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The debate over Washington's millionaires tax
Gov. Bob Ferguson has said he would support a proposed Millionaires Tax, but now, he's rejecting at least an initial proposal from state senators.
OLYMPIA, Wash. - It has been a lightning rod issue in Olympia: a proposed millionaires tax.
Gov. Bob Ferguson has said he would support it, but now, he's rejecting at least one initial proposal from state senators.
He said it doesn't come close to doing what he wants.
State leaders debate WA millionaires tax
What they're saying:
Both the governor and lawmakers said they were surprised by one another as the debate around the tax and what should be included in the bill continues at the statehouse.
"There is much that we agree on, and the Senate's proposal is a good start. But we have a long way to go," Gov. Ferguson said.
The governor, who has been a proponent of a millionaires tax, said time is ticking on the short session, and the proposed Senate Bill 6346 isn't going to work as it stands.
"I said a significant percentage of that revenue must go directly back in the pockets of Washingtonians," Gov. Ferguson said.
By the numbers:
It's projected to raise nearly $4 billion a year, with a 9.9% tax rate on people making more than a million dollars a year.
The governor approves of an expansion to the Working Families Tax Credit, but said it doesn't include enough people or provide a large enough rebate.
He said he likes relief for small businesses, but wants to see a commitment closer to $1 billion instead of $104 million.
He also wants more everyday essentials to be exempted from sales tax such as diapers.
Democrats said they were surprised by the governor's remarks.
The governor said he was surprised himself.
"I've been a little surprised by some of the stuff they have in there, as well. So, that works both ways. I don't think there are any hard feelings about that. That's the way these things go," Gov. Ferguson said. "This is a big, complex proposal, right? There's lots of details in there. So, I understand that, hey, as we get information, sometimes not every detail is there. I understand that. But, the main thing is, we're talking directly. Our teams are talking directly."
Democrats said the proposal addresses hard hits from federal cuts and fixes a broken, 90-year-old tax code, while softening the burden on working people.
They said about 30,000 people would be on the hook for the Washington millionaires tax.
They also said it was designed to mirror tax code and provide credits for taxes paid, including B&O taxes.
"We're sort of mirroring this up with the current tax code," Sen. Noel Frame said. "Give a credit for capital gains tax already paid, you give a credit for B&O tax already paid, when you have passthrough entity income and Public Utility tax, which is for some businesses, paid in lieu of B&O tax, and you start to really reduce that tax responsibility, in some cases, because of the B&O tax paid, for instance, some people, just like, won't owe anything at all under this."
Sen. Majority Leader Jamie Pederson explained further.
"We deliberately made the rate here exactly equal to the capital gains rate on income over a million dollars. Right? So, you know, and that's a rate that's already in effect for this income level," Sen. Pederson said.
Democratic lawmakers also addressed growing concerns this could all morph into an income tax for all in the years to come.
"We are not interested in increasing taxes on working people and that's why it's never happened before and guess what, any change to this, even reducing by $10, the threshold at which people would have to pay it would have to go through the exact same process all over again," Sen. Pederson said.
The other side:
Meanwhile, Republicans are staunchly against the proposal.
They said the Washington millionaires tax will also apply to married couples who earn $1 million a year, combined, not $1 million each.
"It goes to our point that this is not just dependent on people who make a million dollars a year. Already, when they introduced the bill, it will hit people who make $500,000 a year if their spouse also makes that much. It's only a matter of time until that applies to folks with lower and lower incomes," Rep. Drew Stokesbary said.
Republicans also said the proposal amends I-2111 passed in 2024, prohibiting a state income tax to say it does not apply to the Washington millionaires tax.
They reiterated: Washington voters have rejected an income tax 10 times.
So what does the governor envision it will take to get a Washington millionaires tax passed?
"I know we have a lot of competing things to balance, but my north star in this conversation, what my focus is going to be in this conversation in the coming weeks, is making life more affordable for Washingtonians," Gov. Ferguson said.
If a Washington millionaires tax succeeds in this short session, with a little more than a month to go, it would start in Jan. 2028.
Senate Bill 6346 is scheduled for a public hearing on Friday afternoon at 1:30 p.m. in the Ways and Means Committee.
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The Source: Information in this story comes from original reporting by FOX 13 Seattle reporter Dan Griffin.