No One Tried To Stop Half Billion Dollar Corporate Tax Break In Millionaires Tax In WA Senate

The Washington State Senate took a historic step toward fixing the state’s notoriously regressive tax code when it approved a 9.9% income tax on earnings over $1 million. Incumbents will almost certainly tout that vote as evidence of their progressive credentials if left-wing challengers emerge in their upcoming elections. What they are less likely to highlight is the substantial corporate tax relief baked into the legislation.

On Monday, the Washington State Senate passed the millionaires tax 27-22, basically along partisan lines save three purple-district Democrats who voted no with Republicans. During the three hours of debate, Senate Democrats gushed over how the legislation will make Washington’s ass-backward tax code fairer for working people. But not once in those three hours did any Democrat mention the half billion dollar corporate handout built into the tax, let alone propose an amendment to remove it. 

The bill’s primary sponsor, Sen. Jamie Pedersen (D-Seattle), wrote his millionaires tax with a generous half billion corporate tax break tucked in. As passed by the Senate, the legislation ends a 0.5% tax surcharge on companies with more than $250 million in annual revenue a year early, in 2028 instead of 2029. Many critics see this as a favor designed to keep the corporate lobby’s attacks at bay, a political strategy Pedersen’s acknowledged in the press. 

Losing out on half a billion dollars in tax revenue is a major blow. That’s half a billion that could have gone to education, affordable housing, childcare, or tax relief for working people to name a few of the Democrats purported priorities. And not a single Democrat was brave enough to propose an amendment to redirect the handout to working people or even challenge the assumption that the Democrats must appease the corporate lobby to pass the publicly popular millionaires tax.  

The only nod to the corporate carve-out during the entire three hours of debate came from Minority Leader John Braun (R-Centralia). Even then, he didn’t exactly criticize it, rather he made a trickle-down argument that the breaks provided tax relief ‘two or three steps removed’ from everyday Washingtonians.

It's worth noting that the Democrats made another concession to their quest for revenue in a larger dollar amount. Sen. Marko Liias (D-Shoreline) proposed an amendment that will partially rollback a sales tax on services the Legislature passed last year when their efforts to pass a wealth tax and a payroll tax failed. And it's not exactly the sales tax exemption of the working class as it mostly applies to business-to-business sales, including a sales tax on temporary staffing and consulting service. This will lose the State hundreds of millions in revenue a year in perpetuity unlike the surcharge sunset, which amounts to a one time loss. There was also no movement to stop that amendment on the floor and it passed.

There’s still time to amend the bill in the other chamber. It seems likely that House Democrats will take pointers from Gov. Bob Ferguson, who laid out his wishlist for how to spend the tax’s revenue in a press conference earlier this week. He wants about $1.9 billion or half of the revenue to go toward sales tax relief. But without apetite to raise more revenue with other new progressive taxes, that sets up a false choice between a fairer tax code for working people and the services many of them already depend on. But perhaps rabble rousers in the House will win back some dollars by dropping the corporate tax break tax rollback that their moderate colleagues seem to prefer remains out of the spotlight.