Washington State Income Tax Proposal Debated
A proposed bill in Washington, Senate Bill 6346, would create a 9.9% tax on income over $1 million. The proposal was a topic of discussion on the February 11 Lars Larson Northwest podcast, which noted such measures could impact municipal budgets and public safety funding. The debate highlights how state-level tax policy can affect fire department resources and hiring cycles.
- Washington is one of only nine states without a personal income tax, a history that dates back to a 1933 State Supreme Court ruling that classified income as property, thereby requiring any such tax to be uniform, not graduated. Voters have rejected income tax proposals numerous times over the decades. - The tax would be levied on federal adjusted gross income, meaning it would affect not just wages but also income from investments and business profits for those filing as individuals. The National Federation of Independent Business has noted that this could impact many small businesses organized as pass-through entities, where owners report business income on their personal tax returns. - If enacted, the tax would take effect on January 1, 2028, and is projected to generate about $3.5 billion annually. The bill specifies that 5% of the revenue would be dedicated to county public defense services, with the remainder going to the state's general fund for services like education and healthcare. - Proponents, like the Economic Opportunity Institute, argue the measure would help fix what is considered the nation's most regressive tax system, which relies heavily on sales tax and disproportionately burdens lower-income families. - Opponents have raised concerns that the 9.9% rate, when combined with existing local taxes, could give Seattle the highest combined top tax rate on earnings in the country. They also argue it could drive high earners and businesses out of the state. - The bill was introduced on February 4, 2026, and after a public hearing on February 6, the Senate Ways & Means Committee passed it to the Rules Committee for further consideration. - While the current proposal targets income over $1 million, Senator Jamie Pedersen, the bill's sponsor, acknowledged during a committee hearing that no legislature can bind a future one, leaving open the possibility that the income threshold could be lowered later.
