This week on Inland Journal, we present a forum about Washington initiative 645, which would repeal the income tax on the state’s wealthiest people. The tax was approved by the legislature and signed into law by Governor Bob Ferguson earlier this year.
We’ll listen to a virtual forum conducted by the citizens’ group Braver Angels of Washington and the WSU Foley Institute. It was moderated by Sam Rechek from Braver Angels.
Sam Rechek: Our panelists are gonna join us to share arguments for and against resolved initiative measure 26-645 concerning state and local taxes should be passed.
And for our first speech in the affirmative, I'm gonna turn to Chris Gildon. (Gildon is the Senate Republican leader for negotiating the state budget.)
Chris Gildon: Well, thank you and good evening, everyone.
So I believe Washington voters deserve the truth about this new income tax. Supporters say it only applies to millionaires, but the law was deliberately written to make expansion easy. And lawmakers have already shown us through their votes, through their own statements, that expansion is exactly where this is headed. That's why voting yes on I-645 matters.
Let's start with a couple of facts that are not in dispute.
Lawmakers rejected every amendment that would have protected you from future expansion. They voted against locking in the $1 million threshold. They voted against requiring voter approval before lowering it. These are recorded votes. And when lawmakers remove guardrails, they signal intent, and they removed every single guardrail.
They also changed the law in a way that affects thousands of public employees. For decades, Washington statutes protected pensions from state taxation. This bill amended 13 pension statutes and deliberately removed those protections, making pensions subject to the income tax.
Read the bill for yourself if you want. Start on page 44, line 23, go through page 58, line 11, and you can see all 13 of those accounts for yourself.
These are structural changes, not accidents. This was exactly done in preparation for a future tax expansion directly to you. If you're a teacher, a firefighter, a public employee, or just someone on a pension, you should be paying attention.
You'll hear opponents claim that repealing the tax will cut $13 billion from the budget. That is simply not true. This tax doesn't even begin until 2029. Not one dime has been collected. You cannot cut money. It does not yet exist. And none of the revenue is legally dedicated to healthcare or K-12. As a matter of fact, 95% of the taxes collected will simply go to the state general fund and they can be used for any purpose whatsoever. We've seen record revenue over recent years. The truth is that dollars aren't just an Olympia, results are.
Supporters say this tax is only for the wealthy, but lawmakers themselves have already said they want the toll lowered. Some have already publicly floated dropping it to $250,000. The architect told a Seattle reporter that these promises are, quote, pie crust promises, easily made and easy to do. When the people writing the law tell you not to trust the promises, you should listen.
The truth is that the revenue doesn't come close to covering spending, and when that math doesn't work, they're not gonna cut spending, they're gonna adjust the threshold and bring your paycheck into this income tax.
This is our chance to repeal this tax before it expands to your pocketbook. Vote yes on I-645, let's protect Washington families, let's safeguard retirement, and keep our tax system honest.
SR: Thank you for your timely speech, right on time. So I'll go to some questions.
First, to our speaker, how can Washington move to a less regressive tax system?
CG: Well, I'll tell you, they speak a lot in this bill about fixing our regressive tax system, but the one thing that it doesn't do is it doesn't help people at the lower end of the income spectrum. They give a little discount on diapers or deodorant, but with the size of this tax that they're collecting, they could virtually eliminate state collection of property taxes. Can you imagine the type of relief that that would give to people and families, homeowners and renters across our state? If you just use this, we asked them to do that, they refused to do that.
But you don't reduce a regressive system simply by stacking one tax on top of another. You have to help the people at the lower end of the income spectrum.
SR: And another question that came in is about that. Having used nearly 10% of the income of our highest income groups to sustain schools with falling enrollments and other programs, where does the speaker hope to find funds to help poor sectors?
CG: Well, the funds are available. And I'll tell you, if we just change a few systematic areas of the state budget, we've got plenty of money. Just two years ago, the state was facing a $6.5 billion budget shortfall. I was able to craft a real, honest, complete workable budget with no gimmicks that fully funded state government that bridged that $6.5 billion budget shortfall did not have any tax increases or any cuts to services. If I was able to do that two years ago, we can do that today.
