SOUTH SOUND CHAMBER OF COMMERCE LEGISLATIVE COALITION 2026 POST POLICY CUT OFF REPORT - February 6, 2026

The Washington State Legislature has now passed the policy committee cutoff, and attention has shifted decisively to fiscal committees and budget negotiations. At this stage in the session, bills that remain alive in the fiscal committees (Senate Ways and Means, Senate Transportation, House Appropriations, House Capital Budget, House Finance and House Transportation) are being evaluated less on policy concepts and more on cost, implementation, and economic impact. For the business community, the coming weeks will be critical as revenue proposals, labor measures, environmental mandates, and transportation funding decisions move forward. 

One of the most significant developments this week is the hearing on the proposed tax on millionaires. While framed as affecting only high-income individuals, the structure of this proposal raises serious concerns for small and independent businesses operating as pass-through entities. Because business income is reported on personal tax returns, owners of LLCs, S corporations, partnerships, and sole proprietorships could be taxed on undistributed earnings—creating cash-flow challenges and increasing financial risk for businesses reinvesting in operations, employees, and growth.

Beyond the income tax proposal, a number of budget and tax bills remain active that would either increase taxes, modify tax administration, or adjust local government revenue authority. These proposals collectively contribute to uncertainty for employers already navigating inflation, workforce shortages, and rising operating costs.

Labor and employment legislation continues to be a major focus for the business community. Several bills advancing this session expand employer liability, limit opportunities to correct technical violations, or shift enforcement risk onto hiring entities. These approaches disproportionately impact small and mid-sized employers that lack in-house legal and compliance staff, increasing the risk of penalties and litigation unrelated to intentional wrongdoing.

Environmental and climate-related proposals also remain active. While many bills are well-intentioned, compliance timelines and cost assumptions often fail to account for the realities facing smaller employers, particularly those in construction, manufacturing, logistics, and service industries that rely on vehicles, equipment, and fuel-intensive operations.

Transportation policy discussions continue as lawmakers consider new revenue sources and programmatic changes to support infrastructure investments. For South Sound employers, transportation costs, congestion, and system reliability are not abstract policy issues but daily business realities that affect employee access, supply chains, and customer service.  We continue to work to ensure the major projects in the region remain funded.