Initiative Measure No. IP26-645
Concerns state and local taxes
Initiative Measure No. IP26-645 concerns state and local taxes.
This measure would repeal a 9.9% tax on annual individual income over $1,000,000; prohibit taxes measured by individual income and taxes on individual income or the receipt of individual income; and define “income.” This measure would decrease funding for public K-12 education, higher education (including universities and community colleges), and human services (primarily healthcare).
Should this measure be enacted into law?
- To pass
- Majority of votes cast on the measure
- Origin
- Citizen initiative (Initiative to the People)
- Type
- Initiative to the People
Official fiscal impact statement
Written by the Office of Financial Management
For more information visit www.ofm.wa.gov/ballot
Summary
If approved by voters, Initiative Measure No. IP26-645 will result in an estimated loss to state revenue of $11.4 billion over state fiscal years 2027-2031. This would reduce funding to the state general fund to support core government services, particularly public K-12 education, higher education (including universities and community colleges), and human services (primarily healthcare). The Legislature expressed an intent to use the additional revenue created by Engrossed Substitute Senate Bill 6346 (2026) (ESSB 6346) towards providing free school meals, transferring funds for childcare and early learning, and transferring funds to local governments to mitigate sales tax loss.
General assumptions
A state tax equal to 9.9 percent on Washington taxable income greater than $1,000,000 per individual became law following the 2026 legislative session due to ESSB 6346 - Establishing a tax on millionaires. If approved, the initiative will repeal the tax such that it will no longer go into effect on January 1, 2028, and the state will no longer impose this tax.
The effective date of the initiative is December 3, 2026.
The provisions of the initiative apply prospectively, not retroactively.
The Department of Revenue (DOR) ceases all implementation activities on the effective date, including those activities that are in progress.
Estimates use the state’s fiscal year (SFY) of July 1 through June 30. State fiscal year 2027 is July 1, 2026, to June 30, 2027.
Calendar year refers to January 1 to December 31.
RCW 29A.72.025 regarding fiscal impact statements indicates any such statement “must describe any projected increase or decrease in revenues, costs, expenditures, or indebtedness that the state or local governments will experience if the ballot measure were approved by state voters.” As such, impacts that might occur due to actions of a future Legislature or those only expressed through legislative intent, are not included.
Revenue
Local Revenue
The initiative will not impact local revenue.
State Revenue
The initiative is estimated to result in revenue loss of $11,432,414,000 over five fiscal years from the state general fund, federal general fund, and fair start for kids account. The general fund is the principal state fund supporting the operation of the state. The fair start for kids account is used only for childcare and early learning purposes.
State Revenue Assumptions
State General Fund
Revenue estimates are based on several available data sources including:
Department of Revenue (DOR) excise data.
The Economic and Revenue Forecast Council (ERFC) June 2026 tax revenue forecast.
The Internal Revenue Service (IRS) publication 6149 calendar year projections by state for 2024.
IRS individual income tax returns for tax year 2022.
The National Library of Medicine publication, “US Taxation of Gambling Winnings and Incentives to Bet.”
The following additional assumptions are made for calculation purposes:
The first impacted year of tax collections is state fiscal year 2029.
The only tax impacted is the tax described in ESSB 6346 from the 2026 Legislative Session.
There are no estimated tax payments required in tax year 2028 (calendar year 2028), therefore the first payments are due from taxpayers in April 2029.
Approximately 89 percent of total tax payments will occur in April 2029 and the remaining 11 percent of payments will occur in October 2029, due to the six-month extension deadline.
The first estimated tax payments, for the January 2029 to June 2029 period, are due July 1, 2029.
Based on information from the Institute on Taxation and Economic Policy (ITEP), it is assumed that there is a reduced IRS enforcement budget. Based on the ITEP analysis, a 4.71 percent downward adjustment is applied to taxpayers' Adjusted Gross Income (AGI) prior to estimating tax collections.
Due to assumed taxpayer behavior, an assumption about taxpayer compliance is applied to revenue estimates. It is assumed that 90 percent of tax revenue will be collected for tax year 2028 (calendar year 2028) and 95 percent of tax revenue will be collected for tax year 2029 (calendar year 2029) and thereafter.
Federal General Fund
ESSB 6346 made state income tax refunds subject to child support collection action by the Department of Social and Health Services. To implement this provision, the Department of Social and Health Services anticipates receipt of federal funding for information technology updates, policy updates, and staff training. This federal revenue would be eliminated if the initiative was approved.
