Columbus, OH – In Washington’s Tax Gamble, The Buckeye Institute’s economic modeling revealed that a proposed 9.9 percent Washington state income tax on high earners included in Senate Bill 6346 would ravage the state’s economy with a loss of $4.9 billion in economic growth, high-income earners leaving the state, and fewer businesses being opened. The report was published in partnership with Washington Policy Center.

“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.”

Using a dynamic scoring model—STELA (state tax and economic long-run analysis)—developed by economists at The Buckeye Institute, researchers analyzed the economic impact of Senate Bill 6346 and the potential for high-income taxpayer migration and employer startup formation. Buckeye’s modeling provides Washington voters and policymakers with a better understanding of how Senate Bill 6346 will affect the state’s businesses, families, economy, and revenues as voters go to the polls in November to consider its repeal.

Imposing a 9.9% income tax on high earners would lead to a:

• Loss of $4.9 billion in economic growth in 2028.
• Loss of 7,800 jobs in 2028.
• Loss of $3.1 billion in private investment in 2028.
• Loss of $3.6 billion in consumer spending in 2028.

Further analysis revealed that if implemented, Senate Bill 6346 could lead to nearly three percent of high-income earners leaving the state over the long run and 1,400 fewer businesses opening each year. 

“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 at Washington Policy Center. “You won’t read that on the ballot, but you should. This is the tip of the iceberg since the law as passed lays the groundwork for lowering the threshold of the tax.”

The authors of Washington’s Tax Gamble are Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute; Sai C. Martha, economic research analyst; and Donavan Rees Lingerfelt, economic research assistant.

Consistent with academic standards and methodologies, STELA underwent a double-blind peer review. A full methodology and technical description are included in the report, allowing researchers to validate STELA’s accuracy and conclusions.

# # #