‘New kind of March Madness:’ Democrats move to tax wealthy, large corporations to aid budget shortfall

Senate Democrats in Washington have rolled out an ambitious tax revenue proposal Thursday, they say will raise billions of dollars, and prevent deep cuts to public services. Their plan, they say, asks the wealthiest individuals and largest corporations to contribute more while providing relief for working families.

“Senate Democrats have talked for many years about the broken, upside-down tax structure, and today, we are demonstrating our commitment to make changes to that broken system,” said Senate Majority Leader Jamie Pedersen (D-Seattle).

With Washington facing an $845 million decline in projected revenue over the next four years and an overall $15 billion budget gap, lawmakers argue that maintaining the status quo would mean slashing essential programs. Instead, their proposal introduces five major tax changes designed to both raise new tax revenue and cut the sales tax.

A new tax on the ultra-wealthy

The most controversial measure in the package is a financial intangibles tax, which would impose a $10 tax on every $1,000 of assessed value on stocks, bonds, and mutual funds owned by individuals with more than $50 million in such assets. This tax is projected to raise $4 billion per year starting in 2027, with the bulk of the revenue going to public schools.

Democrats argue that this approach mirrors the success of Washington’s capital gains tax, which was approved by voters last year.

“We had some of those policies tested at the ballot box this last November, and the most popular policy was the capital gains tax,” Pedersen said. “We asked just a few thousand of our wealthiest families to pay money to help make sure that our public schools are funded.”

New employer payroll tax targets big business

Another significant change is an increase in payroll taxes on large businesses, specifically a 5% tax on payroll expenses above the Social Security threshold ($176,100 per year). Only businesses with payrolls exceeding $7 million annually—about 5,289 companies—would be affected. The measure is expected to generate $2.3 billion per year to help fund public education, healthcare, and disability services.

Property tax growth cap adjustments

Under the new plan, the property tax growth cap that local cities and counties could impose would be adjusted to track population growth and inflation rather than being arbitrarily capped at 1%.

This change, expected to generate $779 million over four years, would be specifically for public safety and criminal justice at the local level and schools at the statewide level.

“This will help ensure that our local communities have the revenue to reflect the actual cost of providing public safety and community protection services,” said Senator Noel Frame (D-Seattle), vice chair of the Senate Ways & Means Committee.

Also, seniors and people with disabilities would receive full exemptions from the state property tax.

Closing tax loopholes

Democrats also propose eliminating 20 outdated or ineffective tax breaks, raising an estimated $1 billion over the next four years. These include tax exemptions for in-state hauling, gold bullion, and prescription drug wholesalers. Frame said some of these tax breaks go back to the 1930s when laws were different and the exemptions were needed at the time.

Sales tax relief

Recognizing the regressive nature of Washington’s tax system, the proposal also reduces the state sales tax from 6.5% to 6%, cutting revenue by $1.3 billion per year but helping ease the financial burden on lower- and middle-income households.

Frame talked about shifting the state’s tax burden: “We are going to use some of that revenue from those very wealthy people and businesses to reduce the sales tax,” Frame explained. “This proposal reduces that disproportionate impact on low- and middle-income households.”

Republicans speak against proposal

Reaction to the tax revenue proposals falls along party lines, as expected.

“We have not seen a revenue fairness proposal of this magnitude from legislative leadership in Washington State in our organization’s entire history, so this is a watershed moment,” said Andrew Villeneuve, the founder and executive director of the Democrat-leaning Northwest Progressive Institute, in a statement.

Senator Chris Gildon (R-Puyallup), the Senate Republican budget writer, reacted, “This is a new kind of March Madness, especially the latest attempt to do away with the 1% cap voters put on property tax growth.” He went on to say in a statement, “It would fall directly on the backs of families who are far from wealthy and also become a pass-through cost to renters across our state.”

“How could our Democratic colleagues ‘scrub the budget for savings,’ as they claimed today, and still want $20 billion in new and higher taxes?” said Senator Nikki Torres (R-Pasco), the assistant budget leader for the Republican caucus, in a statement.

Several business organizations, including the Bellevue and Seattle Chambers of Commerce, issued a joint statement calling the proposal “disappointing, but unfortunately not surprising.”

“For months, our organizations have urged lawmakers to craft a sustainable budget that corrects a well-worn pattern of overspending. However, it appears they are doing exactly what they intended from the start: raise business taxes as high as they possibly can.”

A response to voter sentiment

Democrats argue that their plan reflects what they’ve heard from voters.

“Voters are really interested both in making sure that wealthy people and businesses pay their fair share of the tax burden in our state, and that they don’t want to see vital services cut,” Pedersen said.

With the state’s budget outlook worsening and essential programs on the line, Democrats say their approach is the most responsible path forward.

“Both a reduction in regressive revenue and an increase in progressive revenue from people who are best able to pay it… will help us as part of a balanced approach resolve the budget shortfall that we’re facing right now and help make our budget sustainable into the future,” Pedersen said.

The full operating budget proposed by Senate Democrats will be released on Monday, followed by a vote on the Senate budget proposal next Saturday. After the House does the same with its proposed budget, only then will these tax revenue proposals be voted on, Pedersen said.

Matt Markovich is the KIRO Newsradio political analyst. Follow him on X.

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