SR: Okay, one more here since we've been tight on time and we're actually running a little bit ahead of schedule. Would the speaker have supported this initiative if there had been deeper cuts or elimination of sales taxes?
CG: Well, I think that's a discussion to have, right? If you're a state that wants to have an income tax, what other tax are you going to do away with? There are a number of states that have income taxes. However, all of them do not have business and occupation tax. They don't have property tax. They don't have sales tax. They don't have the estate taxes. We have every single tax you can imagine. This is the next one in line. And it's poised to come down to be a universal income tax that affects every single person in our state. That is the goal. And that is what I-645 is trying to prevent. It's trying to protect your pocketbook.
SR: That, let's thank our first speaker. Appreciate your time. And I know that you waited till the end to join us, so appreciate your time. Okay, we're going to switch to a speech in the negative. And for that, I'm going to turn to Annie Kucklick. Annie, you've got three minutes.
Annie Kucklick: Thank you so much. My name is Annie Kucklick. I am a research and policy associate at the Economic Opportunity Institute. We fight for fairness, care, and opportunity here in Washington State. Prior to my time as a policy and research associate, I'm a social worker by training and studied cost of living at the University of Washington.
For decades, Washington has had one of the most upside down tax systems in the country. Working families are paying a far greater share of their income in taxes than the wealthiest 1% do. And right now, families are facing a worsening affordability crisis. Childcare costs are going up rapidly. Rent is increasing. Groceries are going up and people are having a hard time getting to work. Meanwhile, paychecks are not keeping pace with this growth.
The millionaire's tax is how we start to fix this. And just to be very, very clear, the millionaire's tax is a tax on annual income over $1 million, meaning that only a handful of Washington households that are making $84,000 per month will be modestly taxed by this tax.
Initiative 645 would repeal this tax and add to the struggles of Washington families by putting the expanded Working Families Tax Credit at risk. This is a tax credit that will expand to 460,000 working families, 570,000 children who are in those families. They would lose a much needed cash boost around tax time.
And it would slash billions going to our state's general fund, which is an important mechanism for how we fund core services like education that we care about, higher education, childcare, healthcare, things that really help lower costs for everyday people.
Unfortunately, Initiative 645 is also coming right on the heels of H.R. 1, which gave the richest Americans a federal tax break funded through cutting healthcare and food assistance that so many of our Washingtonian neighbors rely on to get by.
So this is the time to protect funding, give people more ability to meet their basic needs, rather than allowing the most wealthy people in our state to get another tax break.
Initiative 645 is officially opposed by a large coalition of groups that fight for everyday working people, including labor unions like the Washington Education Association and the Washington State Nurses Association, nurses, small business owners, teachers, and education workers. So please, I ask you to join us in voting no on Initiative 645.
SR: Thank you for your speech, Annie. How would the speaker say, or what would the speaker say is the most equitable way to tax in Washington? How to create a progressive tax code?
AK: So what I would say is the best way to create a progressive tax code would mean having a, when I think about this in data and numbers, it means that you're going up, right? So the lowest earners would pay the lowest percentage of their income in taxes, which the millionaire's tax funds the Working Families Tax Credit, which does lower the percentage that families are paying for their taxes at the end of the year with the Working Families Tax Credit coming back to them as cash.
But it's a variety of mechanisms. You have property tax, you have sales tax. The millionaire's tax lowers sales tax by creating exemptions for things like diapers, for things like shampoo, for like essential household items. So again, you're seeing some lowering of that percentage that low income and middle income households are paying.
In fact, the 95% of the lowest of the typical earners, so you have 95% of earners, then you have the top 5% of earners, 95% of earners are getting a tax cut from this millionaire's tax. That would go away. That funding would go away if initiative 645 was passed.
So again, I encourage you to vote no on initiative 645.
