State Democrats unveil new wealth inequality tax in Olympia
As state lawmakers continue work to get a budget deal done, a group of Senate Democrats are injecting a new idea into the mix: A tax on wealth inequality, specifically on companies with employees making over $1 million.
“When we look at the issues that are state is facing, how we’re not funding education enough, how we’re not doing enough to address climate change, not doing enough to really shore up basic needs such as our roads and transportation, I think largely it comes down to having an unequal tax structure — a very regressive tax structure in Washington State,” said Sen. Joe Nguyen.
“I wanted to make sure that we had this conversation. I wanted to make sure that this was part of the narrative because we need to figure out ways to be more progressive in terms of how we actually address the problems of Washington State,” he added.
That’s why Nguyen dropped a new bill, sponsored by seven other Democratic Senators just days before the end of session, that he’s calling the Excessive Compensation Tax.
Unlike the House’s Extraordinary Profits Tax — essentially a capital gains tax — Nguyen’s proposal would impose a tax of varying rates, on employers in the state for each worker they have in Washington earning more than $1 million a year.
“For instance $1 million to $5 million, it’s about a 5 percent excise fee on employers who have people who make that much money; $5 million to $10 million, it’s 7.5 percent, and $10 million-plus it’s 10 percent,” Nguyen explained.
“Mind you this is all marginal tax rates, so there’s none on the whole thing, just on the amount over. So it’s actually a nominal amount when you look at from a nominal perspective, but it actually could raise $226 million per year,” he added.
All employers in the state would have to pay this tax, but only on those employees who earn $1 million or more working in the state. That accounts for about 3,000 people, according to Nguyen.
“This is not meant to hurt small businesses, not meant to hurt large businesses, and this is the marginal rate on top of folks who already make over $1 dollars a year. This is very different than what Seattle did [with the head tax], but this is certainly a way to address some of he regressive nature of our tax structure in Washington state,” Nguyen said.
Asked whether this would make the state less business friendly, Nguyen cited how large tech companies have thrived in the past.
“It’s kind of odd for me to say that Washington state is less business friendly, when we have some of the largest corporations in the world, and Jeff Bezos and Bill Gates live in Washington state. So, looking at the history of what we’ve been able to accomplish and the history of industry — and specifically Seattle — to say we’re less business friendly is kind of an odd thing to say, simply because we’ve been very business friendly for a very long time,” Nguyen said.
Republican Sen. John Braun responded to the bill Friday.
Maybe it’s a coincidence, but this tax was proposed just after Russell Wilson’s new contract deal, and he’d pay the highest rate,” said Sen. Braun. “Either way it’s like all the other taxes proposed by the Democrat majorities this year, meaning it’s completely unnecessary. The Legislature could spend 14% more without any new taxes, yet the other side is still pushing billions of dollars’ worth of tax proposals besides this one.”
As for the bill’s chances, he noted the difficulty in getting a bill passed so close to the end of the legislative session.
“First off, I’m realistic that can you can’t drop a bill 10 days from when the session is over and think that it’s going to pass,” he explained. “What I really want to do is start re-framing the narrative, so that way, we aren’t just having people fight for scraps and trying to pick off little bits and pieces there to pay for things that are very important, like education. I want to be able to address the income inequality that we have in the United States and Washington state, and largely that starts with having a conversation first.”
“This is not going to happen overnight, but if we don’t start and have this conversation it never will happen,” Nguyen added.
Several large companies in the state would have to pay this tax, including Amazon, Microsoft, and both the Seattle Mariners and Seahawks. None of the companies we reached out to had any comment on the proposal.