Washington's proposed millionaire tax sparks concerns of broader levy, 'damage' to state's economy
Washington state GOP Chairman Jim Walsh is pushing back against Gov. Bob Ferguson's proposed "millionaire tax," warning that it could affect more than the state's wealthy residents.
The millionaire’s tax was proposed in late December when Ferguson announced his support for a new 9.9% income tax on residents earning over $1 million per year ahead of the 2026 legislative session. It doesn't include people whose net worth reaches that amount based on the value of their home, for instance.
Ferguson's office sent out his proposal saying that the state ranks next to last for fairness and equality in the nation's tax system. The governor said that families whose income is in the bottom 20% pay 13.8% of their total income in taxes, while those whose income is in the top 1% pay only 4.1% of their income.
Ferguson is now pushing for the state to "rebalance this unfair system and return money and cut taxes for working families and small business owners who have been hit hard by the affordability crisis."
Ferguson's office did not respond to multiple emails or a phone call for comment.
Walsh argued, according to Fox 13 Seattle, that the state's Supreme Court justices could say that it’s unconstitutional for the state to tax just one group of people for an income tax. He said that the move would pave the way for Democrats to impose an income tax on everyone, according to the outlet.
Ferguson has said that he would not lower the threshold to tax anyone under $1 million annually.
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"We don't buy it, nobody buys it," Walsh said.
FOX Business reached out to Walsh's office for comment.
A Tax Foundation analysis found that the proposed tax would yield a top rate of more than 18% on wage income and restricted stock units (RSU) vesting in Seattle, making it the highest rate in the U.S. The group said that very few people earn salaries of more than $1 million; incomes at that level flow through capital gains and dividend income, pass-through business income and RSU vesting.
The Tax Foundation also said that the proposed tax would hit small business owners and tech workers receiving RSUs in compensation the hardest. Washington state has 695,695 small businesses and nearly 360,000 employees in technology-related jobs, according to the Small Business Administration and Washington State Department of Commerce, respectively.
"A tax this aggressive would do real damage to Washington’s economy, sending jobs and economic opportunity elsewhere," wrote Jared Walczak, a senior fellow at the Tax Foundation. "In particular, for significant swaths of the state’s tech sector, already the target of anomalously high business taxes, a 9.9 percent income tax could prove the last straw, driving any subsequent expansion to other states, and quite possibly taking existing jobs with them."
Ferguson argued that the revenue from this tax should go toward providing more K-12 funding to bolster Washington students’ access to a world-class education and eliminate sales taxes on essential personal hygiene products, such as shampoo, deodorant and toothpaste; essential baby products, such as diapers, wipes and infant formula, or essential and affordable clothing items.
FOX Business reached out to Ferguson and Walsh for comment.