SB 6093
In CommitteeSenate
Payroll expense tax
Enacting an excise tax on large operating companies on the amount of payroll expenses above the minimum wage threshold of the additional medicare tax to fund services to benefit Washingtonians and establishing the Well Washington fund account.
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 5% payroll tax on large employers for wages over $125,000 per employee to help offset expected federal budget cuts—especially in Medicaid, food assistance, and higher education—that Washington could lose starting in 2027. Revenue will fund state programs through a new Well Washington Fund, with oversight by a newly created board.
- Imposes a 5% payroll expense tax on large operating companies for wages paid to employees earning more than $125,000 per year (the threshold for the federal additional Medicare tax).
- Creates the Well Washington Fund, into which 51% of tax revenue will be deposited starting July 1, 2027, for use in health care (especially Medicaid), higher education, cash assistance, and energy/housing programs.
- Establishes a 25-member oversight board (legislative and gubernatorial appointees) to monitor federal funding risks and recommend funding strategies to the legislature annually.
- Exempts employers with less than $7 million in annual payroll from the tax.
- Allows employers to claim a credit for eligible city-level payroll taxes paid, up to the amount of state tax owed.
- Includes strong enforcement and collection tools—including liens, wage garnishment, business injunctions, and penalties—for noncompliance.
Who is affected
- Large operating companies — Large employers with over 20 employees, $5 million or more in annual gross receipts, and a U.S. address will owe a 5% payroll tax on wages paid to employees earning more than $125,000 per year. They must collect, report, and remit the tax; failure to comply may result in penalties, interest, or business restrictions.
- High-earning employees — Employees earning over $125,000 annually are not directly taxed, but their employers may adjust compensation or benefits in response to the new tax burden. Their employers cannot deduct the tax from their wages.
- Small businesses — Small businesses and employers with less than $7 million in annual payroll are exempt from the tax, so they face no new costs or administrative requirements under this law.
- Public service programs and their beneficiaries — State agencies and programs that rely on federal funding—especially Medicaid, SNAP (food stamps), higher education grants, and clean energy projects—are directly affected by the bill’s goal of preserving state-level funding to offset anticipated federal cuts.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The Well Washington Fund is designed to preserve Medicaid and health care access for up to 400,000 Washingtonians at risk of losing coverage due to federal budget cuts. By dedicating 51% of revenue to health care, the bill helps prevent coverage losses and hospital closures—especially in rural areas—protecting vulnerable populations including refugees, asylees, and low-income families.
HealthcarePeopleRef: Sec. 2(1); Sec. 1(3)The bill allocates funds to housing programs through the Well Washington Fund, which could support affordable housing development, rental assistance, and homelessness prevention. Given Washington’s severe housing shortage and rising homelessness, this revenue stream is critical to mitigating displacement and stabilizing vulnerable households.
HousingPeopleRef: Sec. 2(1); Sec. 1(3)The bill dedicates funds to higher education, helping offset projected federal cuts that would eliminate financial aid for thousands of students. This supports low- and middle-income students who rely on state and federal grants, reducing the risk of enrollment declines and student debt accumulation.
EducationPeopleRef: Sec. 2(1); Sec. 1(3)By funding cash assistance and SNAP (food stamps), the bill helps prevent increased food insecurity and poverty-related health issues. These programs have well-documented positive spillover effects on public safety, including reduced crime and emergency room utilization, especially in underserved communities.
Public SafetyPeopleRef: Sec. 2(1); Sec. 1(3)The 5% payroll tax on wages over $125,000 targets high-earning employees’ employers, not individuals directly. This avoids burdening workers and ensures the tax falls on large corporations—many of which are headquartered in Washington (e.g., Amazon, Microsoft, T-Mobile)—making it a relatively progressive revenue source that aligns with the state’s corporate presence.
FinancialPeopleRef: Sec. 4(1)(a); Sec. 1(10)
Potential Concerns (5)
The tax applies only to large operating companies (>$5M in gross receipts, >20 employees), exempting small businesses and sole proprietorships. While this protects small businesses, it may reduce competitive pressure on large employers to control labor costs or could incentivize firms to stay just under the $7M payroll threshold to avoid the tax, potentially distorting hiring and business scale decisions.
Business & EmploymentRef: Sec. 4(1)(a); Sec. 5 (exemption for <$7M payroll)The tax generates revenue for the state, but 49% of proceeds go to the general fund rather than being fully dedicated to the Well Washington Fund. This creates uncertainty about how much funding will actually support health care, education, and housing—especially if future legislatures redirect general fund revenue, potentially weakening the intended programmatic benefits.
FinancialRef: Sec. 4(1)(a); Sec. 2(1) (49% to general fund)The bill allows cities to impose their own payroll taxes and receive credits against the state tax, but only if they already have such a tax in place. This could create inequities between cities that have enacted local payroll taxes (e.g., Seattle) and those that have not, potentially distorting local fiscal capacity and economic development strategies.
Local GovernmentRef: Sec. 4(1)(a); Sec. 2(1)The bill imposes significant compliance and enforcement mechanisms—including liens, wage garnishment, business injunctions, and penalties—for noncompliance. While these ensure revenue collection, they could impose administrative burdens on large employers and increase legal/consulting costs, which may be passed on to employees or reduce investment in hiring.
Business & EmploymentRef: Sec. 4(1)(a); Sec. 9(2)The bill does not directly address public safety, but diverting 49% of tax revenue to the general fund (rather than fully funding Well Washington programs) could indirectly strain state and local budgets, potentially affecting funding for emergency services, crime prevention, or disaster response if general fund shortfalls emerge in future biennia.
Public SafetyRef: Sec. 4(1)(a); Sec. 2(1)
Who Is Most Affected
Large employers (>$5M payroll, >20 employees) face a new 5% tax on high-earning staff wages. While compliance costs and administrative burden increase, the tax is not passed to employees and may be offset by existing city payroll tax credits. The impact is concentrated among large firms, especially those with high-wage workforces.
Employees earning over $125,000 are not taxed directly, but their employers may adjust compensation, reduce bonuses, or slow hiring to offset the tax. However, the bill explicitly prohibits wage deductions, and the tax is structured to avoid shifting burden to workers—making the net impact on high earners modest and indirect.
Small businesses (<$7M payroll) are fully exempt, avoiding new costs and administrative burdens. This preserves their competitiveness relative to larger firms and supports small business growth, especially in rural and suburban economies where small employers dominate.
Medicaid recipients, SNAP beneficiaries, low-income students, and housing-assisted households benefit directly from preserved or expanded services. The bill aims to prevent 250,000+ people from losing health coverage and 900,000 from losing food assistance—making this group the primary beneficiaries of the legislation.
The state and local governments benefit from new revenue and a structured oversight mechanism to anticipate federal funding shocks. The Well Washington Fund provides long-term fiscal resilience, while the oversight board ensures accountability and timely legislative response to emerging needs.