SR: Another question to our speaker. Who in the speaker's opinion is responsible for the upside down tax code that she mentioned at the start of her speech?
AK: Yeah, that's a great question. So our tax code was built almost 100 years ago and I would say that they get to bear most of the responsibility and it's now time for us to update this so that we can keep pace with the growth of our economy so that we can invest in the programs that are important to us, that are important to maintaining affordability, like childcare subsidies, like strong public education, like higher education. So yeah, it's time to change. It was built a long time ago and we're due for an update.
SR: And last question, since you were quick on time and because you've been quick in responses, what would be the annual budget impact of this proposal to our speaker?
AK: Yeah, it varies by year, but I think we're looking at about $4 billion per year. So if we were to lose out, so it's $13 billion over the next five or so years, we'd be losing out at about $4 billion per year.
SR: We're gonna turn back to a speech in the affirmative. And for that, I'd like to go to Viet.
Viet Nguyen: My name is Viet Nguyen and I am a small business owner here in Seattle and have been a Washington State resident for nearly 50 years. And during that entire time, we've not had a tax on personal income. For 93 years, that's how long Washington has gone without a tax on personal income.
Over the last few months or so, you've heard lots of different names for this, millionaire tax, right? But let's call it what it is. It's a tax on income. And for decades, Washington State has been able to deliver quality public services without an income tax.
For decades, Washington law has also said public pensions are exempt from taxes. And the law, but this law goes into, as Senator Gildon had mentioned earlier, 13 different statutes that are gonna impact the public pensions of police and firefighters, teachers, state troopers and state workers. It writes the same sentence into every single one that the protection on these pensions do not apply to this tax. And it even says that the rule to keep collectors off your pension doesn't apply when the state collects the tax. So if you owe some money, the state could go after your pension. Now think about that. Federal law actually caps a public pension at about $290,000 a year, right? No firefighters’ pension gets anywhere near a million dollars. So if this is only for millionaires, why would you put it into the law to go after the pensions? Seems a little odd.
Same thing with Social Security. One of the things that this law does not have is an exemption for Social Security. And so if this law were to not be repealed, we would become one of, we would join eight states, only eight states that actually tax Social Security. And that taxable part of your benefit goes straight into the math.
But I think what's more troubling is, let's be honest, as our senator mentioned earlier, opponents really have been basically identifying their intent. They're looking for a broad-based income tax. Earlier- 30 seconds. Representative Cindy Ryu earlier mentioned $250,000 a year. You can imagine how that's gonna impact a married, retired couple.
We've also seen cities like Seattle attempt an income tax, $250,000 a year in the year 2017. But ultimately the state needs to really address some of the issues that its own budget creates.
I'll give you one number before I leave here. One number is $4.4 billion. That's the amount of dollars that the state has identified for a limited liability fund that it's using to pay for misconduct, for the harm that it has caused, including hurting children in its care. And that growing gaping hole is projected to expand dramatically. It's larger than the $3.1 billion that the entire first year that this state, that this tax is going to allow.
So with that, I would just say thank you and I hope that you vote yes on I-645.
SR: One question first here. Someone who wrote in in advance with. Noting that they had heard a number of people. In support of this repeal note that suggests that wealthy ultra wealthy will leave the state because of this tax. Will the speaker explain how, if they agree with that, how that position tends to come about? What people point to just to defend that because that idea?
VN: Yeah, what I would say is that that's sort of the best case academic estimate and, you know, and while I respect the research, you don't have to need a study to see what's before your very own eyes.
During the capital gains tax issue, we saw Jeff Bezos leave for Florida. We saw Howard Schultz announce his move on the day that this bill passed the House. Fisher Investments have moved their headquarters to Texas and just this past week, we just saw the executives from Columbia Bank – I think that's in Speaker Jinkins's district -- in fact, announced that they were going to move their leadership to Phoenix.
So you look at the evidence right in front of you.
SR: Thank you for that and for your answers to the questions, Viet.
