A 9.9% tax will be imposed on Washington income over $1 million beginning Jan. 1, 2028. Initiative 645 would repeal the income tax and prohibit any state or local taxes on individual income.

I-645 would reduce revenues for funds subject to the outlook (NGFO) by $3.108 billion in 2027–29 and by $8.324 billion in 2029–31. Excluding the income tax, NGFO revenues would total $79.466 billion in 2027–29 and $84.840 billion in 2029–31. Because the income tax is not yet being collected, no current appropriations rely on the revenues. (The outlook for the current operating budget assumes $2.698 billion in income tax revenues in 2027–29.) There is no way to know how the Legislature would respond to the loss of anticipated income tax revenues.

Repealing the income tax would make it more difficult for the state to close the persistent gap between spending and ongoing revenues, but maintaining the tax would not solve the problem on its own.

Even if I-645 is rejected, the Legislature will still need to grapple with budget uncertainty related to the constitutional challenge to the income tax. Further, if the income tax remains in effect, it will be the state’s fourth-largest tax source. But the general volatility of income tax revenues and the uncertainty about how taxpayers will respond to the tax will make writing sustainable budgets more complicated.

Read the report here.