Small businesses in Olympia and Tumwater that stand to benefit from a doubled state tax exemption would keep their new break if voters repeal the income tax that pays for it. The catch: someone else would have to foot the $3 billion bill.

Initiative IP26-645, backed by the conservative group Let's Go Washington, would scrap Washington's new 9.9% income tax on earnings above $1 million while preserving the small-business and consumer tax cuts bundled into the same law. As of Wednesday, June 17, the group reported collecting 317,000 signatures, clearing the 309,000 threshold needed to place the measure on the November ballot. The deadline to submit signatures is Thursday, July 2.

For local firms, the law signed by Gov. Bob Ferguson on March 30, doubles the Business & Occupation tax filing threshold to $300,000 in annual gross revenue, according to Seattle Times reporting on the legislation. Businesses grossing up to $600,000 would also get partial relief. The initiative would keep that break intact.

But the income tax is projected to generate roughly $3 billion a year. If voters repeal it, the state would still carry an estimated $570 million in annual costs from the preserved tax cuts and credits. Sen. June Robinson, D-Everett, chair of the Senate Ways and Means Committee, said the measure "would create a massive budget gap for the Legislature to grapple with" and make it "impossible to write a balanced budget without very damaging reductions in other programs and services."

The initiative would also permanently bar state and local governments from ever imposing any tax on individual income, regardless of source. That means Olympia and Tumwater couldn't pursue a local income tax either, locking in the state's current tax structure indefinitely.

Let's Go Washington spokesperson Hallie Herzberg framed it differently: "We're taking out the parts that drive people away from the state and we're keeping the parts that allow them to be successful."

The measure has local roots. On Thursday, June 4, volunteers gathered signatures under a tent outside The Remnant Church in Tumwater, drawing what Spokane Public Radio reported as a couple hundred people in three hours. Denise Icks of Olympia, among the first to arrive, said she wouldn't personally pay the income tax but feared the threshold would eventually drop. "I think it'll get there eventually. That's the intent," she said.

State Treasurer Mike Pellicciotti, a Democrat, has warned the initiative could threaten Washington's top credit rating. Gov. Ferguson said in a May 29 post on X that he looks forward to voters having their say, noting the tax package included expansion of the Working Families Tax Credit and small-business relief.

The initiative has not yet formally qualified for the ballot. If it does, the Office of Financial Management will prepare a fiscal impact statement, and voters will decide in November whether to keep the income tax or erase it while retaining the $570 million in annual benefits it funds.