It’s the day after the election, and while I can’t claim to have special insight into constitutional, legal, or tax advice matters, I thought I’d share this. I hope you’ll find it an interesting speculative exercise and take a look at the tidbits that have led me to these theories. Thinking through potential scenarios made me take much more notice of the uphill battle that will be necessary to get school lunch funding, and I hope you will also take this moment to think about the likely community needs we’ll need to meet.
Legislative session for 2027: Higher income tax projections are the biggest contributor to expectations that the budget has extra $430M to work with, which will surely be allocated to be spent. School lunch funding didn’t pass in 2025, and now even fewer seats are held by the people who’d voted to support it, but advocates still try to get it through. The legislature considers the request by the Association of Washington Cities for progressive taxation options for local taxation, but ends up raising the property tax cap instead in a slightly technical manner. Schools are asking for a levy lid lift since there’s a cliff for “Local Effort Assistance” funding in 2028, and there’s huge pressure on the legislature to fully fund Special Ed, substitute pay, and school utilities with the new revenue.
Summer 2027 – we start seeing lifestyle reporting on “Seattle marriages*” – arrangements for dual earners that create financial partnership and next-of-kin arrangements without a wedding or civil union that would mean both incomes count toward the tax threshold. The lawsuit about the millionaire’s tax has resulted in a decision that overturns the uniformity clause, and Seattle files to have the 2019 court decision about their 2.25% tax on individual income over $250k revisited. Cities start adjusting their tax structures with new rules as allowed by the legislature, and the earliest will take effect in January 2028. There’s been a notable decrease in property values where homes had been $10M+ before, allowing many people to ask for a review of their assessed values, but this means other property owners will pay more. Some retirees who live on the waterfront actually pay less in tax than they did before the millionaires tax took effect, though of course, they’ve taken a big hit on their home values. Washington luxury properties become more affordable to retirees moving here from other high-cost states.
Fall 2027: Charities are seeing slightly lower contributions as previous contributors avoid giving when it might affect their residency determinations, and donors who are staying feel a bit squeezed with the impending property tax hikes and possible city taxation they’re anticipating. Financial projections for millionaires tax collections rise even more. Couples that were thinking about retiring in 2028 or 2029 and selling the commercial property they use for their business may try to sell it in 2027 instead; others who have the assets included as part of the qualified family-owned small business may be unaffected. I think there will be other ways for astute residents to avoid the tax, especially if they get to decide how much their business pays out to them as their income, but I admit that this is a bit fuzzy since every situation is so unique.
Legislative session for 2028: Higher tax revenue assumptions from fall 2027 get baked into spending authorizations. The legislature wants to develop a pied-a-terre or vacancy tax** to support affordable housing (see Rep. Osman Salahuddin talk about this in regards to the Uniformity Clause) and after the Supreme Court decision about the millionaires tax, the path is clear; it will take effect January 2029. The legislature also decides to allow more progressive tax structures for local taxation, though City Councils will have to make those changes locally if they decide to use that flexibility.
Mid 2028: Actual incomes crossing $1M are lower than expected. Since this tax was announced well in advance and some earners shifted that income earlier where possible, numbers in 2026 and 2027 were a bit higher than baseline and numbers in 2028 and 2029 are a bit lower than baseline. Although we can’t tell that it’s a temporary dip, there is obviously a big hole in the budget.
Legislative session 2029: Washington is being squeezed because of a lower bond rating and reduced federal support for essential services, and of course, revenues from the new tax are lower than expected. The affordable housing money generated by the pied-a-terre tax gets raided Seattle-style, but it’s not enough to plug a hole this big. Dropping the tax threshold to $500k is an easy sell to legislators who agree with Cindy Ryu*** about how much money anyone actually needs. It helps that she didn’t pay a political price for floating the idea of setting the threshold at $250k, helps that the initiative against the tax didn’t come close to passing, and seems likely to continue in popularity since the households earning over $250k are a minority of the voting public.
2030: Some people start paying the tax on their pensions in cases where they’ve recently retired but their spouse is still working. It’s harder to fill some of the commercial space, since the tech sector is opening fewer new offices. This is a problem for getting the increased tax revenues that Bellevue is counting on to pay the debt on our new Grand Connection Crossing. There’s no added relief on sales taxes, but the services provided by the state continue to offer significant support to those in need.
By 2032, the budget is still fluctuating between small shortfalls and larger shortfalls. A tiered structure is introduced to keep the tax progressive while extending it down to individuals for income over $150k****, and households at $225k, though at only 6%.. We decide we don’t have to penalize charitable giving from non-residents (max 30 days of presence in state to avoid being considered domiciled here and the pied-a-terre tax are enough), but those habits are already broken, so it doesn’t help much. Millennials and Gen Z who remember the rhetoric about the initiative become much more cynical toward politicians, and most retirees know someone who’s paying the tax on their pension.
* My view on the Seattle marriage is that it might be a looser tie, and it would be interesting to see if that turns out better or worse for the unfortunate souls whose relationship dissolution becomes a source of precedent for the courts. I’d love to hear your take on the socio-cultural impacts and legal tradeoffs.
** I’m not sure what this tax will look like. I would think we don’t want to create a registry of people’s immigration status and residences, but you’d create incentives to waste water if you base the occupancy determination on water usage. If poorly structured, it could have a negative effect on housing production (akin to rent control), but it could also add housing to the market more quickly than any other strategy. It’s only capable of unlocking housing availability in the housing categories that it applies to, which may not include ordinary apartments since those owners are more politically powerful, but I am optimistic that adding any housing inventory will help housing-seekers in general.
*** At least Rep. Roger Goodman (representing Kirkland since 2007) seems to think people in his neighborhood who drive Teslas are “obscenely wealthy” (during the same candidate forum that Osman was featured in).
**** An individual earning level of $125k was the previous Well Washington fund income threshold proposed in Olympia by Shaun Scott, with a 5% tax on any payroll above that amount. SB 5796 put the threshold at $176,100.
General caveat that I also don’t know that certain people in the other Washington won’t tank the value of the dollar for funsies, and that would make all these tax possibilities way more complicated too.
I should also include a bit about the B&O tax exemptions – I’m not sure if they are enough to encourage anyone to start a business, since I think it’s only up to $250k or $300k or $600k (more research needed) of gross receipts, but we should be able to see if there are effects on business formation from Seattle’s exemption for businesses with gross receipts under $2M (which may save businesses there up to $13,160).
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