Gov. Bob Ferguson said Friday that he will sign the latest version of Washington’s proposed “millionaires tax,” paving the way for legislation that has sparked intense debate within the state’s tech and business circles.
In a statement, Ferguson said the revised proposal met his desire to send more revenue back to working families and small businesses.
“I strongly encourage the Legislature to pass this bill with all of these investments in affordability included,” he said. “It represents a historic step forward in rebalancing our unfair system and making life more affordable for Washington families and small business owners.”
Ferguson earlier this month criticized Senate Bill 6346 for doing too little for small businesses and lower-income residents in the state. He had suggested the measure could be pushed to next year if lawmakers could not strike the right balance.
Ferguson said the latest revision would expand the Working Families Tax Credit, preserve sales-tax exemptions on items such as diapers and hygiene products, add a sales-tax exemption for over-the-counter medicines, support free school meals, and dedicate 5% of revenue to child care and early learning.
The bill, which passed the Senate last month and still needs approval from the House, would impose a 9.9% tax on Washington taxable income above $1 million, beginning Jan. 1, 2028.
SB 6346 represents one of the most significant efforts in years to establish a personal income tax in Washington.
The bill has drawn opposition from some tech leaders and entrepreneurs who worry it could undermine the sector by souring Washington’s relatively favorable tax laws for startup founders, investors and high-wage earners.
Earlier this week, a group of AI researchers, founders, and investors sent a letter to Ferguson, arguing that higher taxes on high earners and investment gains would push top talent and future startups elsewhere. They urged the state to “pause” work on the tax, as well as an increase to Washington’s capital gains tax.
Supporters argue those fears are overblown and say the bill helps correct the state’s regressive tax code, which relies heavily on property, sales and business taxes to fund education and other public programs.
The bill is expected to generate an estimated $3.7 billion annually.
The action comes as the state is struggling to plug a more than $2 billion budget hole with spending cuts and a slate of potential tax changes, while at the same time some of Washington’s largest employers are cutting thousands of jobs from their payrolls.
Lawmakers have also advanced an amendment that would repeal part of a recent sales tax expansion on select services that drew criticism from tech companies and prompted a Comcast lawsuit. However, the higher tax on advertising services would remain.
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