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Washington Gov. Jay Inslee addresses the crowd at the Nordic Innovation Summit on May 13, 2024. (GeekWire Photo / Todd Bishop)
A wealth tax is back on the table in Washington state.
Washington Gov. Jay Inslee released his final budget proposal Tuesday that includes a 1% tax on residents with worldwide wealth exceeding $100 million.
The tax would impact about 3,400 residents and generate $10.3 billion over four years, according to the governor’s office.
Inslee called it the “fairest way to protect the state’s progress on programs that support the safety and economic well-being of the entire state.” The state is facing a budget shortfall, with higher costs and lower revenues.
“Our economy is among the strongest in the nation, and we’ve created a lot of millionaires — thousands of them,” Inslee said in a statement. “Even with recent tax reforms, they continue to pay very little in taxes compared to the average working family.”
Democrats in Washington state have tried to pass a wealth tax over the past several years but none made it into law. A proposal from 2023 aimed to set a 1% tax on financial assets such as stocks and bonds, excluding the first $250 million.
Critics believe taxes that target wealthy people laws can dissuade businesses from coming to the state and undermine the region’s status as a technology hub.
Unlike most states, Washington has no income tax; instead it relies on sales and property taxes to fund government programs.
The state passed a 7% capital gains tax in 2021. An initiative to repeal that tax was overwhelmly voted down by Washington residents in last month’s election.
Some pointed to the capital gains tax after Amazon founder Jeff Bezos announced in November 2023 that he was leaving his longtime hometown of Seattle, where Amazon is based, and moving to Miami.
Bezos has sold billions of dollars of Amazon stock since making the move to Florida, which does not have a capital gains tax or a wealth tax.
In an Instagram post announcing the move, Bezos said he wanted to be closer to his parents and Blue Origin operations in Florida. He did not mention taxes.
Massachusetts passed a “millionaire tax” in 2022. Evan Horowitz of the Center for State Policy Analysis at Tufts University told NPR that the tax may have driven some people to leave but that “the risks of a total breakdown in the state economy are fabricated.”
Business tax increase
Inslee also proposed a 20% increase in the B&O tax rate (from 1.75% to 2.1%) for some businesses in October through December 2026. The change would apply to about 20,000 companies with annual income of more than $1 million in the “service and other activities category.”
That category, according to the state, includes people such as accountants, dentists, lawyers, real estate agents. It also includes “consulting services.”
We reached out to the Department of Revenue to get a better idea of how the tax would impact tech startups. Here’s what they provided:
“It really depends on what the business is reporting under because tech startup isn’t a specified NAICS. Businesses that provide informational, financial, insurance, real estate, personal, professional, scientific, technical, educational, health, and social services, and other activities not specifically assigned a B&O classification in law are subject to the Service and Other Activities B&O.”
Inslee’s proposal would increase all B&O taxes by 10% starting in January 2027, with exceptions for some businesses due to their tax filing threshold and qualification for small business tax credits.
Inslee leaves office next month and will be replaced by Governor-elect Bob Ferguson, the state’s current attorney general.
