SEATTLE — The initiative to overturn Washington’s new income tax on high earners hasn’t officially qualified for the fall ballot yet, but on Tuesday, Gov. Bob Ferguson and other opponents of the measure kicked off a campaign to defeat it.
At Food Lifeline in the city’s South Park neighborhood, Ferguson said that with Initiative 645, voters will have a decision between upholding the tax and “moving our state forward by making life more affordable for Washingtonians,” or rejecting it and “going backwards.”
This month, the Let’s Go Washington political committee, led by financier Brian Heywood, turned in over 500,000 signatures for the initiative, far more than what was required. The secretary of state’s office still needs to verify them to confirm the repeal measure will go to the November ballot. That process could be done by the end of the week.
During the past century, Washington voters have been asked 11 times to approve personal or corporate income taxes. The first vote, in 1932, was successful. But that measure was struck down by the state Supreme Court on a 5-4 decision in 1933.
Ferguson, a first-term Democrat who signed the tax law in late March, and other advocates hope this time will be different.
They believe the new tax will rewire Washington’s tax code, ensuring wealthier residents pay their fair share, while helping working and low-income residents via tax cuts and credits.
Labor unions, including those for state employees, teachers and service workers are chief backers of the anti-initiative campaign.
Heywood and other opponents of the tax on household income above $1 million a year argue it will eventually expand to cover lower earners, though Ferguson has insisted he doesn’t support that.
“This income tax is coming for all of us,” Heywood said in a statement. “Out of control spending, back-to-back record-breaking tax increases, and an unconstitutional income tax funded and supported by self-serving, tax-exempt public unions is a recipe for an economic catastrophe.”
The tax faces a parallel legal challenge that’s expected to force the state Supreme Court to revisit its nearly century-old precedent finding such a tax unconstitutional.
If it survives in court and on the ballot, the tax would first be levied in 2029 on an estimated 21,000 filers. The million-dollar threshold for needing to pay the tax would be adjusted for inflation every two years.
The next sticking point for the initiative isn’t far away.
By July 23, the attorney general’s office needs to draft a “public investment disclosure statement” listing the three categories of state services most affected by the potential repeal. Challenges to that language must be filed in court within three days.
The state Office of Financial Management will also prepare a statement detailing the initiative’s potential fiscal impacts.
What the tax does
The 9.9% tax on income over $1 million is expected to bring in roughly $3 billion for the state each year.
Some of that revenue would help offset tax reductions and subsidies embedded in the law, such as the elimination of sales tax on diapers, many over-the-counter drugs, and toiletry products. The state would also give more small companies a reprieve on Washington’s primary business tax and expand eligibility for a state tax credit to nearly half a million more residents.
“If you’re a business owner, you’ll benefit from this,” Ferguson said. “If you’re one of those 500,000 families, you will benefit from this. If you have a kid who’s in our education system, you will benefit from this in so many ways.”
Matt Hipp, co-owner of breweries throughout Seattle, said the tax break would help his businesses stay afloat.
“The struggles we face are real, and if Initiative 645 passes, it’s only going to make them worse because it’s almost certain it’s going to be taking money out of our pockets, out of our employees’ pockets, out of our customers’ pockets,” Hipp said at the press conference.
Heywood’s initiative would only repeal the tax, while leaving in place the tax breaks and added expenses that come along with it in Senate Bill 6346. This could leave Ferguson and Democratic lawmakers to figure out if they want to renege on those plans or find new revenue sources to still pay for them.
Initiative critics argue that it will force lawmakers to roll back the tax relief provisions.
Ferguson said he plans to campaign across the state against the initiative.
Let’s Go Washington will also have initiatives on the ballot this year to undo changes to the rights of parents and public school students and restrict the participation of transgender girls in school sports. The group has so far raised almost $3 million as it pushes for the trio of ballot measures.
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