(The Center Square) – Democrats in the Washington State Senate have revealed a revenue proposal they say will bring in $17 billion over the next four years. The proposal includes taxes on wealthy individuals, increasing property taxes, and decreasing the state sales tax.
The proposal comes amid a projected four-year budget shortfall of anywhere between $12 billion and $16 billion, based on the state’s latest revenue forecast.
The proposal would implement a new tax of $10 on every $1,000 of assessed value on financial assets such as stocks, bonds, exchange-traded funds, and mutual funds held by people with more than $50 million of these assets.
According to Senate Democrats, the tax would be paid by about 4,300 individuals and will generate approximately $4 billion per year starting in 2027. The money would be dedicated to public schools, with increased funding for special education services.
The revenue proposal includes raising the 1% cap on property tax increases for the state’s common schools levy and for cities and counties to a combined rate of population growth plus inflation. Numerous counties and cities flagged this as a necessary change at the state level.
Senate Democrats’ proposal takes a page from Seattle’s playbook with a payroll expense tax similar to the city’s JumpStart Payroll Tax. The proposed state payroll tax would be set at 5% on large employers on the amount of payroll expenses above the Social Security threshold, which is currently $176,100 per year.
The tax is limited only to about 5,289 companies with $7 million or more in payroll expenses and is projected to raise about $2.3 billion per year for public schools and health care.
Senate Majority Leader Jamie Pedersen, D-Seattle, said the revenue proposal reflects the views of the majority of Washington voters in that they do not want school funding cut so that “extremely wealthy people can keep enjoying a tax break.”
“People across the political spectrum – Democrats, independents, and even Republicans – express their frustration with a tax system that is rigged against working- and middle-class families,” Pedersen said in a news release. “This transformative proposal will rebalance our tax code and provide ample funding for public schools, public safety, and the needs of the people of our state.”
Democrats’ proposal doesn’t just involve higher taxes. It also calls for reducing the state sales tax from 6.5% to 6%, decreasing state revenues by some $1.3 billion a year.
Republican budget leaders were critical of Senate Democrats’ proposal.
“This is a new kind of March madness, especially the new attempt to do away with the 1% cap voters had put on property-tax growth,” Sen. Chris Gildon, R-Puyallup, said in a news release. “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.”
Sen. Nikki Torres, R-Pasco, echoed that sentiment in the news release.
“How could our Democratic colleagues ‘scrub the budget for savings,’ as they claimed today, and still want $20 billion in new and higher taxes?” she asked. “I’m also very troubled by the property-tax increase, because the annual growth rate would likely be higher than the 3% they proposed in 2023 and 2024, and it would compound over time.’
The Senate Democrats’ revenue proposal is considerably different from Senate Republicans’ no-new-taxes budget proposal released last week.
Republicans’ proposed $75.6 billion budget represents a 5% increase in spending from the two-year budget that will expire June 30. The budget proposal would freeze rates and eligibility thresholds for state-subsidized child care, while reducing regulations on providers to help them save costs. It also increases funding for public schools, with K-12 receiving a larger share of the budget for the first time in six years.
Both the House and Senate must negotiate and agree on a final budget and revenue plan by the end of the legislative session on April 27.
