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Last night the Washington legislature took a huge step toward making that state’s tax system fairer by passing a personal income tax on earnings over $1 million. This comes as many states are looking to raise revenue, particularly from people at the top of the income scale who just received massive federal tax cuts.
ITEP has long found that Washington’s tax code is one of the most regressive in the nation, with low- and moderate-income families paying a higher share of their income to state and local taxes than the wealthy, largely due to its lack of a personal income tax.
In our most recent Who Pays? analysis, we found that the poorest 20% of Washington families paid 13.8% of their income to taxes, the middle 20% paid 10.9%, and the wealthiest 1% paid just 4.1%, giving Washington the second most regressive tax system in the country.
The new millionaires’ tax, which Gov. Ferguson says he will sign into law, will reduce that inequality while raising billions of dollars a year starting in 2029.
This will build on the progress that Washington lawmakers have made in recent years by instituting a Capital Gains Excise Tax and a refundable tax credit for working families – the latter of which was also expanded to an additional 460,000 Washington households as part of this bill.
This important development in Washington comes at a time when states across the country are considering new taxes on their wealthiest residents to help shore up state finances and fund critical services at a time of severe federal retrenchment. We are actively tracking developments as they happen in every state during the legislative season, and are closely following revenue-raising pushes in California, Colorado, Connecticut, Hawai’i, Michigan, New York, and Rhode Island.
