Last Tuesday, Feb 3, Democratic lawmakers in Olympia formally introduced their long anticipated “millionaires’ tax,” a 9.9% income tax on earnings above $1 million a year set to begin in 2028. The policy, Senate Bill 6346, is projected to generate nearly $4 billion in yearly revenue, affecting roughly 30,000 of Washington’s wealthiest residents. Proponents are presenting it as a solution to Washington’s famously regressive tax code, and a way to reduce financial burdens for working people and bolster safeguards against federal funding cuts. Despite these ambitions, as a redistributive tax policy, the proposal falls short in providing substantial relief and reducing income inequality.

For decades Democrats have condemned the state’s upside down tax system; their new proposal fails to address the most pressing financial burdens Washingtonians are facing. Apart from offering sales tax exemptions on essential hygiene items—toothpaste, mouthwash, deodorant, etc.—the bill offers little direct relief for residents struggling to get by. Under the plan, residents would continue to pay the same high rates on property, gas and “sin” taxes that disproportionately burden low-income households. In one of the most expensive states in the nation, 65 cents off a $10 twin pack of toothpaste is not enough.

For decades, Washington has ranked among the topmost regressive tax systems in the U.S., according to The Institute on Tax and Economic Policy Tax Equality Index–a measure of how state tax systems impact income inequality by comparing income growth or loss across groups before and after taxes. In Washington, households with income in the bottom 20% pay an average of 13.8% of their income to state and local taxes, while the top 1% pay only 4.1%.

Rather than personal or corporate income taxes, Washington relies heavily on sales and use, business and occupation (B&O), and property taxes to fund public services and infrastructure like schools, transportation, and public health programs. For far too long, the burden of funding these programs have been placed on those least able to afford it. Addressing that inequality is exactly what lawmakers must prioritize when revising the bill during this legislative session. In 2022, Washington implemented a capital gains tax law imposing a 7% levy on sales or exchanges of long term capital assets over $250,000 a year–marking the beginning of the state’s slow shift towards a more progressive structure. Though the policy faced legal challenges, the Washington state supreme court ruled in favor of the tax, ruling it as an excise tax (a tax on goods or services) rather than a property tax, maneuvering around the state’s ban on income tax that has killed previously attempted income tax policies, similar to SB 6346.

Under the new bill, tax revenue from high earners would fund tax cuts on hygiene products and expand the Working Families Tax Credit (WFTC). The WFTC provides refundable credit and currently provides payments of up to $1,200. While these relief programs are a positive step towards a more progressive tax code, they do not provide great enough tax breaks for businesses and individuals. Governor Bob Ferguson wants to expand WFTC eligibility criteria and increase annual payments to include and support more low income Washingtonians struggling to make ends meet. The bill also proposes exempting businesses earning less than $250,000 from the state’s B&O tax starting in 2029, an increase from the current $125,000 threshold. As it stands today, the B&O tax applies to a company’s total income before expenses, rather than actual annual profits. B&O exemptions through SB 6346, lawmakers estimate, would lower taxes for around 65% of businesses statewide. Still, some argue it doesn’t go far enough to reduce burdens faced by small businesses and individuals.

During a news conference last Tuesday, Gov. Ferguson maintained previously stated support for the idea of a millionaires’ tax but criticized the current proposal’s plan to provide sizable tax breaks to businesses and individuals. The proposal devotes only 7% of total projected revenue to tax relief programs. For Gov. Ferguson, and for Washingtonians, it’s not enough.

While substantial work remains to strengthen tax credits and expand relief programs, this proposal marks a rare political opening. Fueled by federal funding uncertainty under the Trump administration, Democratic legislators could harness the politics needed to take control of their state’s upside-down tax structure. If Olympia lawmakers compromise to deliver tax breaks for small businesses and working families, Washington could finally shift its regressive tax code toward fairness and improve affordability for low-income households statewide.

Zoned Out takes a look at local news, policies and politics that shape our daily lives. This column explores how Seattle addresses its biggest challenges around affordability, housing and homelessness, transportation and community development. Jo Moreau is a fourth-year public affairs major.