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Proposed Tax Overhaul Targets Wealthy, Businesses, and Property Owners While Cutting Sales Tax
Senate Democrats in Washington unveiled a sweeping tax package Thursday, aiming to generate billions in new revenue through higher property taxes, a new wealth tax, and a payroll tax on large businesses, while offering relief to consumers with a sales tax reduction.
If enacted, the plan could cover nearly half of the state’s projected $12 billion to $16 billion budget shortfall over the next four-and-a-half fiscal years. However, the proposal sets up a potential clash with Gov. Bob Ferguson, who has expressed skepticism about certain elements, particularly the wealth tax.
A Progressive Approach to Closing the Budget Gap
“This proposal reflects what we’ve heard from our communities: the wealthiest few should share more of the responsibility of investing in public schools and the services people need,” said Senate Majority Leader Jamie Pedersen, D-Seattle.
The five major components of the Senate Democrats’ plan include:
✔ Property Tax Adjustments – The current 1% cap on annual property tax growth would be replaced with a formula based on population growth and inflation. This would apply to the state’s common schools levy, cities, counties, and special districts, generating an estimated $779 million over four years.
✔ Statewide Payroll Tax on Large Employers – Modeled after Seattle’s JumpStart tax, a 5% tax on payroll expenses above $176,100 per year would apply to businesses with $7 million or more in payroll expenses. Businesses already subject to Seattle’s tax would be exempt. Expected revenue: $2.3 billion.
✔ Wealth Tax on Ultra-High Net Worth Individuals – A new tax on wealth exceeding $50 million would levy $10 per $1,000 of assessed financial assets (e.g., stocks, bonds, ETFs, and mutual funds). This tax, set to take effect in 2027, would impact approximately 4,300 individuals and generate $4 billion annually.
✔ Sales Tax Reduction – To provide relief for consumers, the state sales tax rate would drop from 6.5% to 6% starting Jan. 1, 2027, reducing state revenue by $1.3 billion annually.
✔ Elimination of Tax Exemptions – The repeal of 20 outdated tax exemptions, including breaks for gold bullion and prescription drug wholesalers, is expected to bring in $1 billion.
Political and Economic Implications
The unveiling of this ambitious tax plan signals a major shift in Washington’s approach to tax equity and revenue generation. However, Republican lawmakers remain skeptical.
“The question is how many [taxes], and how much,” said Senate Minority Leader John Braun, R-Centralia.
The debate over taxation will likely dominate legislative discussions in the coming months, particularly as Democrats attempt to balance new revenue streams with economic concerns.
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