Washington Gov. Bob Ferguson (D) plans to soon sign into law what he has calls a “truly historic” 9.9 percent tax on household incomes above $1 million. That’s an accurate description, but only because of how significant the coming economic damage will be.
Eight Democratic representatives joined every Republican to oppose the new levy in the state House. After passing 51-46 in the lower chamber, the Senate easily approved the bill on Wednesday night. It’s telling that politicians, who insist the new law is broadly popular, rejected an amendment that would have let the voters decide on whether to impose a state income tax. A legal challenge will inevitably come, but a state Supreme Court stacked with Democratic loyalists is unlikely to do much.
States without income taxes tend to lean Republican, but for decades Washington had been a rare exception to the high-tax norm in other blue states. The state’s constitution broadly prohibits collecting income taxes, and voters have rejected imposing one on 10 separate occasions. Washington has been moving in this direction ever since introducing a statewide capital gains tax in 2021 on profits over $250,000, but this is the most significant move yet.
Sometimes bucking the trend is an act of bravery. In the case of Washington’s new state income tax, it’s nothing short of sabotage. The “millionaire’s tax” will ostensibly affect 20,000 households and raise $3.7 billion. The income threshold will be adjusted for inflation only every other year, which means more and more residents will get tagged by the new levy over time. That assumes, however, that successful people will stick around as the tax rate inevitably increases.
The Seattle area has long been home to massively successful companies like Starbucks, Microsoft and Amazon, which was founded by Post owner Jeff Bezos. Yet entrepreneurs and high-performing workers will now think twice about coming to a state that explicitly designs laws to penalize success.
Meanwhile, the money grab is being imposed just as states across the country are working hard to abolish their state income tax. Oklahoma, Kentucky and Mississippi are moving to reduce their tax burdens as they improve their balance sheets. It’s possible to remain on secure fiscal footing while also cutting taxes.
Higher revenue doesn’t automatically translate to better services or outcomes. Take education. Washington already has above-average spending per pupil, but its education system earns middling rankings in surveys. Lawmakers in Olympia could learn from states like Mississippi, which is getting rid of its income tax while ranking higher than Washington on some education rankings. Don’t expect utopia simply because the state is now punishing high-earning residents.
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