We’re elated that after a whirlwind short session, the legislature just passed the Millionaires Tax after a grueling/marathon 24-plus hours of debate! This monumental new tax on household earnings over $1 million will generate over $3 billion annually to support many good things in our state’s general fund. This is the result of decades of work by so many advocates and everyday people who called on their lawmakers to fix our state tax code and ensure the ultra-wealthy pay their share in taxes. Together, we all accomplished something great that states across the country are closely watching in the midst of the affordability crisis.
In particular, it is excellent news that the final Millionaires Tax funds the following:
- A big expansion of the Working Families Tax Credit – our state tax credit that provides an annual cash boost to households who most need it – that broadens eligibility to residents 18 and older and ensures more people qualify, not just people with extremely low incomes
- A sales tax exemption on household items like hygiene products, over-the-counter medicine, and diapers
- A small business tax credit that ensures that any businesses with less than $250,000 in gross receipts won’t pay any Business & Occupation (B&O) tax
- And much more (that we’ll share soon)
Together, these changes will help support the financial well-being of the many individuals and families throughout the state. Because Washington state has the second-worst tax code in the nation, our state has over-relied on households with the least to pay the highest share of their incomes on state and local taxes for far too long. This is why policies like the Millionaires Tax matter for long-term budget stability in our state – it has never been sustainable to rely on those with the least to pay the most.
All our communities, both urban and rural, benefit when lawmakers prioritize revenue policies that better ensure people with extreme wealth pay more equitably into our tax code to fund shared resources.
While we take time to celebrate this momentous win, the Budget and Policy Center will continue to remain clear-eyed about our long-term vision for Washington state and continue our work toward a tax code that is right side up. The passage of the Millionaires Tax is a big swing at fixing our upside-down tax code. However, fundamental tax code reforms take time to set up, so the revenues from this bill won’t be infused into the state budget until 2029.
And while we feel excited for the future, we continue to wrestle with substantial budget cuts lawmakers made during this session. Even after making the far-from-ideal choice to use funds from the Budget Stabilization Account (or Rainy Day Fund) and using budget maneuvers to support the general operating fund, lawmakers still made significant cuts to early learning, child care programs, and health and human services this session. These near-term cuts, due to our continued reliance on unsustainable revenue sources like the regressive sales tax, detrimentally impact Washington families.
If we want a truly balanced and sustainable tax code, lawmakers need to do more to generate revenue sooner. Next session, lawmakers need to consider nearer-term solutions that they didn’t consider this session, like a high-earners payroll tax on employers or the wealth tax.
But of course, we remain truly excited for how the passage of the Millionaires Tax helps set the stage for the fundamental reform our state desperately needs in the long term. We’ll be watching closely to ensure Governor Ferguson keeps the final bill from the legislature intact.
Stay tuned to our Schmudget blog for more analysis on the final budget and on the Millionaires Tax.
