Washington Senate Democrats unveil revenue plan targeting wealthy households and large employers while trimming sales tax

At a press briefing, Senate leaders presented a revenue package that would raise new progressive taxes on very wealthy households and large employers while reducing the statewide sales tax from 6.5% to 6.0%, they said.

Senator Frey, who walked reporters through the proposals, said the package has five primary elements: a financial-intangibles tax on very large portfolios; a 5% payroll tax on employer payroll above the federal Social Security wage base for firms with substantial payroll; a local option to let property taxes grow with population plus inflation; repeal of 20 tax preferences deemed ineffective or legally obsolete; and a 0.5 percentage-point cut to the state sales tax. “This tax is only on property owned by those with $50,000,000 or more of those specific assets,” Frey said of the intangibles tax, which she described as "$10 on every $1,000 of assessed value" of certain holdings.

Why it matters: Leaders said the package is intended to close a looming budget shortfall without steep cuts to education, social services and programs for vulnerable residents. The majority leader framed the approach as balancing a modest tax cut for all households with targeted revenue increases for those best able to pay. “We are taking steps to fix” what he called a “broken” tax code, he said.

Key provisions and projected revenue: Frey provided headline estimates for several items. She said the financial-intangibles tax would generate roughly $4 billion annually for public schools and related costs. A 5% employer payroll surcharge on payroll above the Social Security threshold was projected to yield about $2.3 billion when fully implemented; the plan would apply to firms with roughly $7 million or more in payroll expense. Allowing property tax to grow with population and inflation was estimated to raise about $779 million for common schools over four years (with local options for cities and counties). Repealing 20 ineffective tax preferences and cleaning up unused exemptions was said to generate over $1 billion across four years. Finally, the sales-tax cut (6.5% to 6.0%) would reduce annual revenue by about $1.3 billion, the sponsors said.

Timing and process: The majority leader said the Senate budget would be released on Monday, with the Ways & Means Committee hearing the proposal the following Tuesday, an expected committee vote on Thursday and a Senate floor vote on Saturday. He said the House and Senate would go into conference to reconcile differing proposals and that revenue bills and reduction bills required to implement agreed budgets would follow.

Questions and forecasts: Reporters asked how planners can budget for a tax tied to market values. The sponsors said the intangibles tax is measured on Dec. 31 and applies only to very large portfolios, which they said reduces volatility relative to daily market swings. Frey also discussed compliance assumptions built into forecasts, saying that the Department of Revenue’s projections assume a lower compliance rate at the very top and cited an overall conservative approach: “I would characterize it as the compliance rate is assumed at 48% for most of the taxpayers in this class,” she said, adding that at the very top the projection assumes about 10% compliance.

Concerns raised and responses: Reporters pressed whether wealthy individuals or firms might leave the state and erode the tax base. Sponsors said they expect Washington’s advantages — workforce, amenities and public investments — to keep the state attractive, and that the revenue estimates account for tax-avoidance behavior. On which exemptions would be repealed, sponsors pointed reporters to the Joint Legislative Audit and Review Committee (JLARC) summaries and said many removals reflect federal or state legal changes that made some preferences obsolete.

What’s next: The sponsors said hearings and public review will follow; specific bill texts were introduced so budget staff can reference line items. If committees and the full chambers agree on a package in conference negotiations, the implementing bills would follow the agreed framework. The briefs closed with continued outreach to the House and discussions with the governor’s office, according to the majority leader.

The Senate leaders invited the public to review JLARC materials for itemized lists of tax-preference changes and said they will present a fuller budget roll-out in committee next week.