Washington state income tax passes House after grueling 25-hour floor debate

After a record-breaking 25-hour-long debate, a proposed income tax on high earners has passed a major legislative milestone, garnering a “yes” vote from the House just as this year’s session winds down.

In a 51 to 46 vote with four Democrats dissenting, the bill now has a clear path to the governor’s desk. If signed into law, it would become the first income tax for the state of Washington.

The tax would take a 9.9% cut of all household incomes over a million dollars. It’s estimated to impact about 20,000 households in the state and generate around $3 billion annually once it takes effect in 2029. Democrats have suggested this tax could be a major revenue generator for a state that is otherwise cash-strapped from federal government cuts, inflation, and rising legal costs.

“We’ve been debating this for hours, but we’ve been on this path for decades,” said Rep. April Berg (D-Mill Creek), who sponsored the bill in the House. She and other lawmakers napped in hour-long stints between votes throughout the 25-hour debate.

“As a state, we’re struggling to fund these vital services and we are in desperate need of structural tax reform,” Berg added. “The 'millionaires tax' before you, Madame Speaker, is a way to change that.”

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The bill racked up over 80 amendments ahead of the House floor debate, with suggested changes from Republicans and Democrats alike.

Republicans tried to pass a number of changes that would have created exemptions for farmers, people who pay income taxes in Oregon, and people who work for less than a week in Washington state. They tried to lower the tax rate to 1% from 9.9%, lower Business and Operations taxes, and divert more of the revenue toward childcare programs and tax credits. They also tried to punt a vote on the bill to next year, and repeatedly asked that the income tax proposal be put to the voters first.

“This will bring change, but I don’t think it’s positive change. I think it’s a negative change,” Rep. Ed Orcutt (R-Kalama) said as debate wrapped up. “We have had one of the most stable revenue structures in the country, and it’s provided additional revenue, every year they’ve grown, even without tax increases.”

He and others worried adding an income tax would upset the state’s more than 90-year-old tax system that has relied heavily on sales taxes, property taxes, and Business and Operations taxes. Members have also expressed concern that this income tax on high earners will soon expand to include all Washingtonians.

“While the title of the bill is a tax on millionaires, it’s my belief this is a tax on Washingtonians,” Rep. Joshua Penner (R-Orting) said. “It just matters when it’s going to apply to which Washingtonian.”

But Democratic leadership held firm, ultimately adopting only a handful of amendments that made exemptions for tribal income, libraries, and some health care services.

For some time, Gov. Bob Ferguson wavered in his support of the tax, initially saying he wanted to see more of its proceeds go toward working Washington families, but amendments added to the bill last week swayed him.

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He eventually said he would sign the bill after changes were made to expand the Working Families Tax Credit further by including higher incomes, earmarking 5% of the revenue for child care and early learning programs, and the addition of over-the-counter medications to the list of sales tax exemptions.

The bill now pledges to fund free breakfast and lunch for all public school children with the money generated from the tax, but many pointed out during the House debate that this promise has no teeth behind it because it didn’t specifically earmark any of the revenue in the bill language.

The latest version of the bill also removed its provision for 7% of the tax revenue to help fund the state’s struggling public defense system.

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Ferguson cemented his support of the bill by showing up in person on Tuesday evening to watch the final vote and congratulate House Democrats.

“I was open to lots of ideas. The key north star that I said over and over was dollars back to the people,” he said. “I made it very clear that I was less focused on specific ideas, I put a lot of ideas out there, and for me it was just the amount, dollars back to the people.”

Another change made earlier in the session was a rollback of a sales tax on technology services, sunsetting the tax in 2029 if the income tax is passed. This was seen as a win for businesses and for other entities, like schools.

Progressive House Democrats also removed a Business and Operations tax exemption for high grossing businesses.

Last week, a number of tech leaders expressed their opposition in a letter to the governor, saying that if the tax was passed, they were concerned it would stifle tech innovation in the region.

Supporters of the tax say that similar types of taxes have been passed in other states and they saw neither large-scale flight of big businesses or a drop in innovation. Many point to Massachusetts as an example, after the state passed an extra tax on incomes over a million dollars in 2022. Some experts have said the tax did not cause large-scale flight from the state, and it has actually generated more revenue than originally predicted, which has gone toward public schools and transportation.

“I don’t believe that wealthy people and successful businesses move here because they want to live in a tax haven, they move here because the quality of life is high,” Rep. Joe Fitzgibbon (D-Seattle) said. “And I believe that we all do better when we all do better — that the wealthiest among us are all better off when we have a strong social safety net, great education, and a sustainable budget.”

If the Senate approves these changes, the final bill will head to the governor’s desk. The last day of this year’s legislative session is Thursday, March 12.