WA Democrats join nationwide rollout of ‘wealth tax’ proposals
Washington state Democrats Sen. Noel Frame and Rep. My-Linh Thai announced legislation Thursday to create a state wealth tax on financial assets in excess of $250 million. They say it could generate an estimated $3 billion per year to fund housing and education, and decrease the tax burden on working-class people.
The rollout was part of a coordinated push nationwide, with similar proposals from Democrats across eight states. Frame called the legislation “the next step in the fight for progressive tax reform in Washington state.”
“Here in Washington state, we are going to fund our future by enacting a narrowly tailored property tax on extreme wealth derived from the ownership of stocks, bonds, and other financial assets, with the proceeds dedicated to education, housing, disability services, and tax credits for working families," she said.
Two-thirds of Democratic lawmakers have already signed on as sponsors of the proposal, Frame said. Thai said she expects the bill to be heard in committee.
Frame said she fully anticipates a legal challenge if the bill passes, but she believes this tax proposal complies with the state constitution, which she said grants lawmakers “fairly unbridled” powers of exemption.
“It’s a broadly applied property tax and a broadly applied exemption,” Frame said. “Everybody’s subject to it, and everybody gets their first quarter billion of assessed value exempt before the tax goes into effect.”
Jason Mercier is the government reform director for the Washington Policy Center, which has argued against new taxes. He called Frame’s legal interpretation a “very novel argument.”
Mercier said the state’s bipartisan tax structure work group found the wealth tax unpopular and declined to recommend one. But he said today’s launch, which was also attended by House Finance Committee Chair April Berg, was a strong show of support for the proposal.
“We knew these bills were coming,” Mercier said. “The amount of sponsors and having [committee] chairs on there kind of changes this from being a conversation bill to a bill that they might try to push through.”
Mercier said these taxes would be the first of their kind in the U.S. But other countries, including France, have abolished them after concerns emerged that they drove wealthy residents to move elsewhere.
Supporters said the wealth tax would be a necessary correction to Washington’s current tax structure, which Frame called “the worst in the country.”
According to the Institute on Taxation and Economic Policy, the bottom fifth of earners in Washington spend six times more in taxes as a share of their income than the top one percent. The wealth tax launch included support from educators, parents of children with disabilities, and housing advocates.
This proposal is separate from the capital gains tax lawmakers successfully passed last year, which is collected when stocks and bonds are sold. That tax has faced a legal challenge, which is scheduled to be heard by the Washington Supreme Court next Thursday, Jan. 26. The crux of that case is whether the capital gains tax can be deemed an “excise” tax on capital gains over $250,000, rather than a tax on income or property.
Frame proposed a wealth tax last year but said it died after lawmakers decided to prioritize the capital gains tax and the Working Families Tax Credit, which takes effect this year.