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this is your weekly update on the latest news from Washington state. Make sure to forward this to someone you think should be informed!


** SPECIAL ALERT
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WPC expects the proposal for a new state income tax to be dropped next week. There is tremendous pressure within the legislative majority to pass this tax. It has been billed as a "millionaires" tax, but experience in states across the nation and federally inform us that this is a starter tax. If it passes now, it will increase in scope later. Many lawmakers will be eager to cut a deal, promising exemptions here or there, phased reductions of other taxes, etc. But income tax promises have already been described by the senate majority leader as pie crust promises, easily made and easily broken.

To help you in your communications with neighbors and your legislators (use our Take Action page ([link removed]) -- and use it often!), our Budget and Tax Policy Director Ryan Frost has prepared a list of the TOP TEN Arguments Against the Income Tax. Be sure to watch for our analysis of the actual proposal when it is revealed next week.


** Top Ten Reasons
A State Income Tax Is A Bad Idea
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By Ryan Frost
WPC Budget and Tax Policy Director

Governor Ferguson and Democrats in the legislature are
about to propose ([link removed]) a 9.9% income tax on "high earner" Washingtonians. Here are ten reasons why this proposal should be rejected.

10. It Won't Solve the Perpetual Deficit Cycle

Washington has collected $18 billion dollars in additional tax revenues since 2019 through various measures including the capital gains tax, the long-term care payroll tax, and increases to the business and occupation tax. The legislature spent all of it, then spent another $8.6 billion above what they collected, culminating in last year’s historic tax hike ([link removed]) of over $9 billion.

Despite that, the state faces a $2.3 billion budget deficit ([link removed]) this year.

This isn't a revenue problem; it's a spending problem. Every major tax increase has been followed by spending growth that outpaced the new revenue, creating a deficit-tax-deficit-tax cycle. There's no reason to believe a new income tax would break this pattern.

9. High Earners and Businesses Already Pay Their "Fair Share"

The "fair share" talking point collapses under scrutiny ([link removed]) . According to the Department of Revenue's own data, the top 20% of Washington earners pay roughly 60% of all personal state and local taxes in absolute dollars. Yes, Washington's tax system is regressive as a percentage of income; lower earners pay a higher share of their income in taxes. But in actual dollars contributed to state coffers, high earners already shoulder the majority of the burden.

And it's not just individuals. In 2024, businesses paid half ([link removed]) of all state and local taxes in Washington, and that's before last year's large ([link removed]) tax increases on business are even incorporated in the data. This income tax proposal will likely apply to adjusted gross income, meaning a business that grosses over $1 million gets taxed even if expenses consume most of that revenue. Washington businesses already pay B&O tax on gross receipts regardless of profit. The proposal will likely include a credit for B&O taxes paid, but that credit will offset a fraction of the 9.9% rate.

8. Seattle Would Have the Highest Combined Tax Rate on Earnings in America

According to the Tax Foundation ([link removed]) , the proposed 9.9% state income tax would stack on top of existing Seattle payroll taxes to yield a combined top rate of 18.037%. That's derived by adding the proposed income tax (9.9%), the WA Cares tax (0.58%), the Seattle Social Housing tax (5%), and the Seattle JumpStart tax (2.557%). That rate would be 22% higher than the next closest jurisdiction, New York City, making Seattle the single most expensive ([link removed]) major city in America for high earners. With federal taxes included, high-income Seattleites would face an astronomical combined rate approaching 58%.

7. The "Millionaires Only" Promise Won't Last

Every broad-based income tax in American history started narrow and expanded. The federal income tax originally applied only to the very wealthy. California's income tax started with modest rates and now reaches deep into the middle class. Washington's own capital gains tax, which every other state and country in the world classifies as an income tax, proves the point.

Passed in 2021 as a flat 7% tax, lawmakers already expanded it ([link removed]) in 2025 by adding a 2.9% surcharge on gains over $1 million, creating a new 9.9% top rate. While they haven't lowered the threshold (yet), the tax has already grown more aggressive in just a few years.

6. Budget Stability Will Suffer

Capital gains and high-earner income taxes swing wildly ([link removed]) with market conditions. In boom years, revenue pours in, encouraging spending increases that become baked into the baseline. In bust years, revenue collapses, creating instant deficits. California's heavy reliance on income taxes from high earners causes budget swings from massive surpluses to massive deficits based largely on stock market performance. Washington's consumption-based system provides much more stability.

5. Washington Will Lose Its Competitive Advantage

The absence of an income tax has been one of Washington's key advantages in attracting businesses and talent. The migration of companies ([link removed]) from Seattle to Bellevue following the JumpStart tax was just a preview ([link removed]) . An income tax would eliminate one of the few remaining reasons ([link removed]) for high-earning individuals and business owners to choose Washington over other states. In an era of remote work and increased mobility, state tax policy matters more than ever for location decisions.

4. Revenue Estimates Are Always Wrong

Revenue projections for taxes on the wealthy consistently overestimate ([link removed]) actual collections because they fail to account for behavioral responses. High earners have options. They can time when they realize gains, restructure their compensation, relocate, or simply reduce taxable activity. Any honest analysis of the proposed income tax must account for the reality that people respond to incentives.

