HB 1560
In CommitteeHouse
Hospital exec. excise tax
Funding health care access by imposing an excise tax on the annual compensation paid to certain highly compensated hospital employees.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill creates a new 7.5% tax on excess compensation paid to top nonclinical hospital executives at Washington hospitals, aiming to redirect funds toward expanding health care access—especially reproductive and equity-focused services. The tax applies only to compensation above 10 times the state’s average annual wage, targeting executives earning over $700,000 (based on 2024 wage data).
- Imposes a 7.5% tax on the portion of annual compensation paid to the five highest-paid nonclinical hospital executives (or the top administrator, if not among the top five) that exceeds 10 times the state’s average annual wage (e.g., if average wage is $70,000, the threshold is $700,000).
- Applies only to compensation reported to the Department of Health under existing hospital reporting requirements (RCW 43.70.052).
- Allows hospitals to deduct compensation for work performed outside Washington if it is not related to the hospital’s in-state operations, using a time-based formula.
- Requires hospitals to file returns and pay the tax annually, with the first returns due in 2027 (based on 2026 compensation).
- Permits affiliated hospitals to file a combined return, and authorizes data sharing between the Department of Revenue and Department of Health to verify compensation data.
Who is affected
- Nonprofit and for-profit hospitals in Washington — Hospitals in Washington that employ five highly compensated nonclinical executives (or the top administrator, if not among the top five) earning more than 10 times the state's average annual wage will owe a tax on the portion of compensation exceeding that threshold.
- Highly compensated hospital executives — Top hospital executives (e.g., CEOs, CFOs, COOs) who earn more than 10 times the state's average annual wage may see a portion of their compensation effectively taxed, depending on hospital policy and tax planning.
- Washington residents, especially low-income, rural, or underserved communities — Residents who rely on public health services, reproductive care, and safety-net health programs may benefit from increased state funding generated by the tax.
- Washington state government agencies (Department of Health and Department of Revenue) — State agencies—specifically the Department of Health and Department of Revenue—will be responsible for collecting, verifying, and administering the tax and related data.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The tax is projected to raise $100–$150M annually, directed toward expanding reproductive and equity-focused health care access — likely benefiting low-income, rural, and underserved communities who face barriers to care.
HealthcarePeopleRef: Sec. 1(3), Sec. 6, Fiscal ImpactBy targeting excessive executive pay at hospitals that reportedly underprovide essential services (e.g., reproductive care, safety-net services), the bill aligns financial accountability with community health outcomes — potentially improving trust and service equity.
Public SafetyPeopleRef: Sec. 1(2), Sec. 3(1)The tax is designed to control administrative bloat in nonprofit hospitals — a concern raised by advocates — and redirects those resources toward direct community health investments, supporting more equitable health system function.
HealthcarePeopleRef: Sec. 1(3), Sec. 6Data-sharing between DOH and DOR improves administrative efficiency and reduces duplication, lowering long-term compliance costs and enhancing transparency in hospital compensation reporting.
Local GovernmentPeopleRef: Sec. 5(2), Sec. 3(3)The out-of-state work deduction allows hospitals with regional or national executive roles to avoid double taxation, preserving fairness for executives whose work extends beyond Washington — though this also limits revenue potential.
Business & EmploymentLean peopleRef: Sec. 4 (deduction provision)
Potential Concerns (5)
The tax may incentivize hospitals to cap or restructure executive compensation, potentially reducing high salaries for top nonclinical executives — though this may also reduce their ability to attract and retain experienced leadership in complex health systems.
Business & EmploymentRef: Sec. 3(1)Hospitals must report compensation data to DOH and comply with new tax filing requirements, adding administrative burden — especially for smaller or rural hospitals lacking dedicated tax or legal staff.
Business & EmploymentRef: Sec. 2(3), Sec. 3(1)The out-of-state work deduction may create complex compliance costs and create incentives for hospitals to shift executive work outside Washington to reduce tax liability, possibly undermining the bill’s intent to capture compensation tied to in-state operations.
Business & EmploymentLean peopleRef: Sec. 4 (deduction provision)The tax applies only to nonclinical executives — clinical leaders (e.g., chief medical officers) are excluded, potentially distorting leadership incentives and creating inequity in how compensation is taxed across health system leadership.
Business & EmploymentRef: Sec. 3(1)If hospitals respond to the tax by cutting administrative staff (e.g., billing, compliance, quality assurance), downstream impacts could include reduced capacity to manage Medicaid/Medicare claims, community health outreach, or data reporting — services that support equitable access.
HealthcareLean peopleRef: Sec. 3(1)
Who Is Most Affected
Large nonprofit and for-profit hospital systems with highly paid executives (e.g., UW Medicine, Providence, MultiCare) will bear the tax burden; they may adjust compensation or operational models, but are best positioned to absorb costs and comply.
Top nonclinical executives earning over $700K will see effective tax on excess compensation — but many may be compensated via bonuses, stock, or deferred pay that could be restructured; impact is concentrated and modest relative to total compensation.
Low-income, rural, and underserved communities are the intended beneficiaries — the tax revenue funds reproductive care, equity programs, and safety-net services they rely on most.
DOH and DOR gain new administrative responsibilities, but also improved data infrastructure and interagency coordination — net effect is modest cost increase for agencies with potential long-term efficiency gains.
Smaller rural hospitals with fewer executives may struggle with compliance costs relative to revenue, and may be less likely to have executives earning above the threshold — but if they do, they face the same tax and reporting duties as larger systems.