A new analysis from the state Department of Revenue shows Washington’s high-earner income tax will be paid by thousands of additional households and produce hundreds of millions of dollars more than previously assumed — if voters don’t ditch it this fall.

These larger figures will be in front of voters as they decide whether to repeal the tax in the Nov. 3 election. If voters uphold the tax, it could mean lawmakers need to make fewer cuts to balance the next two-year budget.

When Gov. Bob Ferguson signed legislation creating the income tax in late March, he and lawmakers counted on it to generate $2.7 billion for the next budget and $6.9 billion for the following two-year fiscal cycle.

Now, three months before an initiative to repeal the tax appears on ballots statewide, the department has revised its numbers, predicting this new levy will bring in $3.1 billion in the initial fiscal year and roughly $8.3 billion in the 2029-31 biennium.

The new estimates appeared without notice last month, tucked into a chart in the online statement describing the potential fiscal consequences of Initiative 645. The revenue agency did the calculations and the Office of Financial Management wrote the document, which will be in voter pamphlets in October.

Initiative 645 seeks to repeal the 9.9% tax on individual and household wage income above $1 million a year, which is slated to take effect Jan. 1, 2028, with payments due the following year. 

Because a “yes” vote on I-645 would eliminate the tax, the projected collections are portrayed as losses in the online statement.

The Department of Revenue analysis also found that 25,000 households would pay the income tax, up from 21,000 discussed during the last legislative session. That information is not in the fiscal statement prepared for voters.

Ferguson, a vocal opponent of the initiative, oversees both the Office of Financial Management and Department of Revenue but was not involved in the development of the document, officials said.

Narrower budget gap?

The added dollars would be welcome for Ferguson and lawmakers who expect to wrestle with a strained budget in the next legislative session. The governor has warned of a shortfall for a third straight year and asked agencies to take a hard look at spending.

But the money can’t be counted on quite yet.

Operating budgets must be based on official revenue forecasts prepared by the state’s chief economist and adopted by the Economic and Revenue Forecast Council. 

For his June forecast, chief economist Dave Reich followed past practice and used the Department of Revenue estimates in the extensive fiscal note for the income tax legislation. That meant he assumed 21,000 filers and tax collections of $2.7 billion for the next budget.

The September forecast will be the first to potentially include the higher sums calculated by Ferguson’s revenue office.

“We will be taking a look at how they forecasted the tax but our forecast may or may not match depending on our assessment of the method, risk, etc.,” Reich said in an email.

An updated forecast won’t matter if voters pass Initiative 645 in November. And even if the measure fails, a legal challenge to the tax’s constitutionality could stanch this revenue stream.

The revenue department’s statement makes no mention of its earlier estimate that was part of the June forecast or what it could mean if the chief economist does not assume the new, larger figures in the next forecast.

Nor is there much explanation for why the figures are so much higher.

“What a shock,” Initiative sponsor Brian Heywood said sarcastically. “Why would you trust anything that comes out of Olympia because there’s been a consistent pattern of factually inaccurate releases from the administration.”

Just estimates

A Department of Revenue spokesman stressed that the new fiscal estimates “are just that, estimates.”

“We do not have any actual collections to inform this question, so we estimate the impact using a variety of data sources that are in turn influenced by the most recent economic forecast,” said Mikhail Carpenter, communications director for the agency.

Providing estimates, he said, is routine. There was no decision on which numbers to use. It was determined by economic modeling, he said.

When the legislation was signed into law, the estimated tax collections were based on the November 2025 forecast. Figures used in the fiscal impact statement are derived from the June forecast and are higher because they reflect improved economic conditions.

“Specifically, dividend income, stock income, personal income, and wages grew from the November to June forecasts, which has a positive effect on the number of taxpayers and the amount of Washington taxable income, increasing both,” Carpenter said.

That is why the department now thinks more households will pay the tax. State revenue analysts plugged in numbers and concluded that 4,000 households just below the $1 million threshold now will be above it by the time the tax kicks in. 

Also, analysts predict those already earning more than $1 million will be wealthier and thus pay more. The combination of more filers and greater household wealth is why revenue estimates rose, he said.

The numbers are not static. Had the June forecast been negative, it would have been reflected as a decline in the numbers for this estimate, he said. Numbers could improve again based on the September forecast. But the fiscal impact statement won’t be edited or updated regardless of the information.

Heywood, leader of the politically conservative Let’s Go Washington, questioned the calculations because they assume a static population. “They think nobody is going to leave because of the tax. They’re wrong,” he said.

Other figures, like the number of filers, need a closer look, he said. “Next month it’ll be only 40,000. Then, after that, it will be 100,000. To some extent they’re just making it up.”

This story is republished from the Washington State Standard, a nonprofit, nonpartisan news outlet that provides original reporting, analysis and commentary on Washington state government and politics.