9.9% is the new marginal tax rate threshold that has set Washington’s small business community on edge, following the enactment of legislation that targets high-earning salaries. While Governor Bob Ferguson signed the "Millionaire's Tax" into law on Mar. 30, the fiscal reality for local enterprises remains shrouded in uncertainty as they look toward the 2028 implementation date.
Divergent Priorities in Olympia and Yakima
The legislative divide was on full display Wednesday when Regional Director of the Small Business Administration (SBA) Kelly Chambers convened with the Yakima Chamber of Commerce. Joined by Chris Corry of the Washington Policy Center, the meeting highlighted a growing friction between state-level tax policy and the operational realities of local business owners. Chambers characterized the current environment as a "crossroads," noting that her office hears daily reports of increasing difficulty in maintaining local commerce.
Follow the money and you find a significant gap between the administration’s stated goals and the anxieties of those on the ground. Governor Ferguson has consistently argued that the tax revenue is intended to provide relief for working families and small businesses. In December, when he first announced support for the measure, he emphasized that a substantial portion of the collected funds would be cycled back to make life more affordable for the state’s residents. However, the direct impact on the tax base—specifically those earning over $1 million—is what has triggered the current pushback from the business sector.
The SBA’s Lending Role Amidst Policy Shifts
As the state prepares for the 2028 rollout, the SBA is attempting to stabilize the lending environment. Chambers underscored that the agency’s primary utility lies in its loan guarantee program, which mitigates risk for private lenders. By guaranteeing loans, the SBA enables banks to extend credit to businesses that might otherwise be deemed too risky in a tightening economy. The tension arises because the efficacy of these loans depends heavily on the borrower’s ability to project future cash flow, a calculation now complicated by the looming 9.9% levy on top-tier salaries.
If the goal is to make business ownership more affordable, as the Governor contends, the state faces the challenge of proving that the redistribution of tax revenue will outweigh the potential capital flight of high-earners. Small business owners in regions like Yakima are watching closely to see if the promised "affordability" translates into actual tax relief or if it remains a rhetorical offset to the new tax burden.
What This Means for Your Wallet
For the individual investor or business owner, the next reading of credit availability through SBA-backed channels will serve as the primary indicator of economic health in the lead-up to 2028. If lending partners become more cautious regarding firms managed by high-earners, the cost of capital could rise long before the tax officially takes effect. Monitor whether the state legislature introduces specific mechanisms to protect small business liquidity, as the gap between Ferguson’s promise of affordability and the new tax liability will dictate the investment climate for the next two years.
