Ferguson’s Millionaire Tax Gamble in Washington
Why Ferguson Backs Income Tax on WA Residents Earning Over $1M: A Bold Move for Tax Fairness?
Key Takeaways
- Fairer Tax System: The proposal targets only the top 0.5% of earners, aiming to ease the burden on working families through credits and sales tax cuts.
- Revenue Boost: Expected to generate $3 billion annually starting in 2029, funding education, small business relief, and essential tax reductions.
- Legal Hurdles Ahead: Despite Ferguson's support, the tax faces court challenges and voter pushback, given Washington's history of rejecting income taxes.
- Economic Ripple Effects: Critics warn of "millionaire flight" and job losses, while supporters see it as a step toward progressive reform.
- Timely Shift: Ferguson's endorsement marks a change from his earlier doubts, driven by a $2.3 billion state budget shortfall.
Imagine this: You're a hardworking family in Seattle, scraping by with rising grocery bills and school fees, while the state's wealthiest pay a tiny slice of their massive incomes in taxes. It feels unfair, right? Now, enter Washington Governor Bob Ferguson, who's just thrown his weight behind a plan that could flip the script. On December 23, 2025, Ferguson announced his support for a so-called "millionaires' tax" – a 9.9% income tax on Washington residents earning over $1 million a year. This isn't just another budget tweak; it's a seismic shift in how Washington funds its future, targeting the ultra-rich to lift up everyone else.
Why does this matter to you, even if you're not pulling in seven figures? Washington's tax system is one of the most regressive in the U.S. – meaning low- and middle-income folks shell out a bigger chunk of their earnings than millionaires do. The bottom 20% of earners pay about 14% of their income in state and local taxes, while the top 1% pay just 4%. Sales taxes on everyday buys like diapers or toothpaste hit families hardest, while capital gains from stock sales often skate by lightly taxed. Ferguson's backing of this income tax could change that, promising to pump billions back into credits for working families, relief for small businesses, and cuts to those pesky sales taxes on essentials.
Still, don’t get ahead of ourselves—this isn’t settled yet. Washington has no personal income tax, and voters have shot down similar ideas time and again. The state Supreme Court has ruled against broad income taxes before, calling them unconstitutional. Republicans are crying foul, labeling it a "slippery slope" that could eventually tax everyday earners like you and me. And with a $2.3 billion budget hole staring the state down through mid-2027, the pressure is on. Ferguson, fresh off signing billions in new taxes earlier this year, admits this is a pivot – but one he says is necessary for fairness.
In this post, we'll dive deep into the proposal, unpack Ferguson's reasons, weigh the pros and cons, and look at what it could mean for Washington's economy and your wallet. Whether you're a high earner eyeing a move to Idaho or a parent hoping for cheaper school supplies, this story affects us all. Let's break it down, step by step, with real facts, real reactions, and even some practical tips to navigate the changes ahead. By the end, you'll see why this debate is heating up just in time for the 2026 legislative session.
What Exactly Is the Proposed Income Tax?
Let's start with the basics. The proposal, floated by Democratic lawmakers like Senate Majority Leader Jamie Pedersen earlier in 2025, would slap a 9.9% tax on adjusted gross income (AGI) for individuals and households earning more than $1 million annually. That's not your total paycheck – it's after deductions like mortgage interest or charitable donations. And importantly, it only kicks in on the amount over $1 million. So if you make $1.2 million, you'd pay 9.9% on that extra $200,000 – about $19,800 in new state taxes.
This isn't a blanket income tax; it's laser-focused on the elite. Less than 0.5% of Washingtonians – roughly 40,000 people – would feel the pinch. For context, that's fewer folks than attend a single Mariners game at T-Mobile Park. The revenue? A whopping $3 billion a year, starting in 2029, once the legal dust settles. That's enough to cover the entire K-12 education budget for a year or expand healthcare access for thousands.
How It Fits Into Washington's Tax Puzzle
Washington relies heavily on sales, property, and business taxes – no personal income tax since statehood in 1889. But a 7% capital gains tax on big stock sales was added in 2022, netting $500 million so far. This new levy builds on that, treating high wages like high investment gains: taxable when they exceed a threshold.
Ferguson wants safeguards built in. He'd push to codify the $1 million cutoff in the state constitution, adjusting it yearly for inflation – so it might rise to $1.05 million by 2030 if prices climb 5% a year. No taxing folks under that line, period. He said he opposes any income tax increase for individuals making less than $1 million annually.
