Days after Microsoft President Brad Smith warned that Washington’s escalating tax burden could “devastate” the state’s economy and drive jobs north to Canada, Democratic lawmakers are doubling down, with a new $5.5 billion payroll tax plan.

Rep. Shaun Scott (D–Seattle) and Sen. Rebecca Saldaña (D–Seattle) will unveil the proposal Tuesday at the State Capitol. Dubbed the “Well Washington Fund,” the measure would slap a 5 percent tax on employer payroll expenses above $125,000 per employee, targeting high-paying tech and professional jobs that anchor the state’s economy.

Scott, a self-described socialist, said the new tax is needed to “protect public services” from the impacts of President Donald Trump’s One Big Beautiful Bill. The socialist claims his bill would raise $5.5 billion every two years, funneling the funds into programs such as higher education, healthcare, housing, and food assistance.

Smith’s warning comes as job cuts sweep through the tech sector. Microsoft has laid off more than 3,200 workers in the region this year. Amazon cut 2,300, while Meta, Oracle, and Salesforce trimmed hundreds more. Meanwhile, Microsoft’s Vancouver, BC office, just across the border, has more than doubled its headcount since the pandemic. Smith said expansion there could accelerate if the federal government moves forward with a $100,000 increase in the H-1B visa fee, or if Washington state “goes off the rails” on taxes.

“You don’t have to look far to find Vancouver,” Smith said in an interview with Bloomberg, signaling the company is already diversifying away from Redmond.

Governor Ferguson and his Democratic allies have already raised state taxes by a record $12.2 billion over four years, yet Washington’s newest revenue forecast shows the budget $1.2 billion in the red.

Now, progressive leaders such as incoming Seattle mayor Katie Wilson are demanding even more corporate levies under the banner of “affordability,” despite the ongoing exodus of private-sector jobs and investment.

Microsoft is not alone in sounding the alarm. Economists report that Washington’s heavy reliance on sales, property, and business taxes, combined with Ferguson’s capital gains tax and newly enacted rent control law, has chilled investment. Developers warn rent control is already reducing housing starts, while forecasters say construction revenue, once a powerhouse for state growth, has fallen sharply.

This isn’t the first time Washington’s employers have warned lawmakers they are steering the state toward an economic cliff. In April, dozens of major companies, including Alaska Airlines, Amazon, Costco, Puget Sound Energy, Microsoft, Nordstrom, T-Mobile, Redfin, Virginia Mason, Weyerhaeuser, Zillow, and even the Seattle Mariners, sent a letter to Gov. Bob Ferguson and legislative leaders warning that Democratic tax and budget proposals threatened the state’s long-term stability. The letter landed one day after Ferguson publicly vowed to veto any bill containing a wealth tax, a promise he made even as Democrats pushed through the largest tax increases in state history to close a $15 billion budget gap created by their own runaway spending. Despite that pledge, Ferguson ultimately signed into law the largest tax increase in Washington state history.

New data revealed that while Gov. Ferguson and Democratic leaders now blame federal Republicans for looming Medicaid cuts; the state’s ruling party slashed nearly $800 million from Medicaid months before Congress acted. House Republican budget leader Rep. Travis Couture says Democrats gutted Medicaid in the April operating budget to free up cash for bureaucrat pay raises, then tried to disguise the move as a response to federal austerity. According to the nonpartisan Office of Program Research, the 2025 budget signed by Ferguson cuts $782 million in Medicaid funding: $446 million in federal dollars and $336.5 million in state matching funds. Nearly 95 percent of those reductions hit general medical care, disability services, seniors, and long-term care. Democrats also targeted hospitals with both program cuts and new taxes, costing them $120 million in 2026 and rising to $239 million per year by 2027, despite Washington hospitals already losing more than $4 billion since 2021.

House Republicans fought to protect access to care, including a proposal to raise reimbursement rates, but Democrats blocked it.

The Well Washington Fund revives the playbook Seattle used with its controversial “head tax,” which is paid by just ten companies, including Amazon, and which pushed thousands of high-paying jobs across Lake Washington into Bellevue. Economists say a statewide version would have a similar effect, discouraging hiring and pushing corporate growth elsewhere.