Washington state Senate Democrats on Thursday, March 21, announced tax and revenue proposals aimed at closing a projected budget deficit of $16 billion or more for the 2025-2027 budget during a press conference in the Senate Democratic Caucus Room at the state Capitol.
The contents of the plan, specifically calls to increase taxes, were blasted by Republicans throughout the Legislature.
The presentation included five draft bills to implement new revenue policies, but those remain just a snapshot of the Democrats’ budget plans. The plans include estimated net revenue of $6 billion for the first biennium and another $11 billion for the second, according to Senate Majority Leader Jamie Pedersen, D-Seattle.
The estimated $17 billion over the four-year budget period would seemingly cover the state's current projected shortfall of more than $16 billion, though the minority Republicans have offered their own plan that includes no budget cuts or new taxes.
The Democratic leaders who who presented the bill included Pedersen, Chair of the Senate Ways and Means Committee June Robinson and Vice Chair of Finance of the Senate Ways and Means Committee Noel Frame.
They described the proposals as an update to an outdated tax code.
“Our nearly century-old tax code relies mostly on flat taxes, does very little to distinguish between large businesses and corporations, between home owners and owners of skyscrapers and between working people and billionaires,” Frame said. “I would say it's antiquated, it’s unfit for a modern economy, it is deeply unfair.”
The first of the new policies is labeled the “Financial Intangibles Tax” and is applied to financial assets such as stocks and bonds. It would tax $10 on every $1,000 of assessed value of eligible assets and would apply to individuals holding assets valued at $50 million or more. Numbers provided by Senate Democrats estimate this will apply to roughly 4,700 residents living in the state of Washington and yield $4 billion in revenue per year starting in 2027.
Employees and employers currently pay a 6.2% Social Security tax on wages, but the amount they can be taxed on is capped at $176,100. New rules would create a 5% tax on large employers that applies to payroll expenses above the cap on the Social Security tax. The tax applies only to companies paying $7 million or more in wages. The new policy would add a state tax that is applied to eligible employers and only to wages paid over the $176,100 cap.
The tax is similar to one already levied on businesses in the Seattle area called the “JumpStart” tax. Companies already paying the “JumpStart” tax would receive a tax credit in order to avoid paying the tax twice. The policy would bring in an estimated $2.3 billion per year once fully implemented, Senate Democrats said.
The third item would raise the 1% cap on annual property tax increases for the state common schools levy and for county and city governments. The new limit would be variable year by year and equal to the population growth rate plus the rate of inflation. Governments are not required to take the full increase each year.
Added caveats mean that the property tax paid to the state would be focused on public schools and generate roughly $779 million in revenue over the full four-year budget period. Money generated with the increases in property tax at the local level would be earmarked for public safety. Also baked into the policy is a property tax exemption for senior citizens, disabled persons and U.S. military veterans.
In keeping with their narrative of updating the state tax codes, the legislation includes a mass repeal of 20 tax exemptions that will generate an estimated $1 billion over the next four years, according to Senate Democrats. Some of the exemptions on the chopping block include those for in-state hauling, prescription drug wholesalers and gold bullion — a fancy term for solid gold in bar or coin form.
The last of the bills enacts a decrease in the state sales tax, which Frame referred to as regressive. In this context, regressive refers to tax codes that require people in lower tax brackets to pay a larger percentage of their income than those in higher tax brackets. The decrease will bring the state sales tax from 6.5% to 6% and decrease the amount collected by the tax by $1.3 billion per year.
State Republicans from both the Senate and the House were quick to respond to the revenue proposals. They uniformly rejected the tax hikes and potential property tax increase.
“This is a new kind of March madness, especially the new attempt to do away with the 1% cap voters put on property-tax growth,” Sen. Chris Gildon, Republican budget leader, said. “We keep hearing from Senate Democrats that they want to make the wealthiest Washingtonians pay more. But the property-tax increase they want is regressive. It would fall directly on the backs of families who are far from wealthy and also become a pass-through cost to renters across our state.”
State Rep. Jim Walsh, R-Aberdeen, who is also the chairman of the state GOP, pointed out the major disconnect between Gov. Bob Ferguson's previous statements against tax increases and the Senate Democrats’ new proposal.
“The D's disastrous tax-hike proposal puts the new governor in an impossible position,” Walsh said in a post on the social media platform X, previously Twitter. “He has to oppose it to keep any shred of credibility from his inauguration speech.”
If all goes according to plan for Senate Democrats, the full budget process will kick off next week, starting with budget policy being introduced on the Senate floor on Monday. The House and Senate will pass their respective budget plans in their own houses before conferencing together to reconcile the budget.
“We’ve been in steady conversation with the House for months about these issues and the proposals are not gonna be identical,” Pedersen said. "There are gonna be large overlaps and I think we have absolutely shared values.”
