications for virtually every insurance sector, the bill will continue to receive priority attention from the industry.
• HB 2089, extending the tax on mortgage loan interest to additional community banks, in order to fund state wildfire mitigation and preparedness, received a public hearing in the House Finance Committee on Friday.
• HB 2098 was heard in the House Postsecondary Education & Workforce Committee on Wednesday, and is set for a committee vote this Tuesday. It increases funding for higher education by removing the $75 million cap established last year on the B&O tax surcharge for Advanced Computing Services.
• SB 6173 was heard in Senate Ways & Means on Tuesday. It would assess private employers of more than 100 employees for the full cost of their employees who utilize state Medicaid for health insurance. Committee staff project the measure could yield as much as $700 million annually in revenue. A similar bill in the House, HB 2300, has not been scheduled for hearing.   

Liability Reform & Litigation

Several proposals with significant implications for the state’s tort and enforcement framework had action this week, with a new proposal intended to address the state’s spiraling tort liability.

• HB 2255, requiring disclosure of third-party litigation funding, and imposing regulations on third party funders, was heard in the House Civil Rights & Judiciary Committee on Wednesday. It has not yet been set for a committee vote.
• HB 2095, creating a presumption of negligence for motorists involved in collisions with “vulnerable roadway users,” is now scheduled for a committee vote Wednesday in the Civil Rights & Judiciary Committee.
• SB 6239, requiring arbitration for tort claims against the state and its subdivisions, will be heard in the Senate Law & Justice Committee on Tuesday, with an executive session already set for Thursday. Critics note the required arbitration is non-binding, and are skeptical the requirement would make a dent in a projected $3 billion in near-term tort liability for the state.
• HB 2585, establishing a state false claims act, is scheduled for a public hearing in House Civil Rights & Judiciary on Tuesday. The bill contains a qui tam private right of action allowing individuals to sue entities on behalf of the state, alleging false or fraudulent claims for payment in a variety of contexts, backed by financial incentives and attorneys’ fees. This has prompted concerns over lawsuit abuse, nuisance claims, and settlement demands.

Technology, AI, and Consumer Regulation

Artificial intelligence, digital commerce, and platform regulation remained a major focus of legislative activity this week into next week.

• HB 1170, requiring disclosure when online content is generated or modified by artificial intelligence, having emerged from the House Technology Committee last week, has been referred to the Appropriations Committee and is set for a public hearing on Monday.
• HB 2157, regulating “high-risk” AI systems, was set for executive session in House Technology, Economic Development & Veterans, but the committee vote was postponed until this Tuesday.
• HB 2225, regulating AI chatbots, with an eye toward protection of young or vulnerable users, was voted out of House Technology on Friday.
• HB 2481, prohibiting surveillance-based or algorithmic pricing in retail and imposing a moratorium on electronic shelf labels, was heard in House Technology on Wednesday and is scheduled for a committee vote this coming Wednesday.

Labor & Employment

Labor and employment legislation continues to move rapidly through committee calendars.

• HB 2611 was a new introduction this week, changing the state’s 40-hour workweek (beyond which overtime must be paid to non-exempt employees) to a 32-hour workweek. The bill has been scheduled for a public hearing on Tuesday in the House Labor Committee.
• HB 2471, creating state-level collective bargaining rights and labor dispute resolution for workers not covered by the National Labor Relations Act, was heard in House Labor on Wednesday, and has advanced to executive session this Friday.
• SB 5437, fully banning non-compete agreements and regulating non-solicitation agreements, was heard in the Senate Labor Committee on Monday. It has not been scheduled for a vote yet. Its House companion from last session, HB 1155, sits in the House Rules Committee and is eligible to be pulled for a floor vote.
• HB 2411, requiring notice to employees regarding electronic monitoring for performance evaluation, is set for executive session in House Labor on Wednesday. Amendments are expected to narrow the bill’s definitions and expansive enforcement provisions, including its private right of action.
• HB 2105, the Attorney General’s Immigrant Rights Act, requiring 72 hours’ notice to employees of a federal audit of an employer’s I-9 forms, was voted out of the House Labor Committee Friday with some slight limiting amendments, while its Senate companion, SB 5852, was heard in the Senate Labor Committee on Tuesday.

Payroll-Tax-Funded Programs

Workers’ compensation legislation continues to see particularly heavy activity, with multiple bills moving from hearing to committee action.

• HB 2218 and SB 5847 narrowing application of the Labor & Industries medical provider network, and imposing penalties for employers found to have directed injured workers’ medical care. The Senate version was heard on Friday in Senate Labor, while the previously heard House version was scheduled for a committee vote this coming Wednesday. Amendments are expected.  
• HB 2243 and SB 6152, expanding the definition of attending provider to include physical and occupational therapists, was heard Monday in Senate Labor and is scheduled for executive session in House Labor this Wednesday.
• HB 2372, expanding disability benefits by including the full value of employer-provided health insurance when coverage is not continued, was heard in House Labor on Wednesday and is scheduled for executive session this Wednesday. Its Senate companion, SB 6067, was heard in Senate Labor on Friday.
• HB 2188, requiring greater transparency in industrial insurance rate-setting, will receive a public hearing in House Labor on Wednesday.
• SB 5292, changing the basis of the Paid Family & Medical Leave Insurance premium rate calculation to an actuarial report, rather than a rate set in statute, was voted out of the Senate Labor Committee on Friday.

Insurance

Several insurance-related proposals advanced in committee this week. In addition to these measures, tax proposals affecting insurers (noted above) continue to emerge as a key area of concern.

• SB 5331, last year’s Commissioner request legislation seeking authority to order restitution and uncapping per-violation penalties on insurers, passed off the Senate floor on a 29-20 vote on Wednesday. It goes back to the House Consumer Protection & Business Committee.
• SB 5928, requiring disclosure of wildfire risk scores, a Commissioner request bill, was voted out of the Senate Business, Trade & Economic Development Committee on Wednesday and is in the Senate Rules Committee.
• SB 6079, another Commissioner request establishing a wildfire mitigation grant program, but restricting underwriting based on IBHS designation and initially funding the program out of the OIC regulatory account surplus, was heard in committee on Thursday. It is set for a vote on Wednesday.
• SB 6248, addressing travel insurance regulation, is scheduled for a hearing Wednesday in the Senate, and a committee vote on Thursday. The House companion, HB 2087, was heard in the House committee on Friday.
• SB 5871, regulating motor vehicle glass repair claims, is now scheduled for executive session on Thursday.
• HB 2428, requiring proof of delivery of life insurance lapse notices, and notice of reinstatement rights, received a public hearing Friday. It is not yet scheduled for a committee vote. The industry is seeking a delayed effectiveness date and a modification of the reinstatement notice requirements.  
  
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