Today Washington Gov. Bob Ferguson signed into law the state’s new millionaires’ tax, propelling the Evergreen State forward toward a fairer economy with a tax code more based on the ability to pay. The legislation, which makes significant investments in public education and child care, will also expand the Working Families Tax Credit – Washington’s EITC – to deliver support to nearly half a million additional working families.
“Inequality is at a historic high and billionaires are walking away with ever-larger shares of our country’s collective wealth,” said Amy Hanauer, Executive Director of the Institute on Taxation and Economic Policy. “With those in charge at the federal level passing policies that only make this worse, it is incumbent upon states to come up with solutions. It is inspiring to see Washington listening to the demands of the people to create a less regressive state tax system.”
Washington’s tax structure has been woefully unequal, ranking as the second most regressive state and local tax system in the country. While lawmakers made progress in recent years by creating and later enhancing their Capital Gains Excise Tax, under their current system families in the bottom 20 percent
The changes signed into law today will undoubtedly make Washington’s tax system fairer. Once the law is in effect, the richest 1 percent in the state will no longer pay the lowest effective tax rate, although they will still pay far less than the middle class and the poorest Washingtonians, leaving plenty of room for additional progress.
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The new tax is also projected to raise more than $3 billion in 2029 after it goes into effect in 2028. Not only will this injection of revenue fund vital services, but it will provide much-needed support for low- and middle-income families at a time when federal lawmakers have made far-reaching cuts to programs like SNAP and Medicaid. It will also help balance out the effects of the new Trump tax law on the wealthiest Washingtonians, who will, on average, receive an annual federal tax cut of more than $90,000.
“This historic move in Washington will help the state prioritize education and child care while ensuring the wealthiest pay their fair share to support these essential services,” said Aidan Davis, State Policy Director at the Institute on Taxation and Economic Policy. “Other states should follow suit as lawmakers work to make life better, and more affordable for their constituents.”
Other states are indeed looking to better tax their wealthiest residents as inequality runs rampant. In recent years, Maryland, Massachusetts, and Minnesota have all increased taxes on the very well-off, while states like California, Connecticut, and Rhode Island are considering doing so this year.
