Washington Governor Proposes Millionaire Tax: Impacts and Controversies

Governor Bob Ferguson of Washington recently announced a bold revenue proposal during his State of the State address: a 9.9 percent tax on adjusted gross income over $1 million annually. This significant change aims to address the state’s tax structure and promote fiscal equity.

A Call for Fiscal Resiliency

In his address to lawmakers, which took place on the second day of a 60-day legislative session, Governor Ferguson emphasized the necessity of the proposed millionaire’s tax:

• Addressing Inequities: Ferguson argued that the current tax system disproportionately burdens lower-income families while easing financial obligations for the wealthy. For instance, families within the bottom 20 percent pay an average of 13.8 percent in taxes, whereas the top 1 percent contribute only 4.1 percent of their income.

• Historical Step: “That’s not fair. That’s not right, and that’s why I’m calling for something truly historic — a millionaire’s tax,” said Ferguson during his speech.

Tax Implications for Seattle Residents

If implemented, the proposed plan would mean that Seattle’s highest income earners could face combined state and local effective tax rates over 18 percent, making it the highest in the nation. Comparatively, New York City’s rate stands at 14.8 percent.

Estimated Revenue Generation

The new tax could potentially generate up to $3.5 billion annually, although Ferguson acknowledged that actual revenue might not flow into state coffers until 2029 due to anticipated legal challenges and the development of collection systems.

• Target Demographic: Ferguson pointed out that less than 0.5 percent of Washington residents would be affected by this new taxation.

Political Reactions: Support and Opposition

The proposal received enthusiastic support from most Democratic lawmakers, who welcomed the governor’s ambitious initiative. However, widespread criticism arose from Republican leaders:

• Senator Keith Wagoner of Sedro-Woolley condemned Ferguson’s plan for breaking past promises to avoid new taxes, claiming, “He said he would not sign a budget built on new and higher taxes,” referring to the governor’s inaugural speech from less than five months prior.

Concerns Over Future Taxation

Critics, including Senator Wagoner, have expressed apprehensions that this income tax could pave the way for broader taxation:

• Rejecting a State Income Tax: Washingtonians have historically dismissed income tax proposals, having rejected them at the ballot box ten times since 1932. Currently, the state does not levy a standard income tax but taxes the capital gains of specific higher-income residents.

• Wider Tax Bracket Fears: Senator Drew MacEwen warned that starting with a tax on high earners could eventually lead to an expansion affecting the middle class. “This current administration has an unquenchable thirst for more taxes,” he stated.

Opposition’s Key Points

• Burden on Families: Concerns arise that a family of four in Washington already faces a tax burden that is over $5,000 higher than the national average.

• Slippery Slope: House Republican Leader Drew Stokesbary emphasized that a millionaire’s tax today could lead to taxation for everyone in the future. “It might be millionaires today, but it’s going to be you and me tomorrow,” he said.

Conclusion: Moving Forward with the Proposal

Despite the criticisms, Governor Ferguson encouraged quick action, stating: “Let’s seize this opportunity … to make our tax system more fair.” With the legislative session set to conclude on March 12, lawmakers have a limited window to debate and potentially enact this historic measure.

For more details on Washington’s tax structure and ongoing legislative discussions, visit the Office of Financial Management or the Washington State Legislature’s website.