Gov. Jay Inslee is proposing a new tax on wealthy Washingtonians as part of his last budget proposal, unveiled Tuesday.
The tax proposal comes as the state is potentially facing a shortfall up to $16 billion over the next four years, Inslee said. The increase would affect about 3,400 residents by adding a 1% annual tax on assets over $100 million. He noted that the tax would raise an estimated $10.3 billion in the coming years, and claimed that it would be less volatile than the capital gains tax passed in 2021.
“We are proposing a balanced budget, and that’s important for the fiscal integrity of the state of Washington,” Inslee said. “We have already taken some steps to reduce some of our expenditures, and that’s the first thing we looked at when we were thinking about this proposed budget.”
Although Inslee will no longer be the governor when Gov.-elect Bob Ferguson is inaugurated on Jan. 15, he is still required to submit a budget proposal to the Legislature in December. The incoming governor will release his own budget at a later date.
Inslee noted Tuesday that the state is already taking steps to close the gap, including freezes on nonessential hiring and expenditures.
Inslee’s proposal would also call for an increase in the state’s B&O tax, and would temporarily tax businesses with an annual income over $1 million at 20%. According to estimates, the tax would raise about $2.6 billion over the next four years. A 10% B&O tax would also be levied on some businesses in 2027 under the proposal.
The proposal also includes cuts to programs and services, such as the closing of the Mission Creek Corrections Center for Women in Mason County, three reentry centers, and two residential habilitation centers.
Proposals to pause board bonuses for educators and to pause expansion of child care assistance eligibility are also included in Inslee’s budget.
In total, Inslee’s proposal would grow state spending to $79 billion for the 2025-27 biennium, an increase from the current two-year $72 billion budget.
Democratic legislative leaders thanked Inslee in statements Tuesday, and called for building a “responsible, sustainable budget that reflects our shared values.”
“It’s clear we must balance the need to protect essential services with smart, strategic choices that help working families, strengthen our economy, and address growing income inequality,” said Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee.
Republicans criticized the proposal, saying the deficit was “caused by overspending, not by a recession or a drop in revenue.”
“The governor could have come up with a budget that lives within the additional $5 billion in revenue that is anticipated. Instead, he wants to spend even more and impose additional taxes on Washington employers to help make up the difference. When the cost of doing business goes up, consumers feel it too. His budget would make living in Washington even less affordable,” said Sen. Chris Gildon, R-Puyallup, Republican leader on the Senate Ways and Means Committee.
Lawmakers will return to Olympia on Jan. 13 to begin the legislative session, and will have 105 days to hash out the state’s budget as well as pass other new laws.