Outgoing Washington governor suggests ‘wealth tax’ to avoid cuts to education and police
SEATTLE — Outgoing Washington Governor Jay Inslee is proposing a new tax on personal wealth of more than $100 million, hoping to close a budget deficit and prevent cuts to education, mental health care and police.
The tax would apply to about 3,400 residents — including Microsoft founder Bill Gates — and raise $10.3 billion over four years, Inslee, a Democrat, said Tuesday.
No other state — and only a few countries — have structured taxes in the way Inslee proposes, according to the Tax Foundation, a conservative-leaning policy organization.
A spokesman for Washington’s Democratic governor-elect Bob Ferguson said he is reviewing Inslee’s proposal. Ferguson said this recently The Seattle Times he has not ruled out tax increases to cover the budget deficit, which Inslee estimates at $16 billion over four years.
Lawmakers in several Democratic-led states, including Washington, have in recent years proposed wealth or other taxes on their richest residents, with Massachusetts voters in 2022 a “millionaires tax” – an income tax surcharge for those earning more than $1 million a year.
Washington, which has no income tax, is considered one of the most regressive tax systems in the country, meaning lower-income residents pay a larger share than wealthier ones. Voters overwhelmingly supported the state’s new capital gains tax in November despite an attempted repeal, showing a desire to make the tax system fairer, Inslee said.
“The state and the nation must respond to these inequities that defy human imagination,” Inslee said. “We cannot survive as a healthy, robust community … while we have this level of poverty and in the midst of this enormous wealth.”
Republicans in the Legislature rejected the proposal, saying the state has a spending problem, not revenue. In an emailed statement, Rep. Travis Couture of Allyn, the ranking Republican on the House Appropriations committee, called it not serious.
“Governor Inslee’s $13 billion tax hike and reckless increase in spending demonstrate how out of touch his administration is with the financial realities facing Washington families,” Couture said.
The Tax Foundation calls wealth taxes “economically destructive” and says they encourage perverse tax avoidance strategies. Jared Walczak, the organization’s vice president of state projects, said Tuesday that only four countries impose taxes on wealth — Norway, Spain, Switzerland and most recently Colombia — while several others have repealed them, including Austria, Denmark, Germany and France.
Such taxes can be challenging to administer because some assets — for example, a private company that has never been sold — can be difficult to value, Walczak said. And unlike taxes on profits, taxes on wealth can reduce the principal value of an asset. The tax could be imposed even if the asset loses money, he said.
“This could significantly erode capital and discourage investment and economic growth,” Walczak said.
Washington is among a number of states facing budget shortfalls. Inslee blamed inflation, higher caseloads in social safety net programs and lower-than-expected state revenues from home sales and capital gains taxes.
Inslee said that in addition to the wealth tax, his budget proposal also includes increased taxes on the annual income of about 20,000 businesses over $1 million in the “services and other activities” category, such as some lawyers and accountants.
It also includes $2 billion in cuts or deferred spending, including the closure of the Mission Creek Corrections Center for Women due to reduced need for lower-security beds.
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This story has been corrected to show that the governor spoke about the proposal on Tuesday, not Monday.