Interesting. No, it won't be extended downward...
Washington Taxed Its Millionaires. Now the Rich Want It Repealed.
Washington State voters will get a chance to accept or reject the 9.9 percent income tax on millionaires approved by the Legislature, which broke the state’s taboo against levying income taxes.
Voters in Washington State will soon be asked to decide which they resent more: rich people or new taxes.
At issue is the state’s new “millionaires tax,” a 9.9 percent tax on income over $1 million a year that is expected to bring in more than $3 billion annually and, in the process, ease if not solve the state’s ongoing fiscal problems.
Critics want voters to repeal it and bar state leaders from imposing income taxes in the future, arguing the millionaires tax will drive out wealthy entrepreneurs and eventually lead to income taxes on everyone else.
“The goal is to put an income tax on every Washingtonian,” former United States Representative Jaime Herrera Beutler, a Republican, said at a recent news conference organized by one of the campaigns working to repeal the tax. “Don’t let them fool you.”
The November election will test how voters feel about taxing the rich up and down the West Coast. In California, voters are considering both a “millionaire tax” and a “billionaire tax.” The less debated proposal asks voters to make permanent a temporary
income tax hike on couples who earn at least $743,000 a year.
Voters will also decide whether to approve a new
wealth tax on people with at least $1 billion in assets, a proposal that has generated enormous blowback from wealthy residents as well as teachers and health care interests who fear it will damage the state budget.
But Washington is unique on the so-called Left Coast, one of just nine states that do not tax personal income, and voters have rejected income taxes 10 times over nearly a century. It is also at a crossroads. The state’s fiscal system, which relies on property taxes, sales taxes and other fees that hit lower-income residents harder, has not kept up with expansions in government programs and the rising cost of basic services.
“People who don’t know much about Washington politics would assume we have a highly progressive tax code,” said Rian Watt, executive director of the nonprofit Economic Opportunity Institute, a progressive research and advocacy group in Seattle. “The reality is, we have a tax code written in the course of a couple of months in the 1930s.”
This spring, the Democrat-dominated State Legislature approved the income tax for wealthy residents along with a slate of tax cuts for lower-income households, such as eliminating the state sales tax on diapers, soap and over-the-counter drugs.
Repeal proponents say Washington’s tax system is a major reason the state has served as an incubator for companies like Microsoft, Amazon and Starbucks. The millionaires tax, along with the election of progressive and socialist candidates, including Mayor Katie Wilson of Seattle, sends a signal to businesses that they are no longer valued, they say.
“This has gone from one of the most attractive places to start a business to the least attractive,” said
Brian Heywood, a hedge fund millionaire whose political action committee collected more than 500,000 signatures to place the tax repeal on the ballot.
Washington has suffered high-profile departures in recent years as the Amazon founder Jeff Bezos and the Starbucks co-founder Howard Schultz moved to Florida. The Valve co-founder Gabe Newell recently bought an estate there.
But just 25,000 households make enough to pay the new tax. A Cornell University researcher named Cristobal Young studied the impact of taxes on higher earners in New Jersey and California and found minimal out-migration in their wake. Washington also hasn’t yet seen significant out-of-state movement after lawmakers created a capital-gains tax in 2021.
“Overwhelmingly, millionaires stay,” Mr. Young said. “They pay the new tax rate. They figure out ways around it. More likely there will be some people who were thinking of moving to Washington who change their minds, but it all amounts to migration at the margins.”
The other big argument against the millionaires tax involves the camel’s nose under the tent: Once an income tax is established, state lawmakers may look beyond millionaires. Gov. Bob Ferguson, a Democrat, has pledged to veto any attempt to expand who pays or to raise the rate, but he won’t be in office forever.
“Who do you trust?” Mr. Heywood said.
Until recently, Mr. Heywood, who is also responsible for Washington ballot measures this fall that would expand parental rights over school records and ban transgender girls from playing scholastic sports, was the chief public face of the anti-tax effort.
But allies recently turned to Ms. Herrera Beutler to replace Mr. Heywood, whose conservative politics have become one of the arguments for keeping the tax.
Progressives have described the repeal initiative as “a tax break for Brian Heywood and his friends.” They’ve also recruited their own pro-tax millionaires, including the travel writer and TV host Rick Steves, who lives in Edmonds, Wash., and the “Jeopardy!” host Ken Jennings, who commutes to California from Seattle to tape the quiz show.
“I like the idea that we could bring back an America where it’s embarrassing for wealthy people to say, ‘Even though I could afford this, and it will improve public services in our state, I’d rather fight it,’” Mr. Jennings said.
If the repeal passes, state leaders would lose billions of dollars in revenue that they are counting on for future budgets, forcing them to cut spending, reverse some of the accompanying tax relief or find other revenue.
Opponents of the millionaires tax have also sued to stop its implementation. They argue that it is illegal under a 1933 Washington Supreme Court ruling that income counts as property. That decision effectively blocked a graduated income tax in the state, because the Washington Constitution requires property taxes to be “uniform.”
The constitutional lawsuit is expected to reach the Washington Supreme Court before the tax takes effect in 2028.