Fair Start for Kids Account
ESSB 6346 directed the Office of the State Treasurer to deposit five percent of the tax revenue collected to the fair start for kids account beginning July 1, 2029, and each July 1st thereafter. The repeal of the tax means that this transfer will no longer occur. The total amount that will no longer be transferred to the fair start for kids account is $377,000,000, including $155,400,000 in state fiscal year 2030 and $221,600,000 in state fiscal year 2031.
State Revenue Impacts
Table 1. Revenue loss, by account
Account
SFY 2027
SFY 2028
SFY 2029
SFY 2030
SFY 2031
State General Fund
$0
$0
($3,108,000,000)
($4,276,600,000)
($3,670,400,000)
Fair Start for Kids Account
$0
$0
$0
($155,400,000)
($221,600,000)
Federal General Fund
($271,000)
($143,000)
$0
$0
$0
Total
($271,000)
($143,000)
($3,108,000,000)
($4,432,000,000)
($3,892,000,000)
State Government Expenditures
State Agency Implementation Cost Assumptions
State agency savings are estimated to be a net total of $150,471,700 over five state fiscal years as a result of the initiative. Savings by agency are:
Table 2. Expenditures, by agency (state general fund and federal general fund)
Account
SFY 2027
SFY 2028
SFY 2029
SFY 2030
SFY 2031
Department of Revenue
Unknown
($53,676,000)
($35,696,900)
($30,544,400)
($29,927,400)
Office of the Attorney General
$0
$0
$0
$0
$0
Department of Social and Health Services – State General Fund
($139,000)
($74,000)
$0
$0
$0
Department of Social and Health Services – Federal General Fund
($271,000)
($143,000)
$0
$0
$0
Office of the State Treasurer
$0
$0
$0
$0
$0
Department of Corrections
Indeterminate
Indeterminate
Indeterminate
Indeterminate
Indeterminate
Department of Children, Youth, and Families
Indeterminate
Indeterminate
Indeterminate
Indeterminate
Indeterminate
State General Fund Total
($139,000)
($53,750,000)
($35,696,900)
($30,544,400)
($29,927,400)
All Funds Total
($410,000)
($53,893,000)
($35,696,900)
($30,544,400)
($29,927,400)
Department of Revenue
The Department will save a net of $149,844,700 over the five fiscal years between 2027 and 2031. It is assumed that the existing state general fund appropriation for administering the tax will end as of June 30, 2027. Impacts to expenditures and subsequent savings are estimated to occur on or after January 1, 2027.
Currently, the Department has received a total appropriation of $10,196,000 for state fiscal year 2027. The total appropriation for the period from January 2027 to June 2027 is $5,408,400. Unspent amounts from the general fund for state fiscal year 2027 are currently unknown due to potential contracts and vendor commitments. For state fiscal years 2028, 2029, 2030, and 2031 it is assumed that DOR would receive funding from the legislature in accordance with the fiscal note for parts I – VIII of ESSB 6346 – Establishing a tax on millionaires. Savings are assumed for tax administration duties for approximately 30,000 taxpayers that will no longer be required. These savings by state fiscal year are as follows:
Savings of $53,676,000 for state fiscal year 2028.
Savings of $35,696,900 for state fiscal year 2029.
Savings of $30,544,400 for state fiscal year 2030.
Savings of $29,927,400 for state fiscal year 2031.
Office of the Attorney General
The Office of the Attorney General (AGO) will have no increase or decrease in costs each state fiscal year from 2027 through 2031. The anticipated change in the amount of legal services workload is minimal. The AGO did not receive funding specific to implementing ESSB 6346.
Department of Social and Health Services
In state fiscal year 2027, the Department of Social and Health Services (DSHS) will save $139,000 in state funds and $279,000 in federal funds. In state fiscal year 2028, DSHS will save $74,000 in state funds and $143,000 in federal funds. This funding was provided for information technology updates, policy updates, and staff training for the agency to implement child support collections on state tax refunds.
Office of the State Treasurer
The Office of the State Treasurer (OST) will have no increase or decrease in costs in state fiscal years 2030 and 2031 to administer the transfer to the fair start for kids account. The OST did not receive funding specific to implement ESSB 6346.
Department of Corrections
The Department of Corrections will have indeterminate savings resulting from the elimination of the class C felony for evading this tax.
Department of Children, Youth, and Families
The Department of Children, Youth, and Families will have indeterminate savings resulting from the elimination of the class C felony for evading this tax. It is unclear if these criminal offenses are limited to adult crimes.