3. The Spending Problem Remains Ignored

Since 2013, real state spending, adjusted for inflation and population growth, has surged by more than 50%. The current deficit exists despite record revenue because spending decisions have consistently prioritized expansion over sustainability. Until lawmakers demonstrate they can live within existing means ([link removed]) , giving them access to a new revenue source simply enables continued fiscal irresponsibility.

2. Voters Have Repeatedly Rejected Income Taxes

Washington voters have rejected ([link removed]) income tax proposals at the ballot box ten times over the past century. The most recent attempt, in 2010, failed by a margin of nearly two to one. Attempting to impose one through legislative maneuvering rather than a direct vote to the people disrespects the clear and repeated will of the electorate.

1. It’s Unconstitutional

Washington's constitution has been consistently interpreted ([link removed]) to require uniform taxation of property, including income (which courts have treated as property). The capital gains tax survived judicial review only through creative legal arguments that classified it as an "excise" tax rather than an income tax. A direct income tax would face immediate legal challenge, creating years of uncertainty and potentially requiring a constitutional amendment that voters have repeatedly rejected.


** ACCOUNTABILITY
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** SB 6304 Would Gamble Washington Pensions on Failing Environmental Mandates
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Senate Bill 6304 would force ideological climate and social mandates into our state’s public pension investment strategy, and the timing couldn't be worse. The financial industry is rapidly retreating from ESG, the argument for superior returns has collapsed, and Washington's pension systems are already taking on needless risk.
READ MORE ([link removed])


** EV Sales Fell Last Year in Washington. More Subsidies Would Be a Mistake.
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Washington failed to meet its 2026 EV sales targets by a wide margin, and attempting to throw more money at the problem would be a mistake. The state’s previous program to subsidize EV sales in 2024 yielded a reduction in statewide transportation-related CO2 emissions by a minuscule 0.03 percent for $45 million.
READ MORE ([link removed])


** House Bill 1834 Would Create a Regulatory Nightmare and Restrict Parental Control on Social Media
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From nebulous definitions of "addictive feeds" to controls that would bar parents from monitoring their own children's internet use, House Bill 1834, aimed at protecting minors online, is a prime example of government going too far.
READ MORE ([link removed])


** AFFORDABILITY
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** Olympia Wants a 4-Day Work Week. It Won’t Work Out as the Politicians Think It Will.
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Shifting the legal definition of a standard workweek from 40 to 32 hours threatens a one-size-fits-all approach that would cause prices in Washington to skyrocket. The very workers this bill aims to help would be paying the most.
READ MORE ([link removed])


** Top 10 Reasons a State Income Tax Is a Bad Idea
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A state income tax won't solve the state's budget deficit, it will expand to every Washington resident, it's been rejected by voters ten times over, and many more reasons to reject the state's income tax proposal.
READ MORE ([link removed])


** SJR 8206 Is Trouble: Inviting Courts Into Health Care Policy Discussion
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This symbolic gesture is asking for legal battles to become part of the health care landscape, driving up costs and inefficiencies for all involved. Legislators should steer clear.
READ MORE ([link removed])


** State Transit Subsidies - What Has Been the Return on Investment?
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The Governor’s proposed supplemental budget for 2026 includes additional funding for the Regional Mobility Grant Program. Before the legislature adds that funding into the state budget, they should consider whether the program has produced a positive return on the state's investment.
READ MORE ([link removed])


** OPPORTUNITY
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24 States In. Washington Out? $732 Million Lost?

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Just yesterday, Colorado became the 24th state to opt in, joining a growing coalition that recognizes this federal education tax-credit scholarship program for the opportunity it is: additional funding for students at no cost to states. It's time for Washington to take advantage of this opportunity.
READ MORE ([link removed]) and TAKE ACTION ([link removed]) to make your voice heard.
Also Read:
* HB 2100: Tax employers for paying people well? It’s for the needy, sorta ([link removed])
* Farmworker unionization bills can’t legislate goodness ([link removed])
* You may need to save $4 million to receive a pension that matches Seattle’s median income ([link removed])
* Free care for people who don’t live here? It’s being encouraged — HB 2250 can help ([link removed])

MORE HEADLINES ([link removed])


** HAVE YOU SHARED THIS INFORMATION YET?
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How many people you know would guess that Washington ranks 45th -- near the bottom -- for business taxes? Or that our state operating budget increased almost 49 percent (AFTER adjusting for inflation and population control) since the 2012-2015 budget? The legislative session is coming up quickly. To make informed decisions about how to best govern our state, we must acknowledge where we are. WPC's Report Card for Washington's Future gives you the data you need to cut through rhetoric and see where our state needs course correction.

GET THE FACTS ([link removed])
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WPC provides solutions, analysis and insight essential to the well-being of our state and government accountability. This year we face the biggest challenge yet to our state's future. Washington is already losing its competitive advantages and a state income tax will accelerate our decline. We hope you and others you know will join us in this fight for Washington's future.
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