Washington rolls back some taxes amid new income tax
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Washington lawmakers made big headlines last month by passing a new income tax, but they also rolled back a few taxes they approved last year, including a big estate tax hike.
Why it matters: The new income tax has drawn criticism that it could hurt the state's business climate or push wealth out of state — outcomes the tax rollbacks aim to help prevent.
Zoom in: Senate Bill 6347 lowers the top estate tax rate in Washington from 35% to 20%, undoing an increase imposed last year. The estate tax applies to property transfers when someone dies.
- The top rate affects estates valued at $12 million or more, with the first $3 million exempt from taxation.
- Estates valued at less than $3 million don't pay.
What they're saying: Top lawmakers said the 35% rate was far higher than other states, and could cause people to try to move money elsewhere to evade the tax.
- "In a country where people are mobile, capital is mobile, being an outlier is not usually in our interest," House Majority Leader Joe Fitzgibbon (D-West Seattle) said during a House floor debate last month.
- Senate budget writer June Robinson (D-Everett) said she heard from constituents about the higher estate tax "probably more than any of the other changes that we made last year."
Lawmakers also rolled back some sales tax hikes they passed last year.
- Those rollbacks were included in the income tax bill, and they repeal sales tax increases on services such as information technology support, website development, temporary staffing and live presentations.
- State Sen. Noel Frame (D-Seattle), Senate Democrats' lead on tax issues, told Axios that those tax reductions were "part of negotiations to get votes and garner support" for the income tax.
- "It was a big request from the business community," said Frame, who said she personally did not want to see many of those sales tax increases rolled back.
What's next: The revised estate tax rates take effect in July, while most changes to sales taxes on services will take effect in January 2029.
- Some repeals will kick in sooner for services provided to schools and hospitals, and for live presentations by nonprofits.