Democrats in the Washington State Senate resurrected a wealth tax on Friday, with the Ways & Means Committee giving a scaled-back version of the legislation a do-pass recommendation on a party-line vote out of executive session.
The initial version of Senate Bill 5797, sponsored by Sen. Noel Frame, D-Seattle, set a tax rate of $10 per $1,000 value on certain financial assets, such as stocks and bonds, over $50 million. According to lawmakers, this would impact some 4,300 Washingtonians, with the revenue generated going to public schools.
A Frame-proposed substitute bill would reduce the $10 rate to 34 cents per $1,000. Another major change would redirect revenue – about $100 million annually starting in 2027 – from the tax to the Education Legacy Trust instead of the general fund. The revamped bill would also exempt the first $50 million of financial intangible assets.
The changes were prompted by Gov. Bob Ferguson’s statement from a few weeks ago that he would not sign a budget that relied on a new, untested wealth tax. The governor, however, offered a trial balloon of sorts in noting he was open to talking about a different figure: no more than $100 million a year to see if it could withstand a legal challenge.
Democrats also advanced a revised version of Senate Bill 5798, which would remove the existing 1% cap on property taxes, out of executive session with a do-pass recommendation.
Once again, a substitute bill was offered by Frame.
The substitute bill revises how property tax increases are calculated, including changing the definition of “inflation” to use the Consumer Price Index and introducing a “population change” metric. It also expands property tax exemptions for senior citizens and disabled veterans.
“We really don’t have an idea of the value of the tax shift that would be happening with this bill, and it seems like we’re moving much too quickly,” said Sen. Minority Leader John Braun, R-Centralia.
Frame responded that the Washington State Association of County Assessors had informed her that “the shift would be a maximum of 5 cents per $1,000 of assessed value.”
Senate Bill 5813, which concerns additional revenue from capital gains and estate taxes, also received a do-pass recommendation out of the executive session.
SB 5813 applies an additional 2.9% excise tax on capital gains exceeding $1 million, increases the estate exclusion amount to $3 million, and provides an updated reference to the Consumer Price Index to allow for annual inflation adjustments.
Washington currently levies a 7% tax on capital gains above $270,000 in a year for individual taxpayers.
Senate Bill 5814 also advanced out of executive session with a do-pass recommendation.
The bill concerns “modernizing the excise taxes on select services and nicotine products and requiring certain large businesses to make a one-time prepayment of state sales tax collection.”
Sen. Ron Muzzall, R-Oak Harbor, offered an amendment to insulate rural hospitals from the prepaid tax collections.
“We continue to see our rural hospitals suffering financially and in most cases operating in negative margins, and we continue to talk about the cost of healthcare,” he said. “This is just going to add to the cost of healthcare.”
Chair June Robinson, D-Everett, urged members to reject the amendment, saying it was “very broad” and would need refining.
The amendment did not pass.
REPUBLICANS LOOK TO KEEP THE ESTATE TAX AT BAY
Just ahead of a final committee vote, Sen. Perry Dozier, R-Waitsburg, said he could not support the bill because of the additional burden on taxpayers.
“When you’re going out to buy things, this adds another half a percent on your sales tax,” he said. “We keep putting the tax burden on the people who can least afford this.”
