NFIB members have been sent a special ballot on the proposed Millionaire Tax. Please vote it If you haven’t already.

This special ballot asks, “Should Washington establish a 9.9% state individual income tax on earnings above $1 million?”

Background

The governor and legislative leaders have proposed a 9.9% tax on an individual’s adjusted gross income (AGI) with a $1 million deduction. For married couples and domestic partners, the deduction applies to the couple’s combined household income, regardless of filing status. The tax would not apply directly to corporations or pass-through entities (LLCs, partnerships, S-corps, sole proprietors) but would apply to the earnings of a pass-through entity’s owner(s), whether distributed or not. State Business & Occupation (B&O) Tax payments would be deducted from the income tax owed.

Proponents Say:

— The Millionaire Tax is estimated to raise $3 billion annually to support education and other critical social benefit programs, reduce taxes on small businesses, expand the Working Families Tax Credit, and exempt essential personal hygiene and infant care items from sales tax.

— It would only apply to approximately 20,000 households.

— Washington’s tax structure, which relies primarily on sales, B&O, and property taxes, is regressive in nature and insufficient to accommodate Washington’s changing economy and growing population. This new tax would help address that imbalance, asking the wealthy to pay more, and provide additional revenue to support our state’s growing population and its needs.

Opponents Say:

— This is the first step towards an income tax on all Washingtonians, even though the state constitution and existing law prohibit state or local taxation of personal income.

— The Legislature could easily reduce the $1 million deduction at any time to capture more small-business owners and other taxpayers.

— Small businesses would be particularly hard hit because the tax would apply to all earnings, distributed or not, from pass-through entities – 85% of small businesses in Washington are structured as a “pass through entity.” The bill’s credit for B&O taxes paid does not carry forward, so is of little help with volatile swings in business income.

Please take a few minutes to vote the ballot. It will set our lobbying strategy on behalf of Washington small businesses.