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Democratic state senators are eyeing an income tax on millionaires as they seek to overcome Washington’s persisting budget shortfall.
Individuals and households would pay a 9.9% tax on adjusted gross income above $1 million, and get credit for state capital gains tax payments, according to those familiar with the broad outline. It could generate an estimated $3 billion from a projected 20,000 households subject to the tax.
The Senate Democratic Caucus discussed the politically explosive idea, which has been repeatedly rejected by voters and the state Supreme Court, during a retreat earlier this month. They also talked about other means of raising revenues to avert deficits in the current and next budget.
Senate Majority Leader Jamie Pedersen, D-Seattle, said Wednesday it’s too early to know if the income tax concept solidifies into legislation in the 2026 session that begins Jan. 12.
“We’ve got a lot of things being discussed and researched. I am aware of at least four or five different ideas being evaluated in various ways,” he said. “It is not the case that anybody has settled on any ideas to the point that anyone is going to introduce something.”
An income tax would not be a short-term solution to the state’s budget difficulties because it is certain to be challenged in court or on the ballot. But supporters view it as a stable revenue source for the future, and a long-sought step toward rebalancing the tax code.
Washington is among nine states nationwide that do not tax individual wage and salary income.
There would be hurdles to getting the tax passed. It would need to get through the Legislature in an election year in which all House seats and a majority of Senate seats are on the ballot. Democrats currently hold majorities of 59-39 in the House and 30-19 in the Senate.
Then Democratic Gov. Bob Ferguson, who is not up for election, would need to be won over or at least not veto it. That’s not a sure thing after he turned down a so-called wealth tax pushed last session by Democrat lawmakers.
Ferguson said Wednesday he is “aware” of the income tax conversation but did not have a position and that, in general, he is wary of tax increases in the coming session.
“We did raise billions of dollars in revenue earlier this year and I’m skeptical of additional revenue at this time,” he said.
Sen. Chris Gildon, R-Puyallup, the lead Republican budget writer, is aware too.
“It just seems the thirst for new and additional taxes from the progressives in the Washington state Legislature is never-ending,” he said. “Because they haven’t paid any price for raising taxes earlier this year. I think they are very emboldened right now.”
‘What are other things we can consider?’
Revenue streams feeding the Washington state budget are not keeping pace with the increasing cost of public services and government operations. The most recent forecast projected tax collections are more than half a billion dollars less than lawmakers counted on when they approved the budget in April.
There’s talk of needing to fill a billion-dollar gap in the current two-year budget, and an even larger one in the next.
This souring situation comes after the 2025 session in which the governor and Democratic majorities in the House and Senate plugged a $12 billion chasm with billions of dollars from new taxes and higher fees, coupled with across-the-board spending cuts.
Washington is often identified as having one of the nation’s most regressive tax codes, meaning lower earners pay a disproportionately high share of their earnings. Many progressives see an income tax as a fix, but the Washington Supreme Court has ruled that the tax is not allowed under a provision in the state Constitution.
Pedersen’s 43rd Legislative District is one of the state’s most progressive. He said Washington must find ways to spread the tax burden “more fairly” over all income brackets.
On the final day of this year’s session, Senate Democrats passed a controversial bill to impose a tax on those with more than $50 million of certain financial assets, such as stocks, bonds, and mutual funds. The bill did not come up for a vote in the House.
The legislation is still alive and, theoretically, could be voted on by the Senate early next session.
“If the wealth tax is not the answer. What are other things we can consider?” Pedersen said.
Rep. Shaun Scott, D-Seattle, who serves the same district as the senator, said he “absolutely” supports the idea of an income tax on higher earners.
“It’s very in line with what I am hearing from people in my district and around the state,” Scott said. “It’s not simply taxing the rich. Funding services are more popular and a plurality will oppose measures to cut revenue.”
The chair of the House Finance Committee, Rep. April Berg, D-Mill Creek, said she’s working on legislation to clear up concerns with new taxes and is unfamiliar with details of the income tax idea.
“Everything is always open for discussion,” she said. “I am not aware of any similar proposal in the House.”
‘Interesting question’
Microsoft president Brad Smith smiled when asked his opinion about the potential tax during an interview on Tuesday.
“I think it’s an interesting question,” he said.
Smith and leaders of many of the state’s largest companies actively opposed this year’s new business taxes. He said any kind of tax discussion in 2026 must be more collaborative than this year because what occurred in the last session “really divided the progressive community politically from the business community economically.”
“Certain taxes are in desperate need of reduction,” he said, citing property taxes and business taxes paid by small and family-owned enterprises. “But if we’re going to reduce some taxes, then that usually means that you’ve got to look for revenue in other places.”
Max Martin, director of government affairs for the Association of Washington Business, said he’s heard the tax discussed and would like more details.
“My head is still spinning from last session. Businesses are still trying to wrap their heads around that,” said Martin, whose focus is tax and fiscal policy. “It kind of feels like Groundhog Day.”
Washington State Standard is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Washington State Standard maintains editorial independence. Contact Editor Bill Lucia for questions: info@washingtonstatestandard.com.
Democrats never have enough of your money. $9.5 Billion in new taxes last year and the highest gas taxes in the US. Their demands are insatiable. No discusssion of implementing budget control. A state income tax may start with the “rich” but it will not stop there. They never answer the question of what is a “fair share”. Time for voters to wise up and get these “progressive” taxaholics out of office and to once again vote against any constitutional amendment to impose an income tax. They cannot do it without a vote of the people.
