Washington Progressives Revise Proposed Income Tax
Progressives in the Washington State House Finance Committee have revised a proposed income tax. The new version shifts the focus away from benefiting large corporations and towards providing greater financial advantages for working families and individual workers after the initial plan drew criticism.
The proposed "millionaires' tax" is a 9.9% tax on household earnings exceeding $1 million annually. The tax would only apply to the amount over $1 million; for example, an income of $1.2 million would be taxed on $200,000. This proposal is estimated to generate $3.7 billion in annual revenue, which supporters say would be used to fund public schools, healthcare, and other essential services. The initial version of the bill included a tax break for large corporations, which was met with criticism from a group of 13 progressive lawmakers. State Representative Shaun Scott (D-Seattle) led the effort to remove a provision that would have ended a business and occupation surcharge for corporations with over $250 million in gross annual income. Removing this tax break prevented a potential loss of $550 million in state revenue. Washington currently has one of the most regressive tax systems in the nation, meaning low-income households pay a much larger percentage of their income in taxes than the wealthiest residents. The poorest 20% of Washingtonians pay 13.8% of their income in state and local taxes, while the top 1% pay just 4.1%. This is largely due to the state's heavy reliance on sales tax and the absence of a personal income tax. This is not the first time an income-based tax has been proposed in Washington; voters have rejected income tax proposals ten times over the past 90 years. A major legal hurdle is the state constitution's requirement that all property be taxed uniformly, and a 1930s Supreme Court ruling that defined "income" as "property." Proponents of the current bill, like its sponsor, Senator Jamie Pedersen (D-Seattle), believe a modern court would likely overturn that precedent. A recently enacted 7% tax on capital gains over $250,000 was also challenged in court as an unconstitutional income tax. However, the Washington State Supreme Court upheld it as a constitutional excise tax. This ruling may provide a legal pathway for the proposed income tax. The revised bill has moved to the House floor for debate and, if it passes, will return to the Senate. The current 60-day legislative session is scheduled to end on March 12th. Even if the bill is signed into law, it is expected to face legal challenges regarding its constitutionality.
