‘Millionaire tax’ sparks fiery debate at House hearing

The debate surrounding the highly controversial tax on millionaires came to a political head during a House Finance Committee Public Hearing Tuesday morning.

The bill, which passed the state Senate more than a week ago in a 27-22 vote, would impose a 9.9% tax on Washington residents earning more than $1 million, beginning Jan. 1, 2028. Democrats say it will bring in $3 billion in revenue annually, starting in 2029.

Leading up to that Senate vote, Republican critics, like Senator Chris Gildon, warned the bill will open the door for a tax down the road on the middle class.

“If this bill passes today, future legislatures can easily come back and change the threshold from $1 million down to $500,000 to $250,000; they can apply it to anyone that they want to,” he said before the bill passed the Senate.

Before public testimony got underway Tuesday, bill sponsor Senator Jamie Pedersen sparked the heated debate that came as he explained to representatives why he helped draft the bill in the first place.

“Last year, I think we ran squarely into the fact that we have a broken, upside-down, 100-year-old tax system that is just not adequate to meet the needs of our state in the 21st century,” Pedersen said. “If we move forward with this proposal, we will have the people who are most able to shoulder the burden of providing those services doing more like their fair share, and it will allow us to reduce the burden on a lot of the other 8 million people who live in the state.”

Organizations supporting the bill

April Sims, president of the Washington State Labor Council, AFL-CIO, which represents 650,000 unionized workers across the state, endorsed the tax and explained rich people should pay up.

“Our tax code is broken. It’s a century-old artifact that has failed to provide a stable foundation for you all to build a state that Washingtonians deserve,” Sims said. “This budget challenge is the latest in a series of disruptions that have pulled the rug out from under working families, just as we were picking ourselves up from a previous crisis … It’s time for the wealthiest people in the history of this world who call Washington home to pay their fair share.”

Ryan Watt, Executive Director of the Economic Opportunity Institute, added that the tax is both foundational and commonplace.

“If passed, Washington State would raise billions of dollars of revenue to fund K-12 education, health care, and higher education. It would also give small businesses the largest tax cut in our state’s history, significantly expand a tax credit for working families, and eliminate the sales tax on a wide range of goods and services,” Watt said. “The people of Washington, including many Republicans, support this bill, and I strongly urge your support.”

Molly Gallagher, with the Direct Cash Coalition, a group of 50 diverse organizations, said, “We believe that flexible, unrestricted cash is the best way to address the root cause of poverty. To balance our state’s upside-down tax code, we need to raise progressive revenue and decrease taxes for working people through tax credits … This bill takes a targeted step towards tax fairness.”

Gleb Sych, a fourth-year medical student planning to enter Family Medicine, and a member of Washington Physicians for Social Responsibility, said, “I watch patients struggle, not with medical advice, but with affordability itself. Medications are skipped to save money. Appointments are missed while arranging child care, and daily stress makes prevention nearly impossible. In clinic after clinic, we treat the downstream consequences of economic inequity while pretending health care alone can fix it.

Passing the ‘millionaire tax’ is a choice to practice prevention at the level of public policy. This allows us to address the conditions that shape health policy, health before patients reach exam rooms or emergency departments. As a future family physician, choosing to build my career in our state, I know I will spend decades caring for the outcomes of decisions made in rooms like this one. I urge you to pass the millionaire’s tax,” he continued.

Organizations against the bill

Max Martin, with the Association of Washington Business, said the organization is concerned about real-world impacts on small- and medium-sized businesses.

“In practice, a tax aimed at individuals would become a new tax on employers, including businesses that may have a strong year on paper, but need the cash to reinvest into their business or weather volatility,” Martin said. “This is coming at a time when many employers are still absorbing last session’s operating cost increases. We appreciate the business tax relief included here, but we believe Washington could be doing more to support small, medium sized businesses strengthen competitiveness and expand economic opportunities.”

Steve Gordon, representing Concerned Taxpayers of Washington, testified in opposition.

“The targeted income tax clearly violates our state constitution and nearly a century of Supreme Court precedent, which is curious, since many supporting lawmakers question potential federal unconstitutional actions while overlooking long-standing state constitutional issues,” Gordon said. “I urge you to uphold your constitutional oath, protect Washington employers and workers, and vote no on this bill.”

Constitutional questions

Former Washington Attorney General Rob McKenna testified against the bill based on a question concerning its constitutionality.

