12 ideas for recovering revenue that would allow Washington to avoid austerity in the 2026 supplemental operating budget

[Yo_Mama_Been_Loggin]

Merry Christmas, Washington! As the Feast of the Nativity begins, and other winter holidays like Kwanzaa and New Year’s draw near, we at the Northwest Progressive Institute are delighted to bring you a list of twelve ideas for recovering revenue that would allow our state to avoid harmful austerity in next year’s supplemental operating budget — like the $146.7 million in cuts to schools, colleges, and universities Governor Bob Ferguson proposed yesterday at his budget rollout in Olympia.

This list is drawn from a larger menu of revenue ideas that we have been researching recently. Ferguson has himself proposed two of the ideas that were on our larger list, at least in part. Those ideas, as presented by the governor’s budget office, are:

Closing the data center refurbishment exemption: The state’s 6.5% sales tax on goods and services is collected by retailers and remitted to the state to pay for various government services out of the general fund. Washington currently waives sales tax on replacement server equipment in qualifying data centers, which was intended to attract investment and jobs, particularly in rural communities. However, over time, data centers became major users of electricity and created fewer permanent jobs than originally expected. Effective July 1, 2026, the proposal ends the sales tax exemption for replacement server equipment, which was utilized by about 25 data centers this past year. This gives operators time to plan while ensuring they contribute more fairly to the grid and infrastructure they depend on.

Closing a tax break for prescription drug wholesalers: Today, businesses that warehouse and resell prescription drugs pay a special business and occupation (B&O) tax rate of 0.138%, far below the roughly 0.5% rate paid by other wholesalers. This was originally meant to level the playing field for distributors with a physical presence in Washington. Today, all distributors are subject to the B&O tax regardless of physical location, making this tax preference obsolete. It now mainly benefits a small group of large national distributors, not patients. Under the proposal, about 49 wholesalers would move to the standard rate and be treated like many other wholesalers in Washington. Some costs may be passed along in the supply chain, but the impact is expected to be small compared to overall drug prices. The additional revenue will go back to the state to help preserve medical and behavioral health services that families rely on.

-more-

https://www.nwprogressive.org/weblog/2025/12/twelve-ideas-for-recovering-revenue-that-would-allow-washington-to-avoid-austerity-in-the-2026-supplemental-operating-budget.html

[Captain Zero]

1. A tax surcharge on all income above $5 million.

nt

[The Roux Comes First]

2. These First Two Are Excellent Ideas, Though I Would Prefer Semi-punitive Taxes or Other Charges on "Data Centers,"

A concept that AFAIK basically severely strains our energy resources and provides a handy excuse for federal meddling and boosting of burning coal.

I am hopeful that the idea of a state income tax on incomes exceeding $1M will get serious traction. We are embarrassingly behind in our taxing system for a state pretending to be forward-thinking.