Opinion: Workers need employers: New state income tax puts job opportunities at risk

Elizabeth New (Hovde)
Washington Policy Center

Workers need employers. They need businesses willing to open, expand and hire here. That is why Washington state’s new income tax matters even to workers who may never earn enough to pay it.

Elizabeth New

Beginning in 2028, the law imposes a 9.9% tax on taxable income above a $1 million deduction. I expect future lawmakers to extend this income tax to lower incomes. That would require changes to the law, but history gives workers reason to dismiss assurances that today’s limits will last. More on that in a minute.

Even if Washington state’s income tax never expands to lower incomes, new analysis warns of costs for workers as the law exists today: fewer jobs, less investment and fewer new employers.

“Washington’s tax gamble: An evaluation of Washington’s income tax hike,” a study from The Buckeye Institute and Washington Policy Center, projects approximately 7,800 fewer full-time-equivalent jobs in 2028 than the state would have without the tax. By 2036, that employment gap grows to approximately 18,800.

Washington state workers already face a challenging job market. In August 2026, Washington’s unemployment rate was 4.9%, tied for fifth highest among the states and above the national rate of 4.1%. If the income tax reduces hiring and business formation as this report projects, workers could face even fewer opportunities to find work, advance or move to a better job.

The report also projects $3.1 billion less private investment and $3.6 billion less consumer spending in 2028. For workers, the concern is practical. Weaker investment and demand can mean less business expansion and hiring.

A separate sensitivity analysis also estimates approximately 1,400 fewer new employer businesses annually, with roughly 6,100 associated jobs not created each year. That highlights another concern: An employer that never opens cannot offer someone a first job or a better opportunity.

Expansion likely

The modern federal income tax began in 1913 with a 1% normal rate and annual personal exemptions of $3,000 for single people and $4,000 for married couples. Federal income-tax history shows that those initial exemptions were later lowered, extending the tax to people with lower incomes. Washington state’s current income threshold is likewise a policy choice future lawmakers could change.

New Jersey provides a direct example of a falling threshold. In 2020, it extended its 10.75% top rate, already applicable above $5 million, to income above $1 million.

New York lawmakers described a high-income tax increase in 2009 as temporary, lasting three years. The state has continued imposing elevated high-income rates, with its current temporary rates extended through 2032.

Here in Washington state, lawmakers raised the capital-gains tax’s top rate from 7% to 9.9% beginning in 2025. This was a rate increase rather than an extension to lower incomes. The new income tax already imposes a 9.9% rate on taxable income above the $1 million deduction. If high-income taxpayers leave or tax collections fall short of expectations, lawmakers could face pressure to broaden the tax base by lowering the income threshold.

A tax’s reach cannot be measured only by whose name appears on the return. Changes in business investment and hiring can affect people far below that threshold.

Again, workers need employers. A policy that discourages employers from starting or growing here puts workers’ opportunities at risk.

Elizabeth New (Hovde) is the director of the Centers for Health Care and Worker Rights at the Washington Policy Center. She is a Clark County resident.