Senate Democrats want to raise billions in revenue ahead of formal budget announcement

OLYMPIA – Senate Democrats have unveiled a plan to raise billions of dollars amid a deep budget shortfall by taxing Washington’s wealthiest residents through what is called a “financial intangibles tax,” allowing property tax increases to be set by inflation and population growth, and removing the cap on employer payroll taxes.

The plan also calls on the state to reduce the sales tax by half a percent, which democrats argue would help make the tax code less regressive.

The proposal comes ahead of a formal budget release by House and Senate Democrats next week, as lawmakers address the state’s multibillion-dollar budget deficit.

“We’ve spent months discussing our budget, learned about how damaging an all-cuts budget might be, and have done the hard work to scrub the budget for savings and efficiencies,” said Sen. Noel Frame, D-Seattle, vice chair of the Senate Ways and Means Committee. “Now, honoring our responsibility to Washingtonians, we are releasing this proposal for new revenue.”

The proposal calls for taxing $10 on every $1,000 of the assessed value of certain financial assets, including stocks, bonds, exchange-traded funds, and mutual funds, which Senate Democrats say could raise $4 billion per year when fully implemented in fiscal year 2027. According to Senate Democrats, the tax, which would be paid by approximately 4,300 residents, would go toward increasing school funding.

Senate Democrats also want to repeal the cap on employer payroll taxes and adopt a system similar to Seattle’s Jumpstart tax, which would raise $2.3 billion per year once fully implemented, with the funds going toward schools, health care and other state programs.

The plan also calls on the state to raise the cap on property tax increases from 1% to the combined rate of population growth plus inflation, though local jurisdictions could opt to take a lower rate. The plan also calls for exemptions for the elderly and those with disabilities. The change, Senate Democrats say, would raise $779 million over four years to fund schools.

The plan calls for eliminating 20 tax exemptions where the “public policy objective was not met, it is unclear whether the policy objective was met, or the exemption is legally obsolete,” which would raise approximately a billion dollars over four years.

Under the plan, Senate Democrats hope to reduce the state’s sales tax from 6.5% to 6%, which they say would reduce the burden on households. The plan would reduce state revenue by approximately $1.3 billion per year.

“Voters were clear last November: they don’t want school funding cut so that extremely wealthy people can keep enjoying a tax break,” Senate Majority Leader Jamie Pedersen, D-Seattle, said in a statement.

“This proposal reflects what we’ve heard from our communities: the wealthiest few should share more of the responsibility of investing in public schools and the services people need.”

During a meeting of the Washington State Economic and Revenue Forecast Council on Tuesday, Dave Reich, forecast council executive director, said an updated economic forecast shows the state will bring in $845 million less during the next four years than initially projected.

Democrats in the House and Senate will unveil their full budget proposals on Monday.

Senate Republicans put forth a spending plan last week they say proves the state can adopt a balanced budget without increasing taxes.

“The smart approach is to avoid new and higher taxes, limit new spending to core priorities like K-12 and public safety, preserve social services, and protect the rainy-day fund,” said Sen. Chris Gildon, R-Puyallup.

Rep. Travis Couture, R-Allyn, told reporters Wednesday that the state has “recklessly spent beyond our means, and beyond our revenue growth.”

“And we’ve created this self-inflicted wound in our budget process,” he said.

Couture added that the state could “absolutely” balance its budget without new revenue streams.

“We certainly believe that we can have state government live within its means and still cover our core caseloads and the things that are most important to Washingtonians,” Couture said.

Relying on new taxes, Couture said, could prove challenging when “you’re budgeting so tightly on an assumption of these new taxes that may never exit a courtroom once they enter.”

Senate Minority Leader John Braun, R-Centralia, said Tuesday that Republicans plan to “push back on taxes because they’re bad for people across the state.”

The Legislature must adopt a balanced budget by April 27.

Correction: This article has been updated to reflect that Travis Couture is a Republican, not a Democrat.