Bloomberg reported on April 29 that the Washington State Legislature passed a series of new tax reform bills at the end of the legislative session, targeting technology giants such as Amazon and Microsoft to fill the record budget deficit. The bill is now submitted to Governor Bob Ferguson for signature. The new tax system will not only affect the technology industry, but will also affect banks, supermarkets, hospitals and other fields, exacerbating the pressure on corporate operating costs.

This tax reform adopts a strategy of improving the existing tax framework: expanding the scope of sales tax application, increasing the total income tax rate, and adding a capital gains tax rate of up to 10%. The legislature did not choose to impose personal or corporate income tax, but achieved fiscal balance by adjusting existing taxes.

The technology industry has become a key target of regulation. For "advanced computing" enterprises with annual revenue exceeding US$25 billion, the total revenue tax rate will be increased to three times the original standard, and an additional 7.5% surcharge will be charged. The annual tax limit for a single enterprise is set to US$75 million. In addition, the bill repeals sales tax exemption provisions for digital automation services (including digital advertising). Although giants such as Microsoft and Amazon can absorb new tax burdens with their scale advantages, local small and medium-sized technology companies are expected to be under greater pressure.

At present, Governor Ferguson has not yet made a clear intention to sign. According to the legislative process, it is necessary to make a decision within less than three weeks, and a special meeting may be convened to restart the review. Ferguson has previously rejected a more radical tax increase proposal, including the first wealth tax in the country. Although the House has not initiated a voting process on the wealth tax proposal, the Senate still symbolically passed the relevant proposals. Democratic leaders said they will continue to promote wealth tax legislation in the future.

Multiple industry organizations issued early warnings that the new tax system will push up operating costs and ultimately pass them on to consumers. The Washington State Hospital Association estimates that the healthcare system will generate a $260 million funding gap by 2027. Representatives of the food industry pointed out that the combined tax burden will increase the costs of all links of the food supply chain and affect terminal retail prices. The Washington State Science and Technology Industry Association said that although companies have no immediate plans to move out, low-tax areas may be given priority in future business expansion. The rising tax costs are approaching the critical point of corporate strategic adjustment. (International Financial News)