House Finance hears bill to add B&O surcharge on highest‑grossing businesses, raises financial institution surcharge

House Finance on April 3 heard testimony on HB 2045, a proposal to add a supplemental business‑and‑occupation (B&O) tax on the state’s highest‑grossing businesses and to increase an existing surcharge on specified financial institutions.

Committee staff and the bill’s sponsor told members the bill would impose a 1% surcharge on a business’ Washington taxable gross receipts above $250 million beginning Jan. 1, 2026, and increase the existing financial‑institution surcharge from 1.2% to 1.9% effective July 1, 2025. Committee staff also described exemptions in the draft language for manufacturing income and certain farmers and beekeepers; the bill would not apply the new 1% surcharge to income related to manufacturing activities.

Supporters framed the measure as a progressive revenue source to avoid cuts to education, childcare and health services. "These businesses benefit from us having quality public schools, colleges and universities, a social safety net, nursing homes for the elderly, public safety, transportation," Representative Fitzgibbon, prime sponsor, told the committee. Advocates and coalitions said the surcharge would protect services relied on by low‑ and middle‑income households.

Committee staff provided fiscal estimates used in the hearing record: the Department of Revenue projected the proposal would affect about 370 businesses with more than $250 million in Washington taxable income and roughly 250 specified financial institutions; estimated revenue was $554.6 million for the final eight months of fiscal 2026 and approximately $1.9876 billion in fiscal 2027 (the first full year), with state implementation costs in the low six figures in the near term.

Public testimony was sharply divided. Labor, education and social‑services advocates urged passage. Eli Goss of the Washington State Budget & Policy Center said the measure would raise progressive revenue "to stabilize families and schools" and cited multi‑billion dollar four‑year revenue projections tied to the surcharge. Planned Parenthood Alliance Advocates and health and anti‑poverty organizations also supported the bill.

Business groups and industry associations warned of price and service impacts. Grocery and food‑service trade groups asked for exemptions for wholesalers and retailers of food, citing very low grocery profit margins; one independent grocer said their net take‑home profit margins are around 1%, and a pharmaceutical distributor testified that its members operate on margins below 1% and would be unable to absorb the increase without passing costs to consumers. Hospitals and health systems, including Evergreen Health and Providence Swedish, testified they face multi‑million‑dollar impacts and said the surcharge would force further service reductions or staff cuts.

Several health and provider witnesses emphasized that some health care entities do not set prices and argued an added levy would be similar to an equivalent budget cut to services. Other testifiers — from organized labor, teachers, childcare providers and municipal officials — described the potential for the revenue to blunt proposed cuts to schools and social services.

The committee took testimony from both in‑person and remote witnesses and closed the public hearing on HB 2045 at the end of the panel. No committee vote occurred during the hearing.

HB 2045 now moves to the committee’s internal process for possible amendment and scheduling; the committee record contains written fiscal notes and a departmental estimate cited during the hearing.