Initiative I-1098 — Proposed New Washington Tax on Income
Several clients have asked for a summary of the provisions and impact of ballot initiative I-1098 (the proposed New Washington Tax on Income) if adopted. This summary has been prepared for those and other clients interested in an unbiased review of I-1098.
Washington currently is one of seven states in the country without a personal income tax. The primary sources of tax revenue for Washington state are the retail sales tax (which generates more than 50 percent of Washington’s tax revenue), the business and occupation (B&O) tax (a tax on the gross receipts from business activities), and the state portion of the property tax (which is dedicated to education). See the attached Table 1 prepared by the Washington Department of Revenue that summarizes the tax receipts collected by the state in Fiscal years 2009 and 2010.
On November 2, 2010, Washington residents will vote on Initiative I-1098 to approve or reject a state income tax. The proposed income tax would impose a 5 percent tax on individuals with adjusted gross income in excess of $200,000 (and on married couples with joint income in excess of $400,000). The tax would be imposed only on adjusted gross income in excess of the $200,000 and $400,000 thresholds. For individuals with taxable income over $500,000 (or over $1 million for a married couple filing a joint return), the tax rate increases to 9 percent of the excess. The new tax on income would apply to almost every form of income received by a Washington-resident individual that is subject to federal income tax. The new income tax, if enacted, will become effective in 2012.
For more information, please contact the Trusts and Estates or the Taxation Practice Groups at Lane Powell: