(The Center Square) – One of the groups that lobbied hard for the new income tax in Washington is touting the coming benefits for working families and small businesses across the state. But a lawmaker who opposed the tax said it will damage the state’s economy.
SB 6346, signed into law by Governor Bob Ferguson late last month, will amount to a 9.9% tax on income above $1 million, or combined household income above that threshold starting with 2028 earnings.
Annie Kucklick, policy and research advisor for the Economic Opportunity Institute (EOI), a Seattle-based think tank that lobbies for progressive revenue, told The Center Square the new income tax on millionaires is about correcting Washington’s regressive tax code.
“This means that the poorest amongst us are paying the highest percentage of their income towards taxes,” said Kucklick. “This is a small step. It’s a historic step towards rebalancing the regressive tax code that we have by asking the wealthy, the very wealthy, the top one percent of Washingtonians, to pay a little bit more.”
EOI says families who will get help from the expansion of the Working Families Tax Credit will be among the biggest beneficiaries.
“We’re really excited about that,” she said. “It’s a big, big benefit in this bill.”
Households that were previously ineligible for the Working Families Tax Credit (WFTC), may now be eligible for a tax refund of between $335 and $1,330, according to an FAQ from WA Senate Democrats. The new income tax will work to broaden eligibility for the credit to another 460,000 households. About 350,000 Washington households are currently receiving the WFTC.
Rep. Travis Couture, R-Allyn, told The Center Square that as the leading budget writer for Republicans in the House, he offered a WFTC expansion, without any new taxes.
“I funded the tax credit not through new taxes….but through the Climate Commitment Act, because that is a very grifty program that we’re paying for,” he said. “DEI studies in Africa and drum circles, all sorts of stuff for environmental justice. It’s not actually doing anything to lessen the carbon impact we have in our society, but it is hammering Washingtonians with the carbon tax on gas. I didn’t need to raise a holy hell with an income tax to fund the working families tax credit.”
Kucklick with EOI said concerns about potential impacts on small businesses from the new income tax in Washington are being exaggerated.
“We really don’t think that this is going to have a big impact on small business,” she said. “I wrote a couple of scenarios on our website, where I documented three different types of business. And I walk through kind of benefits of what each of them will get and then if they will face the tax. It is very unlikely that many small businesses will be impacted by this.”
There is some relief in the legislation for Business and Occupation taxes.
The state will provide an option in which the business pays the tax rather than the owner, which would allow these businesses to claim a federal deduction, reducing their federal tax liability, according to that FAQ from Senate Democrats.
Couture says the contention that few small businesses will be impacted by the income tax is simply untrue.
“They claim that the [tax relief] is for all small businesses….that couldn’t be any further from the truth,” he said. “As a matter of fact, as a small business owner myself with six employees, the chances are you are likely never going to qualify for this B&O tax relief in this bill. There’s no way my cabinet shop would qualify for the B&O tax relief in the income tax bill. And so, a lot of businesses across Washington are that same exact profile.”
Kucklick said EOI understands that constitutional questions about tax remain.
“That’s going to be ultimately up to the courts to decide,” she said. “It’s not our role to determine that. Ultimately it comes down to the definition of how you define property and income and if income is defined as property. So, it will be up to the courts to decide that.”
Couture said there is no question that the income tax is unconstitutional and he believes the legal challenge filed last week in Klickitat County Superior Court will be successful.
“It’s wholly unconstitutional, and it’s probably not even going to get the revenue that they project it will get because if just one out of six millionaires or above, or small businesses leave our state, then the entire scheme falls apart,” he said. “This is like one of the most volatile tax schemes. It’s a false promise.”
EOI’s Kucklick would not say if they would support expanding the income tax to lower earners in the future.
“We are fighting to ensure that the lowest and middle-income earners are paying less in taxes than the highest income earners,” she said. “I don’t know what will happen for future legislatures. They’ve kept that option open.”
Couture said he’s convinced majority Democrats will seek to expand the tax to a lower threshold in years to come.
“Can we just not forget for a second that literally last year, we passed the largest tax increases in state history,” he added. “The Democrats have robbed us blind, and then they give us like a dollar back and ask us to be grateful for it. I mean, it’s nuts. I think that if economics was water and Democrats were in a boat, they couldn’t fall out of the boat and find it. We’re torching our economy right now, and it is like a five-alarm fire.”
