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Washington's 9.9% tax on income above $1m heads to a November repeal vote
Washington voters will decide in November whether to repeal a 9.9% tax on income above $1m that became law in March. The result tells tech executives and their employers whether a state long without an income tax will keep one aimed at its richest earners.
The Board Room · Leadership desk
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What happened
- Initiative 645, the repeal measure, is spearheaded and funded by Brian Heywood, a conservative hedge fund executive who founded the Let's Go Washington political action committee.
- A coalition of unions and advocacy groups opposing repeal estimates the tax on the 20,000 highest-earning households would raise about $3.5bn a year for education, healthcare and expanded tax credits.
- Washington's 7% tax on capital gains above $250,000, passed in 2021, survived both a constitutional challenge and a conservative-led ballot initiative to overturn it in 2024.
- Massachusetts, Maine and New York already levy a separate tax rate on millionaires, and Hawaii passed a similar measure in May.
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Why it matters
- decision Washington employers hiring senior staff have to decide now whether to price in $99,000 a year on $2m of income, before November shows whether the levy survives.
- constraint A repeal would hand lawmakers back a gap: the nearly $15bn four-year shortfall averages $3.75bn a year, more than the coalition expects the tax to raise.
- exposure Governor Bob Ferguson's pledge to veto any extension to lower earners answers the slippery-slope claim only while he holds office, so households under $1m depend on his successors keeping that line.
A November result settles one tax in one state [4]. Whether millionaire taxes become a lasting factor in where senior people live and how they are paid is a slower question, and the record answers only part of it. The tax falls on a small group with large incomes. Divided across the households the coalition counts, its revenue estimate averages about $175,000 each [20]. If that estimate comes only from those households at the 9.9% rate, it implies roughly $1.77m of income above the threshold per household, or average earnings near $2.8m [21].
Washington's electorate has changed its answer before. In 2010 voters rejected a tax on incomes above $200,000 by wide margins [10]. Steve Ballmer, then Microsoft's chief executive, was the leading contributor to the campaign against it, and Jeff Bezos ranked fourth [10]. Jamie Pedersen, the state senate majority leader and an architect of the new tax [17], said the defeat of the 2024 repeal attempt was "some indication that voters were willing to vote for something that the opponents labeled as an income tax" [14]. Lawmakers had "99.9% certainty" that conservative groups would take the new tax to the ballot, Pedersen said [16].
Heywood's objection is about behaviour. Heywood said the income tax and the capital flight he expects risked compromising Washington's "golden goose" economy of Microsoft, Amazon, Boeing and others [3]. His own move fits the pattern he describes: he and his business left California for Washington in 2010, drawn in part by the absence of capital gains and income taxes [2]. California voters will now decide on a one-time 5% tax on billionaires' wealth, which most billionaires and Governor Gavin Newsom oppose [8].
Supporters answer on distribution. Emily Vyhnanek of the Washington State Budget and Policy Center, a non-partisan research group, said the state has "the second-worst tax code in the nation when it comes to who actually pays as a share of their income" [11]. She said those in the lowest-earning fifth spend up to 13.8% of their annual income on state taxes, against about 4% for the top 1% [12]. Those figures address fairness, and both Heywood's warning and the coalition's revenue estimate are still projections. The Guardian's reporting does not include a count of high earners who have left the state since the tax was signed in March [4].
In my view the two outcomes would carry unequal weight. If initiative 645 fails, Washington will have defended two taxes aimed at top earners against repeal campaigns, and the 2010 result will look like the exception [13]. If it passes, Washington voters will have drawn their line at a tax on income, while the states that already charge millionaires a separate rate keep theirs [7].
What to watch
- A court challenge running alongside the ballot campaign, since the state supreme court ruled nearly a century ago that income taxes were a property tax.
- Campaign finance filings for and against initiative 645, showing how much of the repeal money comes from Heywood and how much from tech wealth.