Washington governor: Passage of income tax could slip to 2027

Washington Gov. Bob Ferguson warned Tuesday that the income tax Democratic state lawmakers are pressing to approve in the next nine days might have to wait until next year.

The governor and lawmakers have been unable to resolve differences over how to use revenue from the tax.

Ferguson said he is “hopeful” an agreement can be reached by the end of the session March 12. “I am committed to making sure we get this right, even if that means coming back next year to finish the bill in a longer session,” he wrote in an email to political donors and supporters.

For the first-term Democratic governor, this marked a new level in his saber-rattling on the controversial legislation that would impose a new 9.9% tax on household income over $1 million a year.

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The prime sponsor of the tax bill downplayed Ferguson’s warning.

“I think we’ll get there. I’m not worried,” said Senate Majority Leader Jamie Pedersen, D-Seattle. “He’s been very consistently saying what he needs to sign the bill. It’s just a negotiation.”

Late Tuesday, the chair of the House Finance Committee said the bill has a “strong path forward.”

“I am confident we will have a bill in front of the governor to sign by the end of session,” said Rep. April Berg, D-Mill Creek.

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There will be changes from the version passed by the House committee, she said. Those could be available later this week. No date has been set for a vote on the House floor.

Since Ferguson first embraced the so-called “millionaires’ tax” in December, he’s insisted that a majority of the estimated $3 billion a year it would bring in be spent on tax relief for working families and tax credits for small businesses. Pedersen said lawmakers are aiming for “25 to 40%.”

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Collections from the tax, which is expected to be challenged in court and on the ballot, would begin in 2029.

As Senate Bill 6346 has moved through the legislative process, Ferguson has scolded Democrats for failing to provide enough tax relief in the bill. He did so when it passed the Senate and again after the House Finance Committee revised and approved it last week. At that time, he warned it “still has a long way to go” and raised concerns that time was running out to reach an agreement.

A new iteration is expected if and when the full House votes on the bill, possibly this weekend.

Ferguson’s email came a day after a dozen leaders involved in artificial intelligence ventures sent the governor a letter, ​​urging him to “pause” the income tax legislation and increase the state’s capital gains tax instead. They warned the income tax would stifle AI investment in the state, with companies lured instead to more attractive business climates in San Francisco and Texas.

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The Wall Street Journal editorial board seized on the letter, writing that it reflected “A Tech Tax Revolt Against Democrats.” In an editorial published yesterday afternoon, the board argued that Washington state “Democrats are putting their economy and jobs at risk if they follow the California ratchet of tax, spend, and tax some more.”

Republicans in the state Legislature steadfastly oppose the legislation. They contend that because it doesn’t take effect for three years, there’s no need to do it this year.

On Tuesday, GOP leaders in the House and Senate met with Ferguson and nudged him to do more to convince moderate Democrats to support his approach.

“I told him that my perception is the Democratic leadership isn’t taking his ideas quite seriously, but some moderate Democrats are, and he has an opportunity to step up and provide leadership,” House Minority Leader Drew Stokesbary, R-Auburn.

Rep. Chipalo Street, D-Seattle, noted that there is “a lot of consensus” between the House, Senate, and governor on how to structure the tax and spend the revenue.

And he suggested House lawmakers could be open to some of Ferguson’s proposals, such as expanding a tax exemption in the bill for small businesses or providing broader sales tax relief. Street took part in a call with reporters on the income tax hosted by the union-backed group Invest in Washington Now, which is pushing for passage of the legislation.

“But the amount of money that this income tax brings in is limited,” Street added. “So we’re going to have to make some difficult choices.”

Washington State Standard Editor Bill Lucia contributed to this report.

This story was originally published by the Washington State Standard.