“Under our Constitution, we can have a state income tax if it follows the rules for property taxes, it must be uniform, and no higher than 1%. Washington’s voters amended our constitution in 1930 to comprehensively define property as everything, whether tangible or intangible, subject to ownership,” he explained. “If this legislature wants a progressive income tax, it should send a constitutional amendment to the voters and not pretend the Constitution isn’t clear, unless every legislator who votes for this bill is prepared to explain why taxpayers don’t have a property right to their own income.”

Millionaires against the bill

Mike Sotelo, President of the Ethnic Chamber of Commerce Coalition and a successful entrepreneur who started multiple companies and founded Plaza Bank told committee members the tax would destroy the dreams of others to work hard to create generational wealth. “We pride ourselves on generational wealth. We pride ourselves on being able to give our children our grandchildren that opportunity, whether it’s within our own business or something related to it,” Sotelo said. “This is just another tax that’s going to make us not able to to generate wealth in our families. It limits access to capital. It makes a higher loan denial for us… You want to help minority business? Don’t pass this bill.”

Millionaires Supporting the Bill

Jabe Blumenthal, a lifelong Washingtonian who explained he created his wealth as an early employee at Microsoft, said he supported the state’s capital gains tax since its start, and he expects to pay the proposed state income tax every year.

“By the time I was 30, I could make high-return investments simply unavailable to the vast majority of people, and these investments had some risk, but only that of losing a modest amount of money. My wealth meant that there was no real risk to the quality of me or my family’s life. No scenario where I was going to lose my house, not be able to pay for health care, not be able to send my kids to college,” Blumenthal said. “We need tax policy where all rich people, not just those who want to, are required to pay their fair share into a system that works so well for them. And I’m very happy to do so.”

Hans Mulder, owner of Chelan Hospitality, Inc. in Leavenworth, also supported the tax.

“The wealthiest people in this state, my wife and me among them, are not paying our fair share, and the result is that working families and public schools are asked to make up the difference,” Mulder testified. “To my fellow millionaires, none of us built our wealth alone … We drove on public roads, we shipped goods through public ports, we hired graduates of public schools and universities. We benefited from a stable legal and financial system funded by taxpayers. Taxes are not punishment. They’re the price of a functioning society. If we believe in opportunity, fairness and in the future of our children, then it’s time for those of us who have done extraordinarily well to continue accordingly pass this bill.”

Educators supporting the bill

Maria Lena Velasquez, a fourth-grade general education teacher at Einstein Elementary School in Redmond, told committee members, “These cuts impact my classroom in harmful ways that leave students with unmet needs. For example, I started the school year with 32 students in my class. A class that large is incredibly tough to serve because the range of needs is extreme, student progress is limited when class sizes are that large, more funding would allow for smaller classes and better learning. Another way that budget cuts have affected me is that I no longer have access to instructional resources. This summer, our district’s print center closed permanently. That means I don’t have any way to print workbooks for the students during to use during class.”

Businesses against the bill

Brent Frei, Founder and Chairman of TerraClear, a technology company that builds solutions for farmers, from robotics to AI, asked committee members to reject the bill.

“Our employees now see with federal taxes and Washington State’s past and proposed tax bill, they will forfeit over what they work decades for,” Frei said. “There’s no reason at all to start a business in Washington State anymore. Our hard work goes to wasted spending. My company is actively shifting our operations away from the state of Washington, and I’ll leave as soon as I possibly can. Terrible shame. Please vote no.”

Perhaps the most explosive exchange happened when anti-tax activist Tim Eyman testified before being interrupted by committee member April Berg.

“Shameless, just two years ago, this legislature banned any kind of state income tax, and this bill creates an income tax. Shameless, this bill blatantly bribes big businesses with billions to buy their silence and keep them on the sidelines when there’s a public vote, and these are just payoffs, the governor wants to make sure that most of the money is taken away from people who earned it to send checks to people who didn’t earn it,” explained Eyman man before his microphone turned off.

Berg then issued a warning to Eyman.

“Can you stop for one second? I need you to stop impugning members of this legislature. I will give you 30 more seconds,” Berg explained. “But what you won’t do is talk about a member of this legislature in an impugning fashion. Is that clear?”

Eyman responded, “It is very clear … how worthy is a proposal when it requires bribes and payoffs in order to pass. I know we’re told this is the way the game is played in Olympia, but it’s not a game. You are taking money away from people. It’s about jealousy. It’s about envy. This is a covet bill. It is getting everybody in this room wanting to get other people’s money. If Democrats want to give people in this room money, fine, pull out your wallets, pull out your purses, give them a credit card right now, because if you want to do …”

Eyman’s microphone cut out a second and final time when his time expired.

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