The National Federation of Independent Business (NFIB) launched a campaign on October 6, 2026, backing Initiative 645, a proposal to repeal Washington’s new income tax. The group’s campaign highlights small-business owners’ opposition and their concerns about relocating.
The campaign includes digital advertisements, a website and billboards, with signs along I-5 in Tacoma and near the Idaho border. Patrick Connor, the federation’s Washington state director, said 98% of member business owners polled opposed the measure during debate in the 2026 legislative session.
Owners have raised the prospect of moving. Connor also pointed to vacant storefronts around the state, while an economic study cited by the campaign forecasts future losses rather than measuring effects that have already occurred.
The levy reaches business owners who report earnings personally
Senate Bill 6346, called the “millionaires’ tax,” became law after Gov. Bob Ferguson signed it on March 30. Democratic majorities in the Legislature passed the measure. It sets a 9.9% rate on annual earnings above $1 million, applying to income over that threshold starting in 2028. The first payment would come due in 2029.
The federation describes the law as a $4 billion annual levy. It also cites a separate package of $9.5 billion in business tax increases approved by the Legislature in 2025.
Connor’s objection centers on pass-through firms. About 85% of small-business owners report business income and expenses on personal tax returns, he said, so the levy could reach earnings from those businesses. Connor said that money could otherwise go toward employee pay, benefits or investment.
He contrasted the treatment of those owners with corporations. “Wall Street gets a pass while Main Street gets a tax,” Connor said in the campaign’s October 6 release, arguing that the law targets owners who report earnings on personal returns while exempting large businesses organized as C corporations.
The cited study forecasts job and spending losses
The federation points to a report by the Washington Policy Center and the Buckeye Institute. The authors estimate possible economic effects if the levy stays in place. They are projections, not recorded losses.
| Projected effect if the levy remains | Estimate in the report |
|---|---|
| Washington jobs in 2028 | Nearly 8,000 fewer |
| Jobs and new businesses each year | 6,100 fewer jobs and 1,400 fewer new businesses |
| Goods and services | Almost $5 billion less in 2028, rising to $8.3 billion less by 2036 |
| Consumer spending in 2028 | $3.6 billion lower |
| Business investment in 2028 | $3.1 billion lower |
The report’s overall estimate is 18,000 fewer jobs in Washington if the law remains. Connor called it evidence of losses small-business owners had warned about and said owners overwhelmingly back the repeal campaign.
Connor and three owners describe relocation concerns
Connor said members have discussed moving to Idaho, Oregon, Arizona, Texas, Florida and other states, citing tax and regulatory policies they view as more welcoming. “We are hearing directly from our members who are looking at moving across the border to Idaho, Oregon, or to Arizona, Texas, Florida, and other states who have got not just tax, but regulatory policies that are more welcoming to small businesses,” he said.
He said some members have already left. “There are more and more vacant storefronts across main streets, across the state,” Connor said. He added that the state has already seen some members pack up and go.
Lois Cook, whose America’s Phone Guys is based in Vancouver, WA, said the company is actively considering a move. She cited the 9.9% levy on top of the B&O tax, saying the combined costs could limit raises, hiring and growth. “Unless I-645 passes, we may need to leave to survive,” Cook said.
Larry Nicholas of Accurate Lock & Security in Bellingham, WA, said businesses like his face the levy as larger firms and wealthy individuals scale back or cancel projects. Paul Agather, whose Parts Wholesalers is in Spokane, WA, said his company already loses customers to Idaho amid Washington’s cost of living and doing business. He warned that the new charge could widen the gap with competitors across the state line.
Supporters defend the levy while opponents warn of broader reach
Sen. Manka Dhingra, D-Redmond, argued in a recent debate that the revenue could support healthcare and education. She connected that need to healthcare funding cuts by the Trump administration, saying, “We have people that are going to be dying because they don't have access to healthcare.”
Connor said the law does not guarantee additional funding for either service. He said Democratic majorities rejected amendments that would have directed the revenue to specific uses. “There's absolutely no guarantee that we will see meaningful increases in healthcare or education,” he said.
April Sims, who leads the Washington State Labor Council, AFL-CIO, said repeal advocates were “trying to scare folks into giving a handful of the wealthiest people in our state a $13-billion tax break.” She described a change involving the retirement exemption as “a technical fix. to bring this new millionaire's tax in alignment with IRS regulations.”
Sims said the law also includes what she called the largest small-business tax break in the state’s history. She cited an expansion of the working families tax credit to nearly a half a million more households, the removal of sales tax on shampoo, toothpaste and conditioner, and free lunch and breakfast for schoolchildren.
The law does not bar future Legislatures from lowering the threshold. Washington state Rep. Cindy Ryu said in a recent debate that she would eventually like to reduce it to household net incomes around $250,000. Ferguson has said he would veto such an attempt.
Former congresswoman Jaime Herrera Beutler, who supports the initiative, told TVW’s The Impact that lawmakers have called for lowering the threshold and that legislative leaders have not addressed those calls. She also argued the law removed an exemption that protected retirement checks for teachers, firefighters and other state employees. “It's important that folks understand this is also a retirement tax,” she said.
Herrera Beutler said small- and medium-sized businesses employ half of the Washington workforce and would feel a greater effect than large corporations. Sims disputes the repeal campaign’s account of who benefits, describing the law’s small-business provisions and household tax changes as part of its package.
Voters will decide whether the law stands in the fall election. A separate challenge remains pending in the courts, leaving another legal test ahead for the measure.
