(The Center Square) – A day after majority Democrats passed legislation on the Senate floor to create a tax on personal income of more than $1 million, Gov. Bob Ferguson told reporters the bill in its current form fails to provide enough tax relief for Washingtonians and small business owners.
As reported by The Center Square, if enacted, the tax would go into effect Jan. 1, 2028, and is expected to generate $3.4 billion a year from about 21,000 tax filers. Republicans warn, however, that more wealthy earner will flee Washington if the tax goes into effect.
Proceeds from the new tax would be used for cities and counties to beef up public defense services in local courts, to expand the Working Families Tax Credit program, and increase tax breaks for smaller businesses. Anything left over would funnel into the general fund for public schools, higher education and health care programs.
In a Tuesday press conference, Gov. Ferguson said the current proposal does not provide nearly enough tax relief.
Ferguson said he wants to expand the number of families that could receive the Working Families Tax Credit and increase the amount of the credit by 30%.
“Right now, far too many working families can’t quality for it,” he said. “So we must dramatically expand both the number of families that can qualify and the amount they’d be receiving. I need to see both of those things for any bill I’d be signing.”
He said expanding the program would add another 460,000 thousand additional families on top of the 350,000 who currently receive the tax break.
The governor said he wants to use a billion dollars from the proceeds of the tax on millionaires to offer tax relief for small businesses.
“We need to go much bigger to help small business owners who help power our economy and create jobs,” said Ferguson. “That means dramatically increasing the small business tax credit with effectively wipes out business and occupation taxes on the first $2.5 million in total revenue for that business.”
He said that it would translate into 170,000 small businesses no longer paying any B&O tax, saving each business about $5,000 a year.
Ferguson threw his support behind an amendment offered by Sen. Nikki Torre, R-Pasco, which was rejected by Democrats on Monday to include a sales exemption on diapers.
“All diapers and baby products should be exempt from sales tax,” the governor said.
Ferguson also said he wants the measure to include two sales tax holidays each year, when sales tax would be waived on items under $1,000.
“It’s about making life more affordable for Washingtonians,” said Ferguson, noting that the income tax would only apply to one half of one percent of Washington households.
The Center Square asked the governor about concerns raised by Republicans and the general public that though the legislation is starting out as a tax on millionaires, it will eventually trickle down to all income levels in Washington.
“I’ve been crystal clear on that for anybody who’s been listening,” he said. “The millionaire’s tax should only apply to people making a million dollars, and I’ve also said there needs to be an inflation index so that amount goes up every single year. I would not be supporting a tax on anyone below a million dollars. I’ve been very clear on that.”
Ferguson was asked about the marriage penalty in SB 6346, which applies the income tax to household income in excess of $1 million, not just individuals.
Republicans offered an amendment to remove the marriage penalty, but it was rejected.
“It’s going to apply to one half of 1% of Washingtonians, right? So that would be really for those folks whose income exceeds a million dollars, even as a couple,” he said, indicating he supports that part of the bill.
Ferguson noted he wants people to understand that those paying the tax would be taxed on everything they make over $1 million. So, if you make $1.2 million per year, you’d be taxed 9.9% on the $200,000 made above the first million.
As reported by The Center Square, the bill that passed the Senate Monday drew three Democrats in opposition, as well as every Republican.
The three Democrats voting no were Sen. Adrian Cortes, D-Battle Ground, Sen. Drew Hansen, D-Bainbridge Island, and Sen. Deb Krishnadasan, D-Gig Harbor.
Washington voters have rejected the income tax every time it has appeared on the ballot since 1934, most recently in 2010. And just two years ago, lawmakers in bipartisan fashion approved an initiative to the legislature rejecting an income tax.
