Washington’s proposed state income tax on earnings above $1 million threatens to undermine the progress and stability of minority-owned businesses at a time when our state’s entrepreneurial diversity is finally gaining momentum.
As co-chair of the Seattle Ethnic Chamber of Commerce, I’ve seen firsthand how tax policy shapes opportunity in our communities. Introducing this new tax will disproportionately burden many minority entrepreneurs whose business income flows directly to personal tax returns, turning what appears as “high earner” income into a tax hit on revenue needed for payroll, business growth, and survival.
Recent data underscores what’s at stake. According to the U.S. Small Business Administration’s 2025 Washington profile (based on 2022 Census figures), minority-owned businesses (including Hispanic, Asian, Black, American Indian and Hawaiian owners) represent a growing share of our economy. Roughly one in five businesses statewide qualify as minority-owned with employer firms showing around 32,000 minority-owned businesses out of roughly 140,000 total employer businesses (approximately 23%). Hispanic owners alone account for 8.3% of businesses despite comprising 12.7% of workers, while Black-owned businesses number around 2,700–3,000 statewide, often operating on slim margins in competitive sectors like services, retail, construction, and food.
Consider the types of businesses that make up Washington’s economic backbone. Businesses like a home-based consultant, a three-person landscaping crew, an auto repair shop with five mechanics, a food truck operator, a family-owned restaurant employing 25 people, a construction firm and small manufacturer. Many of these operate on thin margins. A year that appears strong on paper may be followed by equipment purchases, lease increases, insurance adjustments, or unexpected downturns.
Economic stability is key for business success and when the state introduces new taxation policy so damaging, business owners get nervous.
These enterprises are vital community anchors, providing first jobs, sponsoring local events, and fostering economic mobility in underserved neighborhoods. Yet many operate with thin profits after covering Business and Occupation taxes (a gross receipts levy regardless of profitability), workers’ compensation, rising rents, insurance, and regulatory costs. A year of strong revenue might fund equipment upgrades or hiring, but it also triggers personal income taxation under this proposal. The $1 million threshold sounds high, but for net business income that flows through to the owner’s personal return, it captures gross business receipts, minus deductions, often hitting owners of successful mid-sized firms.
The impact is amplified for minority entrepreneurs, who already face barriers like limited access to capital, higher denial rates for loans, and concentration in high-risk industries. When marginal tax burdens increase, business owners have limited options. Absorb the cost, raise prices, reduce hiring, slow expansion or reconsider location.
National studies show minority-owned firms are more vulnerable to tax increases because they reinvest heavily in growth rather than personal wealth accumulation. In states with income taxes, such burdens have slowed minority business formation and expansion by reducing retained earnings for wages, marketing, or resilience against downturns.
Washington competes with non-income-tax states like Texas, Nevada, Florida and Idaho, which aggressively recruit diverse entrepreneurs with promises of predictability. Adding a 9.9% layer above our already high businesses taxes and other burdens risks pushing mobile capital and talent elsewhere, disproportionately affecting minority owners building generational wealth.
This isn’t about protecting the ultra-wealthy; it’s about preserving incentives for all entrepreneurs. History shows narrow taxes expand over time. Today’s millionaire threshold could become tomorrow’s minority business owner’s squeeze. This debate should not divide Washingtonians along partisan lines. It should center on one question: What policies best preserve economic growth, job creation, and upward mobility over the next generation?
Washington’s economic engine thrives on opportunity for everyone. A new income tax risks stalling the very diversity that strengthens us. We must choose policies that accelerate growth and help our communities, not throttle them.
Mike Sotelo is a prominent Pacific Northwest business leader. He is the president of the Ethnic Chamber of Commerce Coalition.
