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Could Washington pass a millionaire tax this year?
By Venice Buhain
This year, Washington state lawmakers are considering an income tax on millionaires to close a budget shortfall. Opponents say it could open the door to a state income tax and drive businesses and wealthy individuals out of the state.
To close a budget gap of about $2.3 billion in this biennium, state Democrats have proposed a 9.9% tax on income of over $1 million.
Washington is one of 9 states that doesn’t have an income tax, which is barred in the state constitution. State services like schools and highways and courts rely instead on property taxes, sales taxes and other various fees. Local taxes and fees also add to taxpayers’ tax bills.
Senate Bill 6346 would:
- Impose a 9.9% tax on income in excess of $1 million.
- Apply to 30,000 Washington residents
- Raise about $3.5 billion in its first year
- Start collection in 2029
The millionaire tax wouldn’t apply to:
- Retirement accounts
- Homes
- The first $1 million of annual income
For someone making $1.2 million, the tax would only apply to $200,000 of their income.
Primary sponsor state Sen. Jamie Pedersen, D-Seattle, and others called the Tax on Millionaires a move away from Washington’s regressive tax system.
“This is a way of changing our direction so that our tax system is adequate to the needs that we face in the 21st century. It's also a way of making sure that the tax systems that my kids will be living under is one that is fairer than the one you and I have lived under,” Pedersen said.
State Sen. Emily Alvarado, D-West Seattle, said the new tax would also provide support for the middle and working class.
“Today I am proud to stand up for low-income Washingtonians, to stand up for working class and middle-class Washingtonians and small businesses, and to stand up to invest in our schools, our healthcare, our childcare, and the services that Washingtonians rely on,” Alvarado said.
But opponents say that Senate Bill 6346 will make Washington a less competitive place to live and work.
“People with means, people who earn the amounts as described in this bill, they have the means to move their assets, to move their residences out of our state,” state Sen. Chris Gildon, R-Puyallup, said. “When they leave… we lose out on all of their revenue, we lose out their jobs, on so many things because they'll just take it with them especially when the rate is so punitive.”
State Sen. Matt Boehnke, R-Kennewick, called the bill “a gateway drug to taxing everyone.”
“There's an opportunity where this will continue to slide down this course that we're not going after millionaires…. We're going to be going out to everybody in the state of Washington.” Boehnke said.
The bill currently includes a tax break for small businesses and other credits and deductions.
Gov. Bob Ferguson said he would like to see the money earmarked for programs aimed at affordability, including expansion of the state’s Working Families Tax Credit.
“Do I support the concept of a millionaires tax? You better believe it, absolutely,” he said. “But -- and this is a significant but -- it just can't be $3.5 billion that goes into our general fund. That's not going to work.”
The bill passed the Senate and is now being considered in the House. If the bill passes, supporters and opponents alike expect it to be challenged in the courts and ballot boxes.
