(The Center Square) – Sounding the alarm for Washington state charities, the CEO of Seattle Children’s recently penned an opinion article raising concerns about Washington’s new income tax having a potentially devastating impact on charitable organizations.
Dr. Christopher Longhurst warned that the donation cap in the income tax would make it harder to get the large donations that are often critical to providing care for seriously ill children.
“Capping the state charitable deduction at $100,000 in Washington creates a strong disincentive for high-impact philanthropy, ultimately hurting the communities and organizations that rely on charitable support,” wrote Longhurst in a Puget Sound Business Journal piece.
Built into the income tax is a deduction cap on charitable giving donations of $100,000 in Washington.
Todd Myers, Washington Policy Center’s Vice President for Research, has some insight in this area, as he used to run a statewide charity for people who couldn’t afford prescription medicines.
He told The Center Square their small staff worked the sometimes-long hours necessary to help people get the medicine they needed to survive, and suggested imposing a one-size-fits-all approach makes it difficult or impossible for charities to meet the changing demands of helping people who are suffering.
He said the income tax bill limits on deductions could be devastating.
“With a very high deduction for charitable contributions, people could say ‘hey I donated this money to Children’s Hospital, a major grant to the arts or other things and therefor I don’t have to pay taxes on that."”
“Olympia doesn’t want that. They want the money. They think they should get the money rather than the taxes being deducted for charitable contributions,” said Myers.
In a WPC article Myers pointed to IRS data that show that in 2022 “Washington was already losing more high-income taxpayers than 45 other states. And real estate analysts are predicting that Washington state will have the largest “downward forecast” in housing prices in 2027 due to a huge number of people putting their house up for sale.”
Myers suggested if voters reject I-645 and the income tax remains in place, the legislature needs to address charitable payroll and overtime rules and allow the threshold for donor contributions and deductions to be lifted.
The Washington State Minimum Wage Act and minimum pay and overtime rules from the Washington State Department of Labor & Industries, require a guaranteed salary that will also apply to workers at charitable organizations.
The final 2028 salary threshold will scale directly based on whatever the statewide minimum wage is adjusted for inflation that year.
That salary is projected to be around $93,000.
So, an employer would have to pay that salary, or if paying a lower salary, compensate the employee for all overtime hours.
“The legislature has to fix that independent of what happens with the income tax. If the income tax is not repealed, they need to fix that threshold as well so that donors can make those very large capital investments that are so necessary for Seattle Children’s and other things like that….otherwise charities are really going to get socked,” Myers said.
The Center Square reached out to NO-645, the main political action committee urging voters to reject the income tax repeal, for comment on this story, but did not receive a response before publication.