Quick Stats on Who Pays What Now:
| Tax Type | Who It Hits Hardest | Avg. Rate for Low-Income | Avg. Rate for High-Income |
|---|---|---|---|
| Sales Tax | Working Families | 10-12% of income | 2-3% of income |
| Property Tax | Homeowners | 1-2% of home value | Minimal impact on investments |
| B&O Tax | Small Businesses | Varies by sales | Deductible for big corps |
| Capital Gains | Investors | N/A (rarely applies) | 7% on gains over $250K |
(Source: WA Dept. of Revenue, 2025 data)
This table shows the imbalance – families buying groceries pay more proportionally than CEOs cashing bonuses. The millionaires' tax aims to even the scales.
Why Is Ferguson Backing This Tax Now? A Look at the Shift
Bob Ferguson isn't new to tax fights. As attorney general for over a decade, he defended the 2022 capital gains tax against lawsuits. But as governor, elected in 2024, he was cautious about piling on more levies. In May 2025, he signed $10 billion in new taxes for climate and education – the biggest package ever. Back then, he nixed ideas like a wealth tax, calling them "untested" and lawsuit bait.
So what changed? Blame the budget blues. Washington's facing a $2.3 billion shortfall through mid-2027, fueled by slowing revenue from tech layoffs and remote work trends. Pandemic aid dried up, and costs for schools, Medicaid, and ferries ballooned. Ferguson released a supplemental budget plan on December 23, tapping rainy-day funds and redirecting climate cash – but he knows that's a Band-Aid.
Enter the millionaires' tax as the long-game fix. According to Ferguson, progressive tax reform must go beyond merely increasing contributions from higher earners. The goal is clear: use new gains to deliver direct relief to working families and small business owners—not redistribution for its own sake, but targeted support.
The Human Side: Stories from the Ground
Take Sarah, a single mom in Tacoma running a coffee shop. She pays 1.5% in B&O taxes on gross sales—even when she isn’t turning a profit. Sales taxes on supplies add up, too. Under Ferguson's vision, that $3 billion would expand the Working Families Tax Credit – a refundable credit for low earners – by 50%, putting $1,000+ back in pockets like hers. Or consider Dr. Patel, a surgeon earning $1.5 million but employing 20 nurses. Relief from sales taxes on medical supplies could save his practice thousands.
Ferguson's pitch is pragmatic: Fix the regressive system without broad hikes. But on X (formerly Twitter), reactions are fiery. One user posted: "This punishes success! High earners create jobs – tax them more, and they flee to Texas." Another cheered: "Finally, fairness! The rich pay their share."
The Potential Benefits: Who Wins and How?
If this tax passes, the wins could be huge – especially for everyday Washingtonians. That $3 billion isn't vanishing into a black hole; Ferguson insists it's earmarked for targeted goodies.
Boosting Families and Small Businesses
First up: Doubling down on the Working Families Tax Credit. Right now, it refunds up to $1,200 to low-income households. With extra funds, eligibility could rise to 200% of the poverty line, helping 100,000 more families. Imagine getting cash back for kids' clothes or rent – directly countering inflation's bite.
Small businesses get a lifeline, too. Ferguson wants to tweak B&O rates for mom-and-pops, potentially saving a Spokane bakery $5,000 yearly. And sales tax cuts on essentials? Goodbye, 10% on diapers or shampoo – a $200 annual break for new parents.
- Education Edge: $1 billion could hire 2,000 teachers, shrinking class sizes in overcrowded districts like Yakima.
- Health and Hygiene Relief: No more taxing toothpaste – freeing up $50 million for Medicaid expansion.
- Economic Multiplier: Studies show tax credits like this boost local spending by 40%, creating jobs in retail and services.
Broader Economic Perks
Washington's economy thrives on tech and trade, but inequality drags growth. The Institute on Taxation and Economic Policy estimates progressive taxes like this could add 0.5% to GDP by reducing poverty. Fewer families in crisis means more stable workers for Amazon or Microsoft.
Example in Action: Look at California's top 13.3% rate on millionaires – it funds universal pre-K without tanking the economy. WA could follow suit, making us more competitive for talent.
For internal reading: How Washington's Regressive Taxes Hurt Small Businesses and Guide to the Working Families Tax Credit.
The Criticisms: Why This Tax Sparks Backlash
Not everyone's popping champagne. Republicans and some business groups are sounding alarms, and for good reason – this could reshape lives.
Legal and Voter Roadblocks
Washington's constitution bans "graduated" taxes, and the Supreme Court struck down a similar levy in the 1930s. Initiative 2117 in 2024 even banned income taxes outright. GOP Rep. Travis Couture calls it a "nonstarter," predicting lawsuits that delay revenue until 2030 or kill it dead. "People don’t want an income tax," he tweeted, echoing voters who rejected measures in 1932, 1934, and 1973.
There will be a court challenge, but it’ll go before the voters,” Ferguson said—an arguably optimistic outlook. Maybe. But delays mean no quick cash for the shortfall.
