Washington has adopted its first income tax after Gov. Bob Ferguson (D) signed into law Monday a bill that applies a 9.9% levy on the roughly 30,000 taxpayers in the state who make more than $1 million a year.
The measure, dubbed the millionaires’ tax, is vulnerable to challenges in court and at the ballot box, as with previous legislative attempts to institute an income tax in the state. Lawmakers are hoping the law’s narrow scope will help it survive those challenges.
Opponents, including several business groups, have expressed concern that the tax will make the state less competitive compared to other parts of the US. But proponents have pointed to Washington’s regressive tax structure and budget issues as signs that an income tax is needed. Washington was one of nine states in the country without an income tax.
“This is truly a historic step forward on re-balancing our tax code. It’s the right thing to do for Washington’s working families. It’s the right time to do it, and it’s the right policy,” Ferguson said in a press conference before signing the bill.
An Olympia-based group called the Citizen Action Defense Fund has already pledged to sue over the new tax, saying it runs afoul of the state constitution.
The law also faces a repeal effort led by money manager Brian Heywood, who founded a political action committee called Let’s Go Washington that is filing a referendum to put before voters this November. “The capital gains tax, estate tax, and now the income tax is driving entrepreneurs, businesses, and employees away from the state,” Heywood said in a statement Monday.
The new tax is set to take effect in 2029.
The legislation creating the tax cleared the legislature March 11. It also institutes an array of tax breaks intended to help low-income families and small businesses.
(Updates to include lawsuit threat, repeal referendum in the fifth and sixth paragraphs.)
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