With less than a month until Washington voters decide the fate of a historic income tax on high earners, fresh debate has erupted over whether the so-called “millionaires tax” should expand to include non-millionaires.
As some Democrats weigh this change, the Republicans who say they’ve seen this coming all along say it’s why voters should overturn the tax this fall.
If the law survives a ballot challenge in November, and a court challenge in the next year or so, it’s set to start collecting revenue in 2029 from roughly 20,000 households earning over $1 million a year. The tax would take a 9.9% cut of every dollar over that million.
State Rep. Cindy Ryu, a Democrat running for a state Senate seat in Shoreline, recently floated an idea to tax the net income of those who make $250,000 a year.
“Let’s take a look at how well can most of us live? Pretty well at $250,000,” Ryu said during a debate hosted by KUOW’s “Soundside” last week.
Ryu said she favors a graduated income tax, where households earning less than a million dollars would get taxed below the 9.9% rate.
Ryu is running to represent the 32nd Legislative District. Her opponent, incumbent Sen. Jesse Salomon, a more moderate Democrat, didn’t say whether he’d support a graduated tax. He noted that he’d consider taxing income at $750,000 in exchange for a rollback of some property taxes – but he said that Democrats in Olympia haven’t shown a willingness to ditch existing taxes so far.
“I think we really blew a long-term opportunity to engage the public trust on this,” Salomon said.
Higher-ranking members of the party are not enthusiastic about the idea of expanding the tax at a time when it’s facing challenges at the ballot box and in the courts.
Senate Majority Leader Jamie Pedersen, one of the architects of the law, told KUOW that while he personally supports taxing more income levels, the idea is not viable in the immediate future.
“I would personally like to see a broader-based income tax, as I have been very clear about for many years,” Pedersen said, adding that “there are not [enough] votes in the Legislature” and that Gov. Bob Ferguson “has promised to veto it.” Ferguson, a Democrat, has said repeatedly that he would not support expanding the tax to include more households.
“I’ve said it before many times, and will say it again, I will veto any attempt by the Legislature to lower the threshold below a million dollars,” Ferguson wrote on X last week.
Ferguson is backing a campaign by Democrats and labor unions to save the millionaires tax from the ballot repeal effort this fall.
Brian Heywood, a wealthy hedge fund manager who is leading the effort to repeal the tax, said he didn’t trust Ferguson or Pedersen.
“ I don't know why anybody would believe anything that they say,” Heywood said, adding that he was extremely skeptical that Democrats would keep any promise to not lower the income tax threshold.
Heywood, along with state Republicans and wealthy opponents of the tax, see this fresh debate as proof of Democrats’ desire to tax the incomes of all Washington residents at some point in the future.
“The truth is, if you focus the state income tax scheme on only a few households, it doesn't generate enough money to meet the gigantic hunger for money in Olympia,” said state Rep. Jim Walsh, chair of the Washington State Republican Party.
Walsh said the way the current law is written makes it easy for the Legislature to amend it and include non-millionaires.
Reformers have long advocated changing Washington’s “regressive” tax system, which puts a heavier burden on lower-income earners through sales and gas taxes. An ideal solution, according to experts on both the right and left, is a graduated income tax.
Taxing the income of the state’s highest earners will be “hard to sustain,” according to Jared Walczak, a senior fellow at the Tax Foundation, a center-right organization that advocates against new taxes. He said that, historically, states that have created high-income taxes have always expanded that tax to all income levels because that’s a less volatile source of revenue.
“Eventually, they all went to taxing a much broader group of individuals,” Walczak said.
“If a state was fully creating a new tax system from scratch, would a more traditional, graduated income tax system perhaps be, abstractly, the way to create the most fair and equitable state tax system? Probably, yes,” said Wesley Tharpe, a senior advisor for State Tax Policy at the Center for Budget and Policy Priorities. His organization is a left-leaning think tank that typically supports new taxes.
But Tharpe also noted that “in the real world” where states like Washington already have existing laws in place preventing a graduated income tax, having a tax on just the ultra-wealthy could still help the system gain some equilibrium.
“This would at least be a very effective way of making a historically regressive tax code more based on people's ability to pay,” Tharpe said.
Forty-one states already have income taxes. Twenty-six of those have a graduated income tax, while 15 states have a flat income tax.
