OLYMPIA, WA – Democrats in the Washington Senate staked out ambitious ground on taxes Thursday, calling for higher property taxes, new levies on the state’s wealthiest individuals and largest corporations, and offsetting some of the burden for consumers with a half-cent cut in the sales tax.
The proposals, if enacted, could cover roughly half of a budget shortfall estimated between $12 billion and $16 billion over the next four-and-a-half fiscal years.
The announcement kicks off the much-anticipated legislative debate on taxes and puts Democratic senators on a potential collision course with Gov. Bob Ferguson. Ferguson, also a Democrat, has expressed skepticism about at least one of the ideas, the wealth tax, and has not yet voiced support for any new taxes.
“This proposal reflects what we’ve heard from our communities: the wealthiest few should share more of the responsibility of investing in public schools and the services people need,” said Senate Majority Leader Jamie Pedersen, D-Seattle. “This transformative proposal will rebalance our tax code and provide ample funding for public schools, public safety, and the needs of the people of our state.”
Their plan contains five major pieces:
Property tax
It would allow an increase in annual property tax growth from the current 1% cap to the combined rate of population growth plus inflation. This would apply to the state’s common schools levy and for cities and counties, as well as special purpose districts. This would generate an estimated $779 million over four years.
Business tax
Also on the list is a statewide version of Seattle’s JumpStart tax. Large employers would pay a 5% tax on payroll expenses above the Social Security threshold — currently $176,100 per year. This tax is limited to companies with $7 million or more in payroll expenses — about 5,289 businesses. Businesses already paying the tax in Seattle would be exempt. This would raise about $2.3 billion.
Wealth tax
This much-discussed idea targets an individual’s wealth above $50 million. As proposed, there would be a tax of $10 on every $1,000 of assessed value of certain financial assets, such as stocks, bonds, exchange-traded funds, and mutual funds, above the $50 million threshold. Democrats say it would be paid by about 4,300 wealthy individuals starting in 2027 and produce approximately $4 billion a year.
Sales tax
Starting on Jan. 1, 2027, the state sales tax would be reduced, from 6.5% to 6%. That would result in a loss of about $1.3 billion a year to the state general fund.
Tax breaks
Twenty tax exemptions considered obsolete or ineffective would be repealed, including carveouts for gold bullion and prescription drug wholesalers. Democrats say this will produce $1 billion.
Democratic budget writers have indicated since late last year that they would look to taxes to help erase the budget gap.
Senate Minority Leader John Braun, R-Centralia, told reporters Tuesday “the question is how many, and how much.”
Senate Democrats answered that question Thursday morning.
This is a developing story.
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