Washington’s tax code can be a powerful tool for economic justice, but right now it is inequitable, upside-down, and worsening the state’s affordability crisis. It over-relies on people with low and moderate incomes, who pay almost 14% of their income in state and local taxes, while the richest pay roughly 4%.

The Millionaires Tax proposal currently moving forward in the legislature (Senate Bill 6346, House Bill 2724) is a commonsense proposal that would help make our tax code more equitable while addressing the continued shortfall in the state budget. It would tax people with annual income above $1 million at a rate of 9.9%. To put that simply: if you earned $1,000,001, your tax would be 10 cents.

This modest tax would affect only 20,000 ultra-wealthy households, who currently enjoy major tax breaks, and would bring in around ​​$3.7 billion in revenue each year. This proposal also recaptures some of the tax giveaways to the ultra-wealthy from H.R. 1, the harmful 2025 Congressional Republican megabill, which provided the richest 1% in Washington state with an average annual tax break of $90,850.

But balancing the tax code isn’t just about taxing the ultra-wealthy – it also means bringing meaningful financial relief to working families. Using the Millionaires Tax to fund bold expansions to the Working Families Tax Credit (WFTC) and make critical investments in our social safety net will do just that.

The tax revenue should protect funding for public programs and fund an expanded Working Families Tax Credit

The WFTC provides an annual cash rebate of up to $1,330 to low- and moderate-income households, and it is one of the most effective tools in our state to ensure people struggling with affordability can meet their basic needs. Since this state tax credit went into effect in 2023, families have been able to use the cash to pay for what they most need – including phone bills, rent, car repairs, and school supplies.

In 2025, the WFTC put more than $225 million back into the pockets of working families across Washington, with an average of $722 to around 300,000 households. The credit reached over 420,000 children, or almost one in four kids, making their families more financially secure.

This tax credit also makes our tax code more racially just. Due to generations of discriminatory public policies, ​​​​​communities of color​ are more likely to have lower incomes and higher taxes compared to their white counterparts. Since the WFTC provides targeted relief to households with low and moderate incomes, it has outsized positive impacts for Black, Native, and Latinx households.

So, it’s good news that legislators are proposing to expand the WFTC with revenue from the Millionaires Tax by boosting the credit amount and including more people, such as low-income college students, working grandparents, and unpaid caregivers.

But it’s also critical that lawmakers use revenue from the Millionaires Tax to ensure the same families still have access to fully funded state services like education, health care, child care, and more. The cash boost from the WFTC is an important complement to our social safety net, but it cannot replace these essential programs that serve largely the same people. For example, when child care services are cut, and costs for families skyrocket overnight, a one-time cash credit will not make up for high, monthly child care costs.

Just last year, lawmakers made more than $7 billion in program cuts, including $1 billion just to child care and early learning. H.R. 1 also made deep cuts to safety net programs that will only exacerbate the harm to individuals and families who rely on these critical services. Up to 320,000 people in Washington state are at risk of losing Medicaid coverage due to changes to eligibility rules. And about 129,000 people are estimated to lose Supplemental Nutrition Assistance Program (SNAP) benefits due to new, harsh work requirements.

When essential support services are cut, WFTC recipients have to make tough decisions on how to use their refund. On the other hand, when the state can adequately fund the programs and services we all rely on, WFTC dollars go further.

Tax credits are a more equitable way to address affordability than broad-based sales tax reductions

Some lawmakers have proposed using the Millionaires Tax to support a sales tax cut or a sales tax holiday. However, compared to a WFTC expansion, a sales tax reduction undermines some of the benefits of passing the Millionaires Tax, including revenue generation and the establishment of a more equitable tax code.

The top 10% of households, which account for nearly half of consumer spending nationally, are more likely to spend their money on big-ticket items and luxury goods. This means that sales tax cuts would be another tax cut for the wealthy. In contrast, households with lower incomes will benefit most from expanding the WFTC, which provides targeted support to people struggling to make ends meet.

In addition, sales tax reductions are costly to the state budget. Just a 1% reduction in Washington’s sales tax rate, from 6.5% to 5.5%, would reduce revenue by around $2.6 billion, leaving less money for education, health care, and child care programs that benefit all our communities.ⁱ

Sales tax holidays, or designated days when the sales tax is lifted, similarly are poorly targeted and ineffective at providing substantial financial relief. Households living paycheck to paycheck have less flexibility and disposable income to take advantage of a tax-free shopping period compared to wealthier households. And a few days with no sales tax does little to help families address their monthly bills and does nothing to address greater tax reform.

Progressive revenue, paired with tax credits for low-income households, addresses both sides of our upside-down tax code

To truly balance our state’s upside-down tax code, policymakers need to raise progressive revenue to better fund our communities and decrease taxes for working people through tax credits. They cannot continue to rely on regressive taxes to fund the bulk of public programs and services, effectively balancing our state budget on the backs of everyday people.

We urgently need new progressive revenue sources and call on lawmakers to pass the Millionaires Tax in the 2026 legislative session. Funding an expansion to the WFTC through the Millionaires Tax would address both sides of our upside-down tax code and be the right move for our state.