- Washington would have 6,100 fewer jobs and 1,400 fewer new businesses annually. Washington's economic growth will slow. The report estimates the tax could reduce new employer businesses by 11.9%, which is about 1,400 fewer new businesses and about 6,100 fewer jobs each year.
- Washington will have nearly 8,000 fewer jobs in 2028. The report estimates about 7,800 fewer full-time jobs in 2028 and about 18,800 fewer by 2036.
- The state collects more, but the state economy will produce less. The tax would raise an estimated $2.6 billion in 2029 and $3.3 billion in 2036. For each additional $1 the state collects, the economy would produce about $1.90 less in 2028 and about $2.50 less by 2036.
- The state would produce almost $5 billion less in goods and services. Washington’s economy will slow. In 2028, the state would produce about $4.9 billion less in goods and services than it would without the tax. By 2036, the yearly gap grows to about $8.3 billion.
- Consumer spending would be $3.6 billion lower in 2028.
- Business Investment would be $3.1 billion lower in 2028.
For every $1 the state collects, Washington would produce up to $2.50 less, according to a new study from Washington Policy Center (WPC) and The Buckeye Institute.
The new report, Washington Tax Gamble: An Evaluation of Washington’s Income Tax Hike finds that Washington's 9.9% income tax on earnings above $1 million (Senate Bill 6346) would bring in money for the state but leave Washington with fewer jobs, less economic growth, and less business investment than it would have had without the tax.
The economic damage estimated by the report is based solely on the current threshold of the tax. Given the law lays the groundwork for future reductions of the threshold for the tax and the historic trend of income taxes broadening once passed, future damages could exceed current estimates.
"This report shows what the state's revenue estimate leaves out, which is how people and businesses react once a new tax is in place. Advocates are focused on what the state would collect but ignoring the damage the $4.9 billion reduction in economic activity and the resulting thousands of fewer jobs this income tax would cause,” said Steven Hatting, president and CEO of Washington Policy Center. “You won’t read that on the ballot’s Public Investment Impact Disclosure statement, but you should."
The report, "Washington's Tax Gamble," was written by economists at The Buckeye Institute in partnership with Washington Policy Center. The authors compared Washington's economy with the tax and without it, starting with income earned in 2028.
“The Buckeye Institute’s modeling shows that abandoning Washington’s no income tax policy and imposing a 9.9 percent income tax on high earners could prove economically disastrous for the Evergreen State,” said paper co-author Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute. “Rather than impose this potentially volatile tax, Washington policymakers would be wise to promote spending discipline, revenue stability, and a competitive tax environment to strengthen the state’s long-term fiscal position.”
The report observes that in each of the last three budget cycles, Washington state adopted spending that was more than the tax revenue it expected to collect: about $1.9 billion more in 2019-21, $2.6 billion more in 2021-23 and $4.1 billion more in 2023-25.
The report concludes that ongoing budget pressures require more than another source of tax revenue. It says the state should address spending growth and commitments, and it recommends that lawmakers promote spending discipline, revenue stability, and a competitive tax environment.
"This is the tip of the iceberg," explained Ryan Frost, WPC director of budget and tax policy. "The law as passed lays the groundwork for lowering the threshold of the tax and we're already hearing legislators calling for the threshold to be lowered to $250,000. When that threshold changes, the economic consequences for Washington will grow.”
The full report is available at washingtonpolicy.org. A related Infographic can be seen here.
