With Washington lawmakers scheduled to wrap up their 2025 session April 27, the session’s biggest drama is shaping up to be what to do about the budget. State revenues are projected to fall short by anywhere from $7 billion to $16 billion over the next four years compared to what will be needed to maintain current services. Washington’s new Democratic governor Bob Ferguson has proposed to save $300 million by mandating that about 75,000 state workers (except state troopers and prison staff) take one furlough day per month. (A furlough is an unpaid day off; taking one per month amounts to a 5% pay cut.) He also proposes to save nearly $90 million by closing unused wards in Western State Hospital, a psychiatric hospital south of Tacoma.
On the other hand, Democratic leaders in the state senate and house have come up with a handful of revenue ideas to eliminate the budget shortfall:
- A payroll tax on super-high-earning employees: Senate Democrats are proposing that about 5,000 businesses that have $7 million or more in payroll pay a 5% tax on payroll expenses above the Social Security threshold (currently $176,100 per year). That would raise about $2.3 billion a year.
- Wealth tax: Senate and House Democrats agree that about 4,300 wealthy individuals with a net worth above $50 million should pay a tax on the value of stocks, bonds, and mutual funds. The Senate wants to set the tax rate at 1%; the House proposes 0.8%. The proposals would raise up to $4 billion a year. The logic is that Washingtonians already pay a wealth tax on land and buildings, known as the property tax — maybe financial property owned by the very richest shouldn’t continue to be tax-free?
- Ending low-performing tax breaks: Senate Democrats propose to end 20 tax exemptions considered obsolete or ineffective. The list includes tax breaks for gold bullion and prescription drug wholesalers. It would raise $1 billion a year
- A small but meaningful increase in the business income tax: Corporations doing business in Washington pay a “Business & Occupation” tax of less than 2% on their gross income (profits). House Democrats propose that businesses with more than $250 million in profit should pay an additional 1%. That could raise $2 billion a year.
But Ferguson has splashed cold water on lawmakers tax proposals, which would make Washington taxation more progressive. At an April 1 press conference, Ferguson said he doesn’t support the wealth tax, and he pushed lawmakers to rely less on tax increases and more on spending cuts.
Unlike the federal government, states must balance revenues and expenses. Lawmakers have just over a week left to agree on how to do that.
