Washington leaders introduce ‘millionaire’s tax’ to fund schools, health care and public defense

Legislative leaders on Tuesday introduced a proposed "millionaire's tax" that would add a new income tax on the state's highest earners and use the revenue to shore up education, health care and public defense.

"By asking the wealthiest income earners in our state to pay a portion of their income to support our shared needs, to support education, healthcare, community safety, we think this is a real opportunity for a win, win, win for our state," said Joe Fitzgibbon, House majority leader, who opened the news conference where Senate Majority Leader Jamie Peterson and other leaders outlined the proposal.

Peterson said the bill is a starting point and will change as it moves through the legislature, but provided the proposal's rough fiscal outline. "The estimate from the bill is in the $3,500,000,000 range," he said, and added that "5% of that ... [is] about $175,000,000 for the state" to help cover public defense costs related to a new Supreme Court mandate. Peterson cited King County estimates that the new mandate could raise county public defense costs by roughly $75 million a year and said the bill would provide about $88 million for King County — roughly half the county's projected added expense.

Sponsors said the measure is designed to reduce Washington's long reliance on sales taxes and the business and occupation (B&O) tax, which they and some business groups have criticized as regressive and distortionary. The proposal would mirror Washington's capital‑gains tax structure rather than federal definitions, expand the Working Families Tax Credit (making about 120,000 additional Washingtonians newly eligible, sponsors said) and double a small‑business credit. Fitzgibbon said the caucus's best estimate is that roughly 30,000 individual taxpayers would face the new levy, and that some who are taxed would not be Washington residents.

To address business concerns — including about pass‑through entities — sponsors described two protective measures: a dollar‑for‑dollar credit for B&O and public‑utility taxes already paid, and an optional pass‑through entity election that would allow businesses to pay the tax at the entity level and deduct it as a business expense. "We're going to follow the pattern in a bunch of other states and include what's called a pass through entity election," Peterson said.

The governor issued a statement saying he could not support the legislation in its current form, a point reporters pressed sponsors to address. Peterson and Fitzgibbon said they have been in ongoing discussions with the governor, the business community and local governments and expect the bill will be revised before it reaches the governor's desk.

Peterson also said the bill affects state revenue and therefore will proceed through fiscal committees. He announced that the Senate Ways & Means Committee will hold the first public hearing on the Senate bill on Friday at 1:30 p.m., and lawmakers said they expect the House to consider the Senate vehicle through House Finance in its regular order.

Lawmakers emphasized the proposal is intended to be narrow and to target very high earners rather than working families. "The rate for the first million dollars of income is 0," Peterson said when explaining blended rates and how many taxpayers would actually see a change. Sponsors stressed the draft is a negotiation starter and said they expect initiatives, hearings and public input in the weeks ahead.

Next steps: a public hearing is scheduled in the Senate Ways & Means Committee Friday at 1:30 p.m.; sponsors said the bill will be revised in committee and through ongoing stakeholder discussions.