Seattle Times staff reporter
OLYMPIA — Senate Democrats want to tax Washington’s wealthiest and are calling for a half-cent sales tax cut to reduce the burden on consumers as part of their sweeping package of new revenue proposals.
The tax package, released Thursday ahead of the anticipated release of the operating budget proposal for the 2025-27 biennium, comes after a new budget outlook estimates the state will collect nearly $845 million less in revenue over the next four years than earlier projected.
Democrats have maintained that new ideas for raising revenue would be a necessary path forward to address an operating budget shortfall estimated to be as much as $15 billion in the same four-year period, and are facing the daunting task of balancing the budget before the legislative session adjourns April 27.
In total, the proposals, if passed, would net approximately $6 billion in 2025-27, and $11 billion in 2027-29 after the sales tax reduction, according to Senate Majority Leader Jamie Pedersen.
Gov. Bob Ferguson, who previously expressed skepticism of a “wealth tax,” has proposed $4 billion in cuts over the next four years, including cuts to most state agencies and furloughs for state employees, while maintaining commitments the state has made in K-12 public education and sparing public safety programs from cuts.
He has not said yet whether he would support any new taxes, which Republican lawmakers staunchly oppose. The governor’s office did not respond to a request for comment Thursday.
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“Rather than balance our budget entirely through devastating cuts or doubling-down on our regressive tax code on the backs of working families, we’re asking the wealthiest among us to finally do their part and pay what they owe so that we can fund great public schools, health care, public safety, and the services that our most vulnerable residents are counting on,” Sen. Noel Frame, D-Seattle, vice chair of the Senate Ways & Means Committee for Finance, said in a Thursday statement.
Here’s what Senate Democrats are proposing:
- Wealth tax: Senate Bill 5797 would tax financial assets such as stocks, bonds, exchange-traded funds, and mutual funds at a rate of $10 on every $1,000 of assessed value for individuals with more than $50 million of such assets. Senate Democrats estimate the tax would only apply to about 4,300 individuals in the state and that it would generate approximately $4 billion a year starting in 2027, with funding going toward school operating costs and special education services.
- Sales tax: Senate Bill 5795 would lower the sales tax from 6.5% to 6% in 2027, and is estimated to decrease revenue by about $1.3 billion per year.
- Business tax: Senate Bill 5796 is similar to Seattle’s “JumpStart” tax and would remove the cap on employer payroll taxes for companies with $7 million or more in payroll expenses and would add a 5% tax on payroll expenses above the Social Security threshold. The proposal would raise $2.3 billion a year if adopted. Funding from the tax would go to public schools, health care and other programs.
- Property tax: Senate Bill 5798 would raise the current 1% cap on property taxes, and would allow the property tax to grow based on population and inflation. Local governments could opt for lower growth rates under the proposal, and would fully exempt state property tax for those in the “Property Tax Exemption for Senior Citizens and People with Disabilities” program.
- Tax exemptions: Senate Bill 5794 would repeal 20 tax exemptions currently codified in state law that are “ineffective and obsolete.” This proposal would raise $1 billion over four years.
Progressive groups like Invest in Washington Now were thrilled Thursday, calling the proposals a “major win” for working people in the state.
“The Legislature is finally listening to the voters who are saying that the wealthy few need to come to the table and pay what they owe,” the group said in a statement.
But the Association of Washington Business, Bellevue Chamber of Commerce, Seattle Metropolitan Chamber of Commerce and Washington Roundtable say the proposals are “disappointing and, unfortunately, not surprising.”
“The fact that Senate Democrats released a revenue proposal before outlining how they intend to spend the money — and that House Democrats intend to do the same — makes it clear that raising taxes was the focus. It is the height of irresponsibility,” the organizations said in a joint statement.
Ranking Republican budget leader Sen. Nikki Torres, R-Pasco, said Thursday that in 2022, Republicans brought up the idea of a temporary 1% tax cut when the state had a surplus, but Democrats chose not to adopt the proposal.
“Now they’re proposing to cut the sales tax half a percentage point, but only along with the largest set of tax increases in state history — and the sales-tax cut wouldn’t take effect until 2027 anyway,” Torres added. “It’s hard to see that as a serious attempt to help the struggling households across our state.”
While Democrats have been supportive of new taxes, Republicans in both the House and Senate have repeatedly stressed the need to cut back on state spending and have said they do not believe new taxes are the answer to solving the budget crisis.
Shauna Sowersby: 206-652-7619 or ssowersby@seattletimes.com. Seattle Times political reporter.