We're gonna turn now to our final speaker. Last, but certainly not least, I've heard that our next speaker referred to a Speaker Jenkins, so, speaker, you've got three minutes to close this out in the negative.
Laurie Jinkins: Thank you and it's been funny to have you call people speaker because then I think I'm supposed to say something and I realized you're just addressing everybody as speaker. I've gotten very used to over my six years as speaker being referenced as Speaker Laurie Jinkins. I'm speaker of the Washington State House of Representatives.
For my entire career, I've fought for families and children who are struggling to make ends meet and because of Washington's really upside-down tax code, success has been out of reach for just far too many families and children in our state because working and middle-class families pay a far higher tax rate than the wealthiest people in this state.
We made a significant step forward this year to make our tax code more equitable and to cut taxes for working families but Initiative 645 puts all that progress at risk. That's why I oppose Initiative 645. It's because it would be a step in the wrong direction for efforts to make our tax code fairer for working and middle-class families and for small businesses and it would cut funding for important public priorities by blowing a $13 billion -- that's billion with a B -- hole in the state budget, including cutting funds for child care, for health care and for K-12 education.
I-645 is fiscally irresponsible, slashing billions in funding for education, healthcare and other public priorities. But it also puts at risk all of the tax cuts that were passed as part of the millionaires’ tax package and that were paid for with the revenues. That includes a major expansion of the Working Families Tax Credit, which reduces taxes on 460,000 hard-working families in the state.
It includes the reduction and elimination of B&O taxes for 138 of the smallest businesses in Washington state. It includes the elimination of sales tax on basic household items and over-the-counter drugs things like diapers, and our intention to make school lunches free will likely go away if Initiative 645 passes.
I-645 passing would stick working and middle-class families and small businesses with higher costs. It isn't fair and that's why I'm proud to be opposing Initiative 645, along with a large statewide coalition of nurses and teachers and small businesses, and that's why I'm here tonight asking you to vote no on I-645.
SR: Thank you for your speech. So to our speaker, why didn't the income tax legislation include requirements to restrict the income level to a million dollars or more. I think this is a reference not to the initiative but to original income tax legislation.
LJ: This legislation says anything you earn over a million dollars is subject to a tax, 9.9 percent tax. Anything below the million dollars is not subject to that at all. So it has excluded specifically any income that people earn that is less than a million dollars.
I'm not sure what somebody would want us to do that's more clear than that. It's very clear how the bill will operate. So we did actually exclude everything under a million dollars. Maybe I'm not understanding the question quite right, Sam. I think it's more likely that I'm not understanding the question quite right.
SR: There’s a question directed to this in response to your speech. If Initiative 645 passes, will the speaker pledge to work across the aisle to design progressive tax reform. removing all regressive taxes?
LJ: Oh, well, I've spent my entire career trying to remove regressive taxes and to try and work across the aisle doing that. So, yes, I think I'll work on this issue until I am no longer in office again and then probably when I'm not in office anymore. I'll keep on working on it as a regular person.
There are lots of opportunities that we have to think about doing that. How do we get rid of the B&O tax, which no other state in the country has, which is very regressive? How do we think about our sales tax? We were able to bring down the sales tax on many items with millionaires’ tax, but these are all super regressive taxes that we need to think about bringing down.
We used to be the most tax regressive state in the country. We are now 49th, so we are moving in the right direction, but we're not moving as fast as we need to to really help working families be able to be successful in Washington.
SR: One more because you came in under time here. Would the speaker clarify why our concerns for low-income families leads to a focus on raising revenue for redistribution, rather than creating more better jobs and economic opportunities for those people?
LJ: I think if the the issue on regressivity is that when we have as a state having the poorest 20% of our population spending you know 12 to 15 cents of every dollar they earn in taxes and the wealthiest people in the state spending a nickel on every dollar they earn in taxes, that's the definition of unfair.
What we want to get to is fairness so that everybody pays basically the same portion of every dollar they earn in taxation. That's what makes a strong economy.
You can pick and choose whatever data points you want to pick. I guess we all will do that.
