The Hidden Economic Costs of Washington’s Income Tax

Opinion:

Out of all the initiatives on the state ballot, I-645 has been driving the most debate. Many voters are even confused about what exactly they are voting for or against.

Background

On March 30, 2026, Governor Bob Ferguson signed Senate Bill 6346, the state’s first income tax, into law. The bill means Washington State will tax millionaires 9.9% on their annual income over $1,000,000. The tax will first take effect in 2028,meaning payments will be due in 2029.

However, Washington State allows voters to create new law initiatives on the ballot, provided a minimum of 8% of the number of those who voted for governor in the last election sign it. The required signatures were 308,911, and the initiative received 509,365.

The initiative (I-645) proposes a new law to overturn the existing income tax law. Therefore, those who want to see the income tax preserved vote no, and those who want to see it abolished vote yes.

The Problems

While supporters of projects such as an income tax believe it will simply force those at the top to pay a fair share for the public good, they often ignore the unintended consequences of such a law. Often, when tax rates on the highest earners are increased, these individuals either move states, cut investments, or scale back economic activities.

low angle photo of city high rise buildings during daytime

Progressives must remember that the very demographic they seek to tax are the key drivers of economic growth. When high earners move their businesses out of state to avoid tax burdens, many good jobs are lost. Even when these individuals don’t move states, they have less incentive to expand their businesses, invest in new sectors, or hire new employees. Not only does higher unemployment hit the most inexperienced workers particularly hard, but the productivity lag also leads to higher prices for all consumers.

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In conclusion, while “taxing the rich” is a good political slogan, it actually taxes everyone in ways that just aren’t immediately visible.