Governor says tax must return revenue to families, rejects income tax under $1M – KOMO

OLYMPIA, Wash. — Gov. Bob Ferguson signaled Tuesday he supports a millionaire’s tax but insists any final bill must return a substantial share of revenue to families and small businesses, and that he will not back an income tax on individuals earning under $1 million. The state Senate approved the measure 27-22 and the proposal now advances to the House as lawmakers race to finish the session by March 12. Ferguson outlined proposals — including roughly $1 billion for small business tax relief, expanded sales-tax exemptions for essentials, twice-yearly sales-tax holidays, and a larger Working Families Tax Credit — as conditions for his support.

Key Takeaways

• The Washington State Senate approved the millionaire’s tax 27-22; the bill moves to the House for consideration before the March 12 session end.
• The proposal would impose a 9.9% income tax on annual income above $1 million; Ferguson says he will not support any income tax on individuals earning under $1 million.
• Ferguson wants about $1 billion of revenue used for small business tax cuts and broader sales-tax exemptions on essentials such as diapers and baby products.
• He is calling for a twice-a-year sales-tax holiday on purchases under $1,000 and a dramatic expansion of the Working Families Tax Credit to reach more low- and moderate-income households.
• Business leaders warn of relocation risks and cumulative tax burdens, while the governor says he has not seen concrete evidence of mass departures tied to the measure.

Background

Debate over a millionaire’s tax in Washington has intensified against a backdrop of rising housing and living costs, limited state revenue options, and the state’s lack of a broad-based personal income tax. Proponents argue a targeted levy on high earners can fund affordability programs and services, while opponents warn it could drive capital and jobs out of state. Washington has previously enacted other targeted levies — including a capital gains tax and local levies — which have already shaped conversations about competitiveness and tax burdens.

Governor Ferguson, a Democrat, has long prioritized affordability measures for working families. The current proposal — a 9.9% surcharge on income above $1 million — is designed to raise substantial revenue quickly, but its passage requires careful allocation decisions. State leaders, business groups, and advocacy organizations are engaged in negotiations over offsets, tax credits, and exemptions intended to reduce pressure on middle- and lower-income households and small enterprises.

Main Event

The Senate passage on Monday by a 27-22 margin sent the bill to the House, where amendments and budget trade-offs are expected. Speaking from his Olympia office the next day, Ferguson described the measure’s direction as positive but incomplete, saying, “We are not there yet, and we are still not close to being there.” He emphasized that any signed legislation must channel a meaningful portion of revenue back to residents.

Ferguson outlined concrete mechanisms he wants included: roughly $1 billion in tax relief targeted at small businesses, expanded sales-tax exemptions for essential items such as diapers and baby supplies, and a twice-yearly sales-tax holiday eliminating sales tax on purchases under $1,000. He also demanded a significant expansion of the Working Families Tax Credit both in eligibility and payment size to ensure low- and moderate-income households benefit.

When asked whether he would veto the bill if those changes are omitted, Ferguson declined to state a hypothetical outcome but reiterated prior public remarks that the measures he described are “musts” for his support. He also pushed back on anecdotal claims that the tax would trigger mass departures of high earners, saying his conversations with business visitors do not reflect that as a dominant concern.

Analysis & Implications

Policy design will determine whether the tax produces net gains for Washington residents or creates unintended economic consequences. Directing revenue toward small business tax cuts and refundable credits increases political and public support, but implementation details — who qualifies, phase-in periods, and offsetting revenue reductions — will shape distributional effects. A $1 billion allocation for small business relief would reduce operating costs for many firms but may not fully offset long-term concerns about competitiveness.

Economists note targeted relief and refundable credits can blunt regressivity and stimulate local spending if funds flow to lower-income households. Expanding the Working Families Tax Credit would directly increase after-tax income for low- and moderate-wage earners and could produce measurable reductions in poverty and improved household stability. However, the overall revenue envelope and administrative setup will define the scale and speed of those benefits.

Opponents’ warnings about out-migration hinge on behavioral responses that are difficult to predict. Past state-level tax changes show some relocation by a small subset of wealthy taxpayers can occur, but broad economic effects depend on many factors including housing, labor markets, and regional business climates. The governor’s posture — insisting on offsets and household rebates — attempts to balance revenue goals with retention concerns.

Comparison & Data

The table highlights immediate numeric anchors for negotiations. Lawmakers will weigh these figures against projected revenue estimates, program costs for an expanded Working Families Tax Credit, and choices about which sales-tax exemptions to broaden. Those decisions will affect both the net revenue available for public services and the distributional impact across households and businesses.

Reactions & Quotes

“I’m crystal clear that I will not support any form of income tax for individuals earning less than $1 million annually,”

Gov. Bob Ferguson (statement, Olympia)

The governor framed his stance as a safeguard for middle‑income residents while urging revenue recycling. He emphasized programmatic options he believes would make the tax politically and economically sustainable.

“I think his response was baffling… Washington is becoming a harder and harder place to do business,”

Collin Hathaway, Skylight Capital founder

Hathaway, a business owner, expressed concern about cumulative tax changes and cited anecdotal moves within the region. Business community voices are likely to press for additional offsets and clarity on long-term tax strategy during House deliberations.

Unconfirmed

• Claims that the tax will cause widespread relocation of high earners are based on anecdotal reports and are not corroborated by comprehensive migration data at this stage.
• Exact revenue projections and how much would be allocated to specific offsets (beyond the governor’s $1 billion suggestion) remain to be finalized in legislative text and budget forecasts.

Bottom Line

The Senate’s 27-22 passage sets up a consequential House debate in a short window before the March 12 deadline. Governor Ferguson’s conditional support—insisting on sizable returns to families and businesses and ruling out taxation of earners under $1 million—will be a key constraint shaping amendments and negotiations.

If lawmakers incorporate direct relief for small businesses and meaningful expansions of refundable credits and sales-tax exemptions, the measure’s political viability could improve. Conversely, failure to include those offsets may increase the risk of a veto fight or deepen business opposition. Observers should watch House amendments and the fiscal notes accompanying any changes to assess both distributional outcomes and economic implications.

Sources

• KOMO News — local news report on Governor Ferguson’s statements and Senate passage (media)