Washington House passes 9.9% ‘millions tax’ as business leaders warn of ‘seismic change’
The so-called “million tax” passed the Washington House on Tuesday night after more than 24 hours of debate, putting the bill together for final approval today or tomorrow.
The controversial measure creates a 9.9% tax levied on taxable, annual personal income over $1 million. Washington is currently one of nine states with no income tax and the measure is expected to face challenges in court and as a ballot measure.
Supporters of Senate Bill 6346 say it will bring fairness to a tax code that relies heavily on sales, property and corporate taxes. The law includes tax benefits for low-income families and small businesses.
A final financial analysis has not been released, but the bill is expected to generate $3.5 billion or more each year in tax revenue beginning in 2029. State leaders this year have been trying to close a $2 billion budget gap.
“The Billionaire Tax will work for less than one-half of one percent of Washingtonians, but it will make life easier for millions. I look forward to signing it,” said Gov. Bob Ferguson in a statement.
But some tech leaders and entrepreneurs worry it could undermine their industry by undermining Washington’s tax laws that favor startup founders, investors and high earners.
That concern took center stage last night as Howard Schultz, the billionaire former CEO of Starbucks, revealed on LinkedIn that he and his wife, Sheri, had moved to Miami. While Schultz — who is retired — chalked up the move to a desire to be closer to family on the east coast, he clearly noted his “hope that Washington will remain a place for business and entrepreneurship to thrive.”
Schultz’s family office will follow him to Florida, though his base will remain in Seattle. The move echoes warnings from critics like Kris Johnson, president of the Association of Washington Business, who called SB 6346 a “seismic shift” in the state’s tax system.
“By adopting a federal income tax, Washington gives up our first competitive advantage that we’ve had over other states and territories,” Johnson said, adding that the state is already costly to families and employers and can pressure businesses to start, expand or relocate.
Others take a more concerned, but more nuanced, tone. Rachel Smith, president of the Washington Roundtable, a nonprofit organization that represents large employers, thanked lawmakers for sunsetting a year before the expanded sales tax on services and a reduction in the property tax.
He emphasized the need for further changes to the tax code to improve “economic competitiveness” and “long-term budget sustainability.”
“As we’ve said before, we see this as the beginning — not the end — of real, serious work to implement the reforms that Washington needs,” Smith said. “It is important that this work happens quickly.”
SB 6346 marks the first time in decades that state lawmakers have pursued a personal income tax aimed at high-income residents.
The bill passed the House by a vote of 51-46. No Republican lawmakers supported the measure and eight Democrats voted against it. One member was released. Now it goes back to the Senate to be agreed upon, and then it goes to the governor. The legislative session is scheduled to end tomorrow.
Related:
- Opinion: The wrong tax at the wrong time for Washington
- Opinion: You couldn’t pay me to leave Washington state, and I would pay more to stay
