Washington Gov. Proposes 1 Percent Wealth Tax to Address State Budget Gap

Outgoing Gov. Jay Inslee targets residents with worldwide net worth exceeding $100 million.

Washington Gov. Jay Inslee speaks at a press conference in Seattle on Oct. 22, 2021. Bruce Bennett/Getty Images

Washington Gov. Jay Inslee, in his final budget proposal before leaving office in January, proposed a first-in-the-nation statewide wealth tax intended to bolster revenue amid a significant budget shortfall.

Announced on Dec. 17, the proposed 1 percent wealth tax would apply to residents with worldwide net worth exceeding $100 million. This approach marks the first time any U.S. state has sought to levy a tax specifically targeting the richest fraction of its population.

Washington state is grappling with a multibillion-dollar budget gap triggered by inflation, increased caseloads in safety net programs, and decreased revenues from sources such as home sales and capital gains.

By focusing on ultra-wealthy individuals, of whom state officials estimate roughly 3,400 meet the threshold—including Microsoft founder Bill Gates—the governor says his proposal would bring in more than $10 billion over four years.

The influx of funding could help preserve progress in areas such as housing affordability, behavioral health services, early learning, and K-12 education, which all face potential cutbacks, he said.

In addition to the new wealth tax, Inslee’s proposal includes changes to the state’s Business & Occupation tax that would temporarily raise rates on certain high-earning service providers.

However, the wealth tax represents the core of the plan and what sets Washington state apart from other states.

“We cannot survive as a healthy robust community that believes we’re treated fairly while we have this level of poverty and want amidst this enormous wealth. There has to be some mechanism so that working people have a way to survive in an economy that generates this much wealth,” Inslee said in a Dec. 17 briefing.

Washington’s incoming governor, Democrat Bob Ferguson, is currently reviewing Inslee’s plan and has indicated he would not rule out new taxes to address the projected $16 billion budget shortfall over four years. Ferguson will be sworn in on Jan. 15, 2025.

Likewise, the state’s newly upheld capital gains tax and the November voter support for it indicate a public appetite for a different tax structure, though Republican lawmakers argue Washington’s issue is spending, not revenue. Economists skeptical of wealth taxes say that only a handful of countries have them and that previous attempts elsewhere have often been repealed due to difficulties in valuation and the risk of discouraging investment.

The Associated Press contributed to this report.