NEWS / WA adopts Millionaire’s Tax

The State of Washington has adopted a historical income tax after the tax bill was signed by Governor Bob Ferguson into law on Monday, March 30. Supporters argue that the tax, which is only imposed on households making over $1 million a year, will make it easier to finance healthcare and educational initiatives, particularly for children, while opponents point to a 1933 state Supreme Court ruling which classified income as property and prohibited taxing it at a progressive rate.

“Adoption of the historic Millionaires’ Tax makes our tax system more fair, and means free meals for K-12 students, the largest tax break in state history for small businesses, eliminating the sales tax for baby diapers, and sending a check to nearly 500,000 working families to make life more affordable,” Governor Ferguson stated.

The new law was introduced as Senate Bill 6346 by State Senator Jamie Pedersen, a Democrat from Seattle, and was later amended by Representative April Berg, a Democrat from Mill Creek.

According to the Governor’s office, the new 9.9% tax imposed on households making over $1 million will enable the state to fund free school lunches, expand the Working Families Tax Credit, reduce or possibly eliminate the Business & Occupation (B&O)Tax (a tax on the gross income of businesses) for small enterprises, eliminate sales tax on diapers, drugs, and hygiene products, and invest more in healthcare and childcare.

But the tax is likely to be challenged in the Supreme Court, as the state’s judiciary set a precedent that prohibited taxing income, which was defined as a form of property, at an uneven rate.

As such, Washington is currently one of the few states in nation that does not have its own income tax. The other states in this category are New Hampshire, Florida, Tennessee, Texas, South Dakota, Wyoming, Nevada, and Alaska. As a result, Washington relies heavily on its sales and business taxes, both of which are considered regressive as sales tax often imposes a disproportionate burden on poorer families, while the B&O tax is imposed on gross business income without allowing any business expenses to be taken into consideration.

And now, many are arguing that the 1933 Supreme Court decision, articulated by Supreme Court Justice Oscar Holcomb, is outdated.

“He was incorrect,” University of Washington emeritus law professor Hugh Spitzer was quoted by the Seattle Times as stating. “It was untrue at the time. A majority of states took the position that income is money in flow. It is not an asset.”

At the same time, former Attorney General Rob McKenna, a Republican opposed to the new tax, argued that one has “a property right to your income.”

Another point raised by critics is that the new tax could lead to capital flight, with Washington currently being the headquarters of some of the largest companies in the United States, such as Amazon, Microsoft, Boeing, and Starbucks, as reported by The Guardian.

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