WA Income Tax Won't Solve State Budget Problems, Research Group Says

Washington voters will soon decide whether to repeal the state's newly enacted 9.9% income tax, but a new analysis from the Washington Research Council argues the tax itself does not solve the state's underlying budget problems. Initiative 645 would repeal Washington's new individual income tax while leaving several tax-relief provisions enacted as part of Senate Bill 6346 in place. The income tax is scheduled to apply to Washington taxable income above the applicable $1 million standard deduction beginning with the 2028 tax year. If voters approve I-645, the income-tax provisions would be repealed while several other provisions of the broader tax package would remain. Those include an expansion of the Working Families Tax Credit, certain sales-tax exemptions and business tax relief included in SB 6346. Washington Research Council Senior Research Analyst Emily Makings says the income tax itself does not resolve Washington's existing state budget imbalance. Makings argues state spending has increased beyond expected ongoing revenues in recent budget cycles and says lawmakers will still have significant work ahead to bring spending and revenue into alignment regardless of whether the income tax remains. The Research Council says repealing the income tax could make that task more difficult because the state would lose the revenue lawmakers expect the tax to generate. But Makings argues keeping the tax would not by itself solve the underlying budget problem. I-645 also creates a different outcome for the tax-relief provisions than could occur if a court ultimately invalidated the income tax. Under provisions of SB 6346 discussed by the Research Council, a final court ruling invalidating the individual income tax could trigger a clause eliminating associated tax-relief provisions. If voters instead approve I-645 as written, the Research Council says those tax-relief provisions would remain in law. Lawmakers could subsequently revisit those policies during a future legislative session. The Research Council also raises questions about the reliability of the income tax as a major state revenue source, pointing to the volatility of high-income earnings and uncertainty over how taxpayers may respond to the new tax. Washington voters will decide I-645 in the November 3 election. Today's report examines Washington's new 9.9% income tax, Initiative 645, Senate Bill 6346, the Working Families Tax Credit, Washington's state budget, government spending and what could happen if voters repeal the income tax. Follow The Center Square for continuing coverage of Washington's income tax, I-645, SB 6346, Washington taxes, state spending, the Washington budget, ballot initiatives and state government. Want the next important update by text? Get the Washington state government and policy developments worth your attention sent straight to your phone. Text TCSWA to 206-944-3016 or sign up here: https://joinsubtext.com/c/thecentersquarewa Msg & data rates may apply. #WashingtonState #IncomeTax #I645 #Taxes #WashingtonBudget #SB6346 #TaxReform #WashingtonPolitics #WashingtonElection #GovernmentSpending #WashingtonNews #TheCenterSquare #WashingtonInFocus