House Finance Committee Hears Hours of Testimony on SB 6346, the "Millionaire's Tax"

SEATTLE — The Washington House Finance Committee heard hours of testimony on Tuesday, Feb. 24, for Senate Bill 6346, an engrossed substitute that would impose a 9.9% tax on household income above a $1,000,000 deduction and take effect Jan. 1, 2028, with returns due in 2029.

Tracy Taylor, staff to the committee, told members the bill begins with federal adjusted gross income, adjusts for capital gains and certain deductions, and allows pass-through entities to elect to pay the tax at the entity level. Taylor summarized key provisions and the fiscal estimate: an estimated $2,530,000,000 increase in state revenues in fiscal year 2029 and $3,210,000,000 in fiscal year 2030, with associated local revenue decreases and Department of Revenue implementation costs. She described available credits and deductions, including a per-individual standard deduction capped at $1,000,000 per household, a charitable contribution cap of $100,000 per household, credits for B&O and public-utility taxes, and a capital construction fund deduction noted in the bill text.

Sen. Jamie Peterson, the bills prime sponsor, said the change is intended to correct what he called an "upside down" state tax system and to raise money for public schools, higher education and health care while reducing the tax burden for lower- and middle-income households. "We will have the people who are most able to shoulder the burden of providing those services doing more like their fair share," Peterson said in remarks to the committee.

Supporters at the hearing included labor unions, public-health and education advocates, caregivers and a range of community members who described cuts to services and the consequences for students, seniors and people with disabilities. April Sims, president of the Washington State Labor Council, AFL-CIO, testified in strong support, saying, "Our tax code is broken" and urging the committee to adopt revenue measures that stabilize public services. Child-care providers, teachers and health-care workers said the bill would protect programs facing federal and state cuts.

Opponents framed the measure on two main fronts: legal/constitutional vulnerability and impact on small and pass-through businesses. Former Attorney General Rob McKenna testified that Washingtons constitutional framework treats income as property under long-standing precedent and that any progressive income tax should be decided by a constitutional amendment. "If this legislature wants a progressive income tax, it should send a constitutional amendment to the voters," McKenna said, arguing the bill risks litigation. Business groups and owners, including contractors and associations representing small and ethnic-chamber businesses, said the bill as written would fall on pass-through entities and could impede cash flow and reinvestment for firms that report income but reinvest earnings.

Several witnesses pressed technical fixes: requests for income averaging or carryforwards for seasonal or capital-intensive industries; nonresident safe-harbor rules for short-term convention workers and visiting speakers; clearer rules for how pass-through elections interact with federal deductions; and stronger guarantees that credits and exemptions would protect family-owned enterprises.

Committee staff noted other policy elements in SB 6346: a specified distribution of revenue including a local public defense funding stabilization account (7% to that account and formulas for city and county distribution), a number of sales-tax exemptions phased in or repealed in future years, and that several newly created tax preferences in the bill are exempt from automatic ten-year expiration and JLARC review as written.

The hearing also included a procedural matter that briefly overshadowed testimony: Chair Berg said initial review of the public-comment system found evidence of manipulation, "over 19,000 duplicate records and over 200 people have been fraudulently signed in on the bill without their knowledge," and she said the committee would investigate further. To accommodate testimony while the review continues, the chair limited committee questions during the public-comment period and reduced individual testimony time later in the morning to 60 seconds.

There were no formal votes at the hearing. Committee staff closed the public-comment period and announced amendment deadlines for this bill, stating: "Amendments must be requested by 12PM tomorrow" and that amendments must be released to the EBB by 12PM the following day, before adjourning. The committee recessed and Democrats caucused afterward.

What happened next: The committee did not take final action at this hearing; members were given amendment deadlines and staff said they would follow up on the reported sign-in manipulation. If the bill advances, legislative proponents and opponents indicated areas they expect to negotiate, including pass-through protections, income averaging, safe-harbor language for nonresidents, and constitutional considerations.

Reporting notes: The article relies on the committee staff briefing for the text, key fiscal numbers and effective dates, on sponsor remarks and the breadth of public testimony recorded at the hearing, and on the chairs on-the-record announcement about suspected sign-in manipulation.