The fall election is a test of the new 9.9% state income tax on households that bring in more than $1 million a year. Initiative 645 aims to overturn the tax before it takes effect.
Championed by Gov. Bob Ferguson and passed by the Democratic majorities in the legislature, it’s now up to the voters to decide if the new tax will stand.
Senate Bill 6346, signed into law March 30, will apply to earnings above that threshold from 2028 forward. I-645 could overturn the tax before the first payment is due in 2029.
Supporters of the repeal effort say it’s an opportunity to prevent lawmakers from expanding the income tax to non-millionaire households in the future.
I-645 supporter Jaime Herrera Beutler, a former congresswoman, told “The Impact.”
“There’s already lawmakers calling to lower that threshold and we’ve heard crickets from legislative leaders about that,” she said.
“The reality is they put all the pieces in place to expand it to all of us and I think voters deserve the truth,” she added.
Herrera Beutler argues that the initiative is also a way to shield retirement plans for teachers, firefighters, and other state employees from being taxed in the future and notes that the bill which created the new tax also eliminated longstanding exemptions.
“It’s important that folks understand this is also a retirement tax,” said Herrera Beutler. “They removed the exemption protecting their retirement checks from being taxed by the state.”
I-645 opponent, April Sims, who leads the Washington State Labor Council, AFL-CIO, argues state worker retirement benefits are not at risk.
“This is a campaign slogan from a losing initiative and they’re trying to scare folks into giving a handful of the wealthiest people in our state a $13-billion tax break,” said Sims. “That was a technical fix, is my understanding, to bring this new millionaire’s tax in alignment with IRS regulations.”
Herrera Beutler contends many small business owners will be subject to the tax.
“This doesn’t really hit the large corporation which is, I think, where you see most of the animus. This will have a pretty big impact on small- and medium-sized businesses, which employ half of the Washington workforce,” she said.
Sims sees the new tax as a step towards a more equitable tax code for average state residents and small business owners.
“That’s why the millionaires tax includes things like the largest tax break for small businesses in our state’s history, and expansion of the working families tax credit to nearly a half a million more households, the elimination of sales tax on the things that we all buy like shampoo and toothpaste and conditioner, free lunch and breakfast for school kids,” said Sims.
The fate of the new tax may remain uncertain even if it survives the election, because a separate challenge is pending in the courts.
