(The Center Square) – Washington’s leading small business association says thousands of small businesses in the state will suffer should the newly signed income tax law remain in place following legal challenges.
The National Federation of Independent Business (NFIB) joined the lawsuit filed last Friday in Klickitat County Superior Court challenging the constitutionality of Senate Bill 6346, the so-called Millionaire Tax signed into law by Gov. Bob Ferguson on March 30.
In a Monday interview with The Center Square, Elizabeth Milito, executive director of the National Federation of Independent Business’ Small Business Legal Center, said its Washington team worked hard during the legislative session to make sure lawmakers understood what the income tax would mean to businesses across the state.
“Their business income is reported on their personal tax return. It does not mean that they are keeping that in the bank and going around and spending it on personal things. What that means is they are keeping it and then reinvesting it in the business,” said Milito.” So, it’s coming through, but they’re putting it right back into the business more times than not. They’re reinvesting that income into the business.”
NFIB reports 85% of small businesses are organized as pass-through entities for federal tax purposes and report their business earnings and expenses on their personal income tax forms. But that does not mean the business owners are taking home millions of dollars.
“One thing that we have heard from our members, even those that don’t necessarily report a million dollars on their tax returns, is they are still very concerned that this is the nose under the camel’s tent, or the first step towards an income tax on potentially all Washingtonians,” said Milito.
As previously reported by The Center Square, the lawsuit NFIB has joined includes former Republican State Attorney General Rob McKenna and former Democratic Supreme Court Justice Phil Talmadge, as well as other groups including the Building Industry Association of Washington.
“If by chance we don’t prevail, then you better believe that the legislature’s going to come back, right?” Milito said. “So I do really fear that this is the first step towards an income tax … If we don’t defeat this in court, it’s the first step towards an income tax on all Washingtonians.”
Let’s Go Washington is pushing to get a referendum on the ballot to repeal it. The State Supreme Court must rule in favor of allowing one, with April 30 set for those arguments as the secretary of state is currently blocking the referendum, based on the fact the legislation contained a necessity clause precluding voter input.
LGW’s referendum attempt is urgent as getting the referendum or an initiative on the November ballot, would require valid signatures to be turned in to the Secretary of State’s Office in short order.
Let’s Go Washington must submit about 200,000 valid signatures by June 10, 2026, if its legal challenge allows a referendum to move forward.
An initiative petition would require nearly 309,000 signatures to be submitted by July 2, 2026, though supporters would work to gather far more signatures to ensure certification by the Secretary of State.
Milito told The Center Square NFIB is confident in the legal argument being on its side.
“The Constitution in your state is very clear, and the court has interpreted that in a way that supports our argument too. I think we’ve got the winning side, and hopefully at the end of the day, we do prevail,” Milito said.
