​Earlier in this series, we explored why Washington lacks a personal income tax and reviewed its basic pros, cons, and design options. In this final part, we show how various income tax models might work in practice. These scenarios aren't predictions, but simple examples to help businesses and communities consider how different choices affect jobs, investment, family budgets, and local services.

 
In a flat rate model, everyone pays the same percentage on taxable income above an exemption. For example, the state could tax income over $20,000 at 4 percent. Someone earning $50,000 would pay about $1,200 in tax. Someone earning $200,000 would pay more in total, but still the same 4 percent rate. This approach is easy to understand and simple to administer. It offers predictability for small business owners whose profits are taxed as personal income. The main trade-off is fairness: lower- and middle-income households pay a larger share of their income than high earners, unless the state provides large exemptions or credits. The tax could produce stable revenue for schools, roads, and public safety, but might increase pressure on moderate earners.

 
A progressive tax uses tiers so higher incomes pay higher percentages. For example, the state might tax the first $50,000 of taxable income at 2 percent, $50,001 to $250,000 at 5 percent, and above $250,000 at 8 percent. A worker earning $40,000 would pay about $800. Someone earning $300,000 might pay around $15,000 across the three brackets. This structure eases the burden on lower and middle-income individuals and can boost revenue for community needs. However, high-earning individuals and business owners may face higher bills and change how they invest, hire, or operate. The tradeoff is greater equity and flexibility for public investment, at the cost of more complexity and potential competitiveness concerns.

 
A business-friendly design focuses on protecting job creation and investment. The state might exempt a set amount of pass-through business income, apply a lower rate to small business profits than to wages, or offer credits for training workers, investing in equipment, or operating in underserved areas. This can make the tax climate more attractive to employers, potentially encouraging expansion and hiring in Washington. At the same time, if the state gives too much relief, it may not collect enough revenue to support schools, transportation, and other services. The burden could shift to wage earners or to other taxes, and smaller firms without tax experts might not benefit as much from complex credit programs as larger companies do.

 
An aggressive income tax design combines high rates and a broad base. Under this model, the state taxes wages, business, and investment income—including capital gains—at a higher top rate, such as 10 percent, with fewer exemptions. The goal is to generate steady revenue for major investments in education, infrastructure, health care, and social support. Lawmakers might pair this with deep cuts in other taxes, such as sales or B&O taxes. This can create a more robust public system and improve long-term business conditions, such as better roads, broadband, and workforce skills. The risks are higher: businesses and top earners may be more sensitive to costs and could scale back or relocate, and a downturn could strain the state budget.

 
Comparing these four approaches underscores key tradeoffs: Flat-rate systems prioritize simplicity and predictability but tend to shift costs to lower- and middle-income households. Progressive systems emphasize fairness and boost community resources, yet introduce complexity and draw concerns from high earners and some businesses. Business-friendly models favor growth and job creation, but can shrink the tax base and challenge notions of equity. Aggressive designs pursue ambitious public service gains, but heighten economic and fiscal risks if revenues dip.
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For businesses and communities, key questions arise in every scenario. What income is taxed, and at what rates? How large are exemptions and credits, and who benefits? How will the state phase in changes and adjust other taxes, such as sales, property, or B&O? Most importantly, how will leaders show that new revenue visibly improves schools, infrastructure, and quality of life? Clear answers help employers, workers, and residents judge which model fits Washington’s economy, competitiveness, and community goals. Tools and worksheets that let people input their own numbers can make these choices more concrete and support productive discussion about the path forward.

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References
“Washington State Taxes: Income, Property and Sales.” AARP.
“Income tax – Washington State Department of Revenue.”
“How Washington State Doesn’t Have an Income Tax: The 1930s Campaign for Tax Reform and the Origins of Washington’s Tax System.” University of Washington.
“Washington may not have an income tax … but we pay more than you think.” Washington Policy Center.
“Washington state Democrats look at imposing income tax on higher earners.” Washington State Standard.

• ​This article was written with contributions from AI to organize the information and improve its readability.

The design of a potential statewide income tax for Washington centers on critical choices that will ultimately determine the tax’s effects on residents, businesses, and the state’s future. These key decisions include setting tax rates, defining which incomes are taxed or exempted, handling business income, and determining revenue allocation. While previous articles examined Washington’s absence of a personal income tax and outlined key arguments for and against it, this article focuses on how specific design decisions shape whether an income tax would strengthen or hinder the state’s economic and social well-being.
 

