A bill that dropped Wednesday would impose a tax on Washington employers for each employee earning over $1 million.
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The bill, which is sponsored by eight Democratic senators, sets three rate tiers for the “excess compensation tax,” depending on the employees’ wages:
- For employees making between $1 million and $4,999,999.99 per year, the rate is 5%;
- If an employee makes between $5 million and $9,999,999.99, the rate is 7.5%; and
- If an employee makes $10 million or more, the tax rate is 10%.
The tax is not a “head tax,” prime sponsor Sen. Joe Nguyen said, but “a tax on wealth inequality.”
Based on the bill text, it’s not readily apparent exactly which Washington employees the tax covers. But Nguyen says the intent is for the tax to apply to employees living in Washington only. A company like Amazon, then, wouldn’t pay the tax on its workers who live out-of-state.
Rather than direct new revenue from the tax toward a specific purpose, like Senate Democrats’ “Fix Our Tax Code Plan” that includes a capital gains tax, Nguyen said this money would go toward the General Fund. It’s “agnostic on purpose,” he said, so that there’s flexibility in how the money can be spent down the road.
As for why Nguyen introduced the bill with just 11 days left in the session, he said the goal is to “inject” a narrative into the conversations that are happening right now, especially in the middle of budget discussions.
“Doing it right now makes sense,” Nguyen said. “We’re talking about the budgets right now, we’re talking about what we can and cannot fund right now.”
Nguyen called wealth inequality one of the “driving forces” behind a lack of resources in Washington, “one of the wealthiest states in the wealthiest nation in the world” — resources that could fund priorities like education, behavioral health, and orcas.
“It’s important to just have this conversation,” Nguyen said.