Seattle was just rated the fourth top city to live in the world, with Paris, London and New York. That was, in large part, due to the economy that Washington has.
But really what we face is, I know there's a question about flight of the wealth. We've had a flight of working families who can't afford to live in this state, in part because of our regressive tax structure.
So making a more fair tax structure is really important to strengthen our economy and to strengthen fairness in this state to also strengthen the services that we can provide to Washingtonians in K-12 education and in health care and in child care, things that we know build stronger businesses and stronger economies.
So that's why we want to move away from regressivity is so that we can strengthen all of those things.
SR: Okay. We are going to switch to our closing speeches here. For our first closing speech in the affirmative on this resolution, I'm going to turn back to Viet. You've got a minute.
VN: 93 years. That's how long Washington has gone without an income tax.
Tonight, the other side told you that this is only for millionaires. But if you read the law, it removes the tax protection from nearly every public pension in the state: police, firefighters, teachers and it leaves your Social Security at risk. Only eight states tax Social Security. This law would make Washington one of them.
None of that was needed to tax millionaires, that million dollar line.
It's an ordinary law they voted down, locking it into the Constitution and we've seen leading Democrats already talk about lowering that down to $250,000 and we've actually seen other cities like Seattle and Olympia try to pass these income taxes previously. It keeps coming back.
So before Olympia asks for more it should explain a $4.4 billion liability pool that is trying to deal with new conduct.
And so protect your paycheck, your pension and your Social Security, 93 years. Vote yes on I-645.
SR: I appreciate your brevity there. Quick question. I'm going to ask this actually to both of our panelists who give closing comments here. What's a point that tends to talking points from the other side's perspective that you find reasonable?
VN: You know, I think the other side makes a reasonable point of the regressive tax system that we have in Washington state and and it hits our our low income families really hard.
The question you have to ask is why do we keep sort of layering on some of those taxes in some cases without even a vote of the people? We just saw one recently happened here in King County. So let's work to provide a reasonable tax relief for some of these lower income families, rather than piling on.
SR: Back to Speaker Jinkins here for a one-minute closing statement on the negative side.
LJ: I just really want to reiterate what's really at stake here, as someone who represents thousands upon thousands of working families and small businesses and as Speaker of the House. I'm always trying to write legislation and vote in favor of legislation that has working families and children in mind.
I-645 will absolutely make Washington more difficult to live in for those families with inflation that's out of control and attacks from the Trump administration that defund our health care and our child care and housing and food programs.
The state's struggling to fill the gaps that are left by Trump. The proponents of this initiative have no answer for this because they don't seem to oppose those devastating cuts, like the cuts from HR 1 which would make rural hospitals in our state have to close their doors.
The millionaire’s taxes, our effort not only to begin to write our upside down tax code, but to avoid even further devastating cuts on top of Trump's cuts and I-645 puts all of this at risk by, as you've heard today, putting a $13 billion dollar hole in the state budget.
I wasn't elected to cut budgets for elementary schools or cut budgets for hospitals or cut budgets for health care or child care for kids. I was elected to help Washingtonians, not hurt them. So this will hurt my constituents. It'll hurt people across the state.
I urge you to say no to health care and education cuts, to say no to getting rid of tax cuts for the working and middle class families of the state, to say no to tax breaks for millionaires and billionaires. Nurses, teachers, small businesses, Planned Parenthood advocates all agree, and I agree with them. Vote no on Initiative 645.
SR: And what's the perspective that the other side raises that the speaker finds useful?
LJ: I think that one thing we very much agree on is that we, as a state legislature, because we write the budgets and oversee budgets, we have the responsibility to make sure that we have a stable budget going forward with programs that work for people and not have programs that don't work for people and to make sure that that's what we're funding in our budget for people. That's what I heard Viet say in some of his comments and I very strongly agree that that's an important place of agreement for us.\
Washington Initiative 645 would repeal the state’s new tax on wealthy citizens. This forum is sponsored by Braver Angels of Washington and the WSU Foley Institute.
