Washington State’s decision to let voters decide, via Initiative 645, whether to repeal its newly enacted 9.9% tax on income above $1 million sets up one of the more closely watched state tax fights in the country this year. The outcome will matter well beyond Washington’s borders, at a time when several other states have floated similar wealth-tax proposals as a way to diversify revenue away from sales and property taxes.
A Test of a Narrow but Symbolic Tax
Supporters note that fewer than half of one percent of Washington residents would actually pay the tax, and that it is paired with relief measures including expanded tax credits and planned sales tax exemptions aimed at lower earners. Opponents, led by a campaign funded in part by hedge fund investor Brian Heywood, argue the real risk is precedent: once a state with no general income tax creates one, even a narrowly targeted version, the political and legal barriers to expanding it in future may weaken.
A State Long Defined by Having No Income Tax
Washington’s absence of a state income tax has long been part of its economic identity, credited by some for helping attract major employers and wealthy residents. The departure of high-profile billionaires to no-income-tax Florida, cited by tax opponents, illustrates the competitive pressure state tax policy operates under, even though it is difficult to isolate tax policy as the sole driver of any individual relocation decision.
Why It Matters
If voters uphold the tax, Washington would join a small number of states experimenting with targeted taxes on very high earners, potentially offering a template — or a cautionary tale — for other states considering similar measures. If they repeal it, the vote would reinforce how difficult it remains to introduce new income taxes in states without a longstanding tradition of one, regardless of how narrowly targeted the measure is designed to be.
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