Senate Democrats are publicly acknowledging that recent tax policy may be driving some residents out of Washington as they move to reverse last year’s estate tax increase.
Lawmakers last year raised the state estate tax to a top rate of 35%, described by critics as the highest in the country. Senate Bill 6347 would lower the top rate back to 20%. “We do have a lot of anecdotal evidence that people are making a decision to re-domicile, and I think it’s worth taking that seriously,” said Senate Majority Leader Jamie Pedersen of Seattle.
Business groups warn the higher estate tax rate could drive away wealthy residents and slow investment. The Association of Washington Business said a survey found more than half of its members are considering leaving the state because of Washington’s tax burden and are putting business expansion plans on hold. “You’re going after some of the most mobile taxpayers you can think of, which could then push people out of state at a time when we desperately need the revenue,” said Max Martin of the Association of Washington Business.
Pedersen acknowledged the estate tax rollback is part of broader discussions with stakeholders over other tax proposals, including the state’s proposed 9.9% tax on income above $1 million. “As part of our conversations with stakeholders about the millionaire’s tax, we agreed that we would just go ahead and make this change,” he said. The estate tax change is not tied to revenue from the millionaire’s tax.
Estate tax revenue supports the Education Legacy Fund and higher education, including financial aid for students. The millionaire’s tax passed the Senate on Monday on a 27-22 vote and now heads to the House.
Steve Gordon, co-chair of Let’s Go Washington, criticized the legislative reversals. “One session, they’re fine passing an initiative banning income taxes. Less than two years later, they’re pushing through an income tax. Last year, there was a near doubling of the estate tax; they want to reverse that,” he said.
