Debate Over Washington’s Proposed Millionaire Tax

Steve Moore, co-founder of Unleash Prosperity, shares insights in The Bottom Line, suggesting against using higher taxes to push residents out, and he advocates for indexing capital gains on home sales with inflation.

On the other hand, Jim Walsh, the chairman of the Washington State Republican Party, stands firmly against Governor Bob Ferguson’s proposed “millionaire tax.” He cautions that this tax could extend its impact beyond the wealthy, affecting many residents.

This proposal, revealed in late December, suggests a new income tax of 9.9% on individuals earning over $1 million annually, which governor Ferguson supports as the state gears up for the 2026 legislative session. Notably, the proposal does not consider individuals whose net worth reaches that threshold based solely on their home’s value.

The governor’s office claims that Washington ranks almost at the bottom in tax fairness. He highlighted data showing that the lowest-income households contribute 13.8% of their income in taxes, while the top 1% only pay 4.1%.

Ferguson is now urging a reformation of the current tax system, aiming to provide relief and support to working families and small business owners facing hard times due to the affordability crisis.

Despite reaching out multiple times, Ferguson’s office has yet to respond to inquiries regarding the tax proposal.

Walsh argues that the state Supreme Court may find it unconstitutional to impose income taxes on only a specific group, suggesting this could open the door for a broader income tax system. He questioned the rationale of the proposal, expressing skepticism by stating, “We don’t buy it, nobody buys it.”

Ferguson insists the tax threshold for those earning less than $1 million will remain unchanged.

In a recent analysis by the Tax Foundation, it was revealed that the proposed tax could push the effective tax rate on payroll and stock unit vesting in Seattle beyond 18%, potentially becoming the highest in the nation. The analysis pointed out that very few individuals earn over $1 million via salaries; such income often comes through capital gains, dividends, or other forms.

Small business owners and tech workers, who frequently receive restricted stock units (RSUs) as compensation, might be particularly hard-hit. Washington currently hosts around 695,000 small businesses and employs about 360,000 people in tech-related jobs, according to the Small Business Administration and the state’s Department of Commerce.

Jared Walczak from the Tax Foundation stated that a tax of this nature would significantly harm Washington’s economy, potentially driving jobs and opportunities to other states. He emphasized that for a substantial part of the state’s tech sector, which is already facing high taxes, a 9.9% income tax could deter growth and lead to job displacement.

Governor Ferguson advocates using the revenue from the millionaire tax to enhance K-12 funding, thereby improving educational access for Washington students. The funds could also help eliminate sales taxes on essential products like personal hygiene items and baby necessities.

In light of this ongoing debate, both Ferguson and Walsh have yet to provide further comments to FOX Business regarding their positions.