Taxpayers are only paying their “fair share” when Democrats have more than enough of taxpayers’ money to take care of all of the Democrats’ wants and wishes.
Toward Washington Financial Stability:
1. Come under budget
2. Finish projects ahead of schedule
3. Get rid of virtue signaling fluff
4. Quit hiring overpriced extra staff
5. Trim the FAT
6. Governor/Legis need to quit spending garishly other peoples’ money
7. Work smarter
8. Put the taxpayer first rather than last!
And
Cut ✂️Cut ✂️ Cut ✂️Cut ✂️ Cut ✂️Cut ✂️ Cut ✂️Cut ✂️ Cut ✂️Cut ✂️
Cut ✂️Cut ✂️ Cut ✂️Cut ✂️ Cut ✂️Cut ✂️ Cut ✂️Cut ✂️ Cut ✂️Cut ✂️
Meanwhile fill the freakin’ potholes in Washington State!!
…Just sayin’
Regarding the Wish list by D Williams:
1-2. If an organization is replacing one bridge, I would applaud its completion under budget and ahead of schedule. To expect this to happen when hundreds are in need of care is ridiculous.
3. What is “virtue signaling fluff”?
4-5. It goes without saying that in a lean organization we would not want extra staff,
Why then overpay for them? If this happens wouldn’t we consider that “fat”? These two items are redundant and in need of trimming!
6. What spending is garish? Fully funding state education for the first time, which is now happening?
7-8. We agree here, if we concur on the meaning of “smarter” and “first”. Their use leave a lot for clarification.
Sure go ahead WA democrats and punish wealth and success. But first, ask CA, IL, NJ, NY what happened when they drastically raised taxes on ‘The Rich’. Many of them moved, The took their families, their civic engagement, their spending and their tax receipts. Heck, even Joe and Mika, good morning Joe Fellow Travelers, departed NYC for FL a few years ago when the taxes were drastically increased.
Not that I am a fan of Google for information, but I will refer to it here: in Washington in 2022 there were 463,000 millionaires. In 2024 there are 681,000. Discounting inflation one can believe that millionaires like our state. If my math is correct, we’re each of these 681,000 to be assessed an additional $100.00 in taxes, our WA coffers would have an additional $68,100,000. And if they felt generous enough to provide $1000.00, Washington would have $681,000,000. You get my point. If these millionaires willingly live here, hopefully some, if not all, would not oppose contributing one one-hundred-thousandth of their wealth to keep WA a place they want to stay.
Sure, that is the failed rhetoric Leftists continually fall back upon when drooling over OPM (Other Peoples’ Money). They get warned that the projected tax revenue will not magically appear because a measurable segment of the targeted (rich) payers will move. Don’t have to believe me, check historical reports from as nearby as Multnomah County, the second highest taxed region nationally after NYC. The the Public School System has reported significant loss of school age enrollment, Portland State University shows the once growing area is now losing population, especially from the ranks of those much better off financially. But also look to IL, NJ, NY and of course, CA.
Yeah, Kurt, it seems for a variety of reasons all those rich people like moving around, and a bunch of them choose to come here, along with those who are not so rich like me. I recently went to a Kraken hockey game. I was surprised by the number who demonstrated or said that they came from the town of the opposing team. Our area is attractive. People come and choose to stay. We can “stick our head in the mud” or accommodate them with planning to “make things work”. Either way governing costs money. I suppose the rich are very pleased, Kurt, that you are keeping such a careful account of how much the wealthy have to pay. According to Google stats they like it here. Watch out for me, I will be out here trying to get the wealthy to pay more of a share of the costs to govern.
Mike, your class envy is showing and your inability to face the inconvenient truth that wealth goes where it is welcomed rather than punished is telling. Those who can move will; there is no ‘liking it here’ involved. As stated earlier, just look at the empirical data from IL, NJ, NY and CA when juxtaposed with that of TX, The Carolinas, AZ, FL and GA. You will be one of the head hand-wringers 3-5 years after this punish the rich tax results in the predictable loss of wealthy families and their community spirit along with their tax revenue and daily spending habits. It is axiomatic.
By the way, the Tax Foundation des excellent reports on who pays the taxes and the top 5% of earners (your target population) pay 65.6% of the taxes while making 42% of adjusted gross income with an actual marginal median tax rate of 23.3%. Meanwhile, the lower 50% of earners pay just 2.3% of taxes (gross before all government subsidies and services) while making 10.4% of adjusted gross income with an actual marginal median tax rate of 3.3%. In effect, Net Takers from the system.
Just how much more would you and your followers have ‘the rich’ pay?
Hey, Kurt, thanks for asking! Unapologetically, I believe in times without wars or great national disruptions such as a pandemic, our government should be able to balance its budget. Assuming that we are in a peaceful time, our democratically-elected legislators should establish our public needs and desires, work up a budget and raise taxes accordingly. I have no problem with the progressive income tax, one with tweaks that emphasize government priorities. The $100 in taxes paid by the poor is a greater percentage of their income than it is for the rich. Let the rich pay more in dollars and in percentage than the poor until a balanced budget is achieved. This is my answer. I do admire Al Kaline’s ability to play baseball, W.E.B.DuBois’s ability to describe, and Winston Churchill’s ability to speak. I recall envying only those six feet in height or above while I was growing up. You got that one wrong.