Economic Risks: Flight and Fallout
The big fear: Millionaires bolt. After the capital gains tax, 200 high-net-worth folks left for Oregon in 2023, per migration data. A 9.9% hit could accelerate that – think tech execs to Nevada, no income tax there. X user @WheelerRipWA warned: "Businesses cut jobs, raise prices... hurting working families the most."
Small businesses tied to high earners suffer, too. A Bellevue surgeon taxed extra might skip that new clinic, axing nurse jobs. Critics like the WA Policy Center estimate 5,000 jobs lost in the first year.
- Slippery Slope Alert: Starts at $1M, but history shows creep – California's top rate began at 7% in the 1960s, now 13.3%.
- No Spending Cuts: GOP says Dems avoid trimming fat, like $1B in unused climate funds.
- Inequality Myth? Some argue WA's top 1% already pay 30% of state taxes; this piles on without reform.
Practical Tip for High Earners: If you're over $1M, chat with a tax advisor now. Defer income via 401(k)s or move assets to trusts. For more: WA Tax Planning for Executives.
External source: Institute on Taxation and Economic Policy Report on WA Taxes.
Historical Context: Washington's Long Tax Tango
Washington's aversion to income taxes dates back. In 1932, amid the Depression, voters OK'd a 1% levy – but courts killed it as a property tax in disguise. Similar flops followed, cementing sales taxes as king. By 2022, when the capital gains tax squeaked through (7% on gains over $250K), it was the first "income-like" tax in 90 years – and even that faced suits.
Ferguson's proposal echoes national trends: Nine states have no income tax, but four (like NY) tax millionaires extra. Oregon's 2023 "kicker" refund shows how targeted levies can work without exodus.
Timeline of WA Tax Fights:
| Year | Event | Outcome |
|---|---|---|
| 1889 | Statehood, no income tax | Relies on sales/property |
| 1932 | Voter-approved 1% tax | The court strikes down |
| 2022 | 7% Capital Gains Tax | Upheld, $500M revenue |
| 2024 | Initiative 2117 bans income taxes | Passes narrowly |
| 2025 | Ferguson endorses 9.9% on $1M+ | Pending legislature |
This history fuels skeptics: Why try again? Supporters say times change – inequality is worse now, with WA's Gini coefficient at 0.48 (higher = more unequal).
For a deeper dive: History of WA Tax Reforms.
What Happens Next? The Road to 2026 and Beyond
The legislature kicks off January 13, 2026 – a 60-day sprint. With Dem majorities (58-40 House, 29-20 Senate), passage is likely if Ferguson twists arms. Bill signing could follow by March, but expect Initiative 2117 challenges – possibly a voter referendum by November 2026.
If upheld, revenue flows in 2029 after appeals. Meanwhile, Ferguson's budget taps $500M from reserves and $300M from climate funds – controversial moves GOP calls "robbing Peter to pay Paul."
Tips for Navigating the Uncertainty
- For Families: Track Working Families Credit deadlines – file early for max refunds.
- For Businesses: Lobby for B&O tweaks; join groups like the WA Retail Association.
- For All: Vote in '26 – this could hit ballots.
External: WA Legislature Bill Tracker.
Frequently Asked Questions (FAQs)
Based on trending searches and X chatter as of December 2025, here are the hot questions:
Will this tax affect me if I earn under $1M?
No – Ferguson vows to keep it strictly over $1M, inflation-adjusted. But watch for expansions if revenue falls short.
How much will millionaires really pay?
On $1.5M income: 9.9% on $500K = $49,500. But credits for capital gains tax paid could offset some.
Could millionaires just move away?
Possibly – post-2022 tax, outflows rose 15% to no-tax states. But "you can't just flee," says one analyst; roots like family keep many.
Is Washington's tax system really that unfair?
Yes – ITEP ranks it 38th fairest; low earners pay 12.7% effective rate vs. 3.4% for the rich.
When does revenue start flowing?
Not till 2029, after legal hurdles. Short-term fixes like fund taps bridge the gap.
What's the GOP alternative?
Spending cuts and sales tax rebates tied to the budget balance – no new taxes.
Wrapping It Up: A Fairer Future or Risky Gamble?
Ferguson's backing of an income tax on WA residents earning over $1M is a gutsy call – promising $3B to fix a broken system, ease family woes, and fund schools without broad pain. But with legal fights, potential flight, and partisan fire, it's no sure thing. As Ferguson puts it, it's about "fairness in tough times."
What do you think? Will this make Washington more equitable, or drive away dreamers? Share in the comments – and if you're a high earner, book that tax consult today. For updates, subscribe to our newsletter or follow WA Tax Watch. Let's push for policies that lift all boats.
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