Bill > SB5638

This bill introduces a new tax targeting highly compensated employees at hospitals in Washington state, with the goal of redirecting resources to improve healthcare access. Starting January 1, 2026, hospitals will be required to pay a 7.5% tax on the annual total compensation of their five highest-paid non-patient-facing employees (including the lead administrator) if that compensation exceeds 10 times the state's average annual wage. The bill defines "covered employees" as top earners without direct patient responsibilities and establishes a mechanism to calculate "excess compensation" based on published wage data. The legislature's intent is to control administrative healthcare costs and use the generated revenue to fund programs that advance health equity and expand access to reproductive care. The tax is in addition to existing taxes and applies to hospitals licensed under Washington state law. Hospitals can deduct compensation for work performed outside the state that does not further their business activities. The bill also allows affiliated hospitals to file a single tax return and provides for data-sharing between state departments to facilitate implementation. Notably, the bill stems from a legislative finding that some nonprofit hospitals have large revenues and high administrative salaries while potentially neglecting their community service responsibilities.

Budget and Finance

https://app.leg.wa.gov/billsummary?BillNumber=5638&Year=2025&Initiative=false