Governor's Shocking Rejection: No Income Tax for Families Earning Under $1M—What’s the Real Cost?

OLYMPIA, Wash. — The debate over Washington state's proposed millionaire's tax is heating up as Governor Bob Ferguson outlines his vision for the legislation, signaling that significant changes are necessary before he will consider signing it into law. Following the state Senate's narrow approval of the bill, which passed 27-22, Ferguson is advocating for a revised version that he believes will better assist Washingtonians grappling with an affordability crisis.

The millionaire's tax, aimed at imposing a 9.9% tax on annual income exceeding $1 million, is now headed to the House for further discussion. Ferguson has made it clear that he does not support any form of income tax for individuals earning less than $1 million, both now and in the future. “We are not there yet, and we are still not close to being there,” he stated emphatically from his office in Olympia, underscoring the need for adjustments.

Ferguson acknowledges the importance of the millionaire's tax but insists that any version he signs must return a significant portion of its revenue back to residents and small business owners. He has proposed allocating approximately $1 billion in tax revenue for small business tax cuts, expanding sales tax exemptions on essential goods such as diapers and baby products, and implementing a twice-a-year sales tax holiday for items under $1,000. Additionally, he advocates for an expansion of the Working Families Tax Credit, which provides financial assistance to low- and moderate-income workers and families. “We must dramatically expand both how many working families qualify and the amount of money that they receive,” Ferguson asserted, reiterating his conditions for supporting the bill.

When asked whether he might veto the proposal if it does not meet his expectations, Ferguson refrained from providing a direct answer, instead emphasizing his clarity on the matter. "I think I've been pretty clear. I think where I’ve used the word must, you know?” he remarked.

Despite the governor’s optimistic view, concerns linger among critics regarding the tax's potential impact on high earners and businesses. Some warn that it could drive them out of the state, prompting further scrutiny of Washington's tax landscape. Ferguson dismissed these worries, stating, “I don’t see evidence of that. You know, there are anecdotal things I’ve read in the newspapers. That’s not what I hear when I have conversations, for example, with businesses that come to meet with me on a fairly regular basis.” He suggested that business concerns are more nuanced, encompassing broader issues like gas taxes and overall financial burdens rather than being solely about the millionaire's tax.

Contrasting Ferguson's perspective, Collin Hathaway, founder of Skylight Capital and operator of several small businesses, including the largest residential roofing company in Washington, disagrees with the governor’s assessment. Hathaway describes the governor’s stance as "baffling," citing a trend of businesses relocating from Seattle to Bellevue due to tax policies, crime, and homelessness. “I know dozens of people who have re-domiciled, dozens more who are thinking about it,” Hathaway stated, highlighting a trend that extends beyond just the millionaire’s tax to include other tax policies such as the capital gains tax and estate tax.

Hathaway indicated that while he has not yet considered moving his businesses out of Washington, the idea is becoming increasingly plausible. "I’d say it’s a lot closer than I would have envisioned when we moved home in 2010 from the Bay Area,” he mentioned. “Washington is quickly approaching that point,” he added, reflecting a growing concern among some business leaders about the state’s evolving tax environment.

The fate of the millionaire's tax now lies in the hands of the House of Representatives, with both chambers needing to pass the final legislation before the session concludes on March 12. As discussions advance, Ferguson remains focused on his key goal: “Our North Star, as I’ve said before and I will say it again, is to make life more affordable for more Washingtonians.”