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57.9% of Washington state voters opposed repealing the millionaire income tax, and the new system is expected to take effect in 2029. Although it can increase financial resources, it still faces high income outflow and unconstitutional lawsuits.
Major tax changes are likely in Washington state’s midterm elections. Initiative 645, which sought to repeal the new millionaires income tax, lost in the vote. According to unofficial results released by the Washington State Elections Agency, 57.9% of voters opposed the abolition of the tax, and 42.1% supported the abolition of the tax. The difference between the two parties was about 16 percentage points, indicating that voters preferred to retain the new system of taxing high earners.
Washington has long been known for not imposing a personal income tax, but the state Legislature passed a new law this year, and Governor Bob Ferguson signed it on March 30, imposing a 9.9% income tax on an individual or family’s annual income of more than $1 million. The new tax system is scheduled to take effect in 2028, and taxes will begin to be collected in 2029.
It should be noted that this tax is not levied at 9.9% on all income, but is calculated only on the portion exceeding 1 million yuan. For example, if a family’s annual income is NT$1.2 million, in theory, only the additional NT$200,000 will be taxed according to the new tax rate. The basic tax amount is NT$19,800. The actual burden will still depend on applicable deductions and other rules. In future the tax threshold will also be adjusted with inflation. According to Axios Seattle, the new tax is expected to affect about 25,000 taxpayers, mainly concentrated in higher-income households.
Initiative No. 645 calls for eliminating the 9.9% income tax and also seeks to prevent state and local governments from imposing personal income-based taxes in the future. Therefore, it is considered an important referendum on the direction of Washington’s tax system.
Those who support maintaining the new tax system believe that Washington’s current tax revenue is overly dependent on sales taxes and other consumption-related taxes, which places greater pressure on low- and middle-income families. The new income tax could increase resources for education, medical care and child care. According to the state government’s financial estimates, the new tax is expected to generate more than $11 billion in revenue in the first three years after its implementation.
However, hedge fund manager Brian Haywood, a member of the “Let’s Go Washington” camp and the main supporter of tax repeal, warned that imposing a high income tax could encourage companies and high-income talent to leave the state, weakening the competitiveness of Seattle’s technology industry. They are also worried that the government may lower the 1 million yuan threshold in the future, which will increase the tax burden on more families. Governor Ferguson said that if the state legislature tried to lower the limit, he would veto it.
The voters’ stance does not mean that the controversy is over. Former Washington Attorney General Rob McKenna and others have filed a lawsuit, arguing that previous judicial precedents in Washington treat income as property and that the new tax could violate the state’s constitutional limits on estate taxes. The state government believes that the new tax is a special tax on income transfer and is not a wealth tax. How the court rules in the future will determine whether the millionaires tax can be successfully implemented.
Summary FAQ
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Unofficial votes show that 57.9% of voters oppose repealing the new tax, and 42.1% support repealing the tax. The difference is about 16 percentage points, indicating that a majority of voters prefer maintaining this high income tax system.
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The new tax is not imposed at 9.9% on all income, but is calculated only on the portion of an individual’s or family’s annual income exceeding 1 million yuan. It is scheduled to take effect in 2028 and begin tax collection in 2029. The limit will be adjusted with inflation.
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Proponents believe it could improve the state’s excessive reliance on sales taxes and increase education, medical, and child care resources; Opponents worry about an outflow of high-income talents and businesses, and argue that the new tax could violate the state Constitution’s restrictions on property taxes.