When analyzing state tax policy, a central decision is defining the tax rate structure. Lawmakers must choose between a flat tax, where all pay the same tax percentage on taxable income (e.g., 4 percent), and a progressive tax, which imposes lower rates on lower-income households and higher rates on higher-income households (e.g., 2 percent at the bottom and up to 8 percent at the top). Additionally, policymakers must determine which types of income are taxed, such as wages, investment income, business profits, and capital gains. Importantly, a broader tax base enables lower rates, while a narrower base typically requires higher rates to generate equivalent revenue.

 
Other essential choices include exemptions, credits, and handling business or corporate income. States may exempt Social Security or retirement income, or exclude income below a threshold. Tax credits can offset costs for families or low-wage earners. Lawmakers may partly exclude pass-through business income or apply lower rates to support hiring and investment, and decide whether to tax corporate profits at the business or individual level.

 
The core issue is how new tax revenue will be allocated. Directing income tax dollars to areas such as K-12 education, higher education, workforce training, transportation, public health, or local services could yield tangible benefits. If communities observe improvements in schools, roads, and public safety, public trust in the tax system may increase. Conversely, if the income tax merely replaces other taxes without noticeable advantages, residents and employers may question its value. For businesses, allocating tax revenue to workforce and infrastructure development could offset some of the tax's cost.

 
All these choices involve trade-offs that shape Washington’s business climate and quality of life. For example, higher tax rates or fewer exemptions could raise more revenue for public services but would increase taxpayer burdens and might discourage businesses from expanding or relocating to the state. On the other hand, more exemptions and credits could protect groups like small businesses or low-income residents, but may require higher rates for others or reductions in government spending. A simpler tax system is easier for taxpayers to understand and comply with, though it is less customized to the diverse needs of individuals and businesses. A more detailed system, while potentially fairer by addressing specific situations, can be harder to administer effectively.

 
Designing a statewide income tax goes beyond choosing a rate; it requires lawmakers to make targeted decisions that will decide whether such a tax advances or undercuts economic vitality, fairness, and community strength in Washington. An effective system can enhance tax fairness, provide stable funding for essential services, and foster long-term growth. In contrast, a poorly structured tax could raise costs, dampen investment, and erode public trust. The debate is not just about whether to implement an income tax, but how to design it so it delivers tangible benefits and strengthens communities statewide.

• This article was written with contributions from AI to organize the information and improve its readability.

Washington adopted two important land division laws in 2025, which aimed to speed up housing production and make local reviews more predictable. One law updates how cities regulate “unit lot subdivisions.” The other creates a simple process for residential lot splits within cities. Together, they set clearer standards, shortened review steps, and informed cities when they must update their codes.

SB 5559: Clearer rules for unit lot subdivisions
SB 5559 adds detail to the 2023 law, which first required local governments to allow unit lot subdivisions. The new law narrows down the scope of who must comply. Only cities and towns in counties that plan under the Growth Management Act must adopt these rules. Counties and non-GMA jurisdictions are not required to do so.

The bill sets the timelines. Cities that owe a comprehensive plan update in 2027 must include unit lot subdivision provisions in that update. All other affected cities and towns must adopt the required regulations within two years of the bill’s effective date (May 20, 2025).

SB 5559 also adds definitions for “parent lot,” “unit lot,” and “unit lot subdivision,” and defines what “clear and objective” standards mean. It requires prominent informational notes on recorded plats, including the original application number and warnings regarding any limits on future development. Purchasers must be notified of the legal status of a unit lot subdivision by June 30, 2026.

The local review must be administrative. Cities cannot require pre-decision public hearings or design reviews beyond an administrative check, except where state law, such as the Shoreline Management Act, requires it. Review timelines in RCW 36.70B.080 apply, and neighbors within 250 feet must receive notice with instructions on how to submit comments. Critical areas and other protective regulations still apply.
 
HB 1096: A simple, administrative lot split inside cities

HB 1096 directs cities to create a straightforward process for splitting one residential lot into two, if certain conditions are met. The decision is made administratively by the planning director or a designee, using clear and objective standards. The lot split can be reviewed simultaneously with a residential building permit for either single-family or middle housing. Lots created under this process are exempt from the detailed middle housing requirements of RCW 36.70A.635.

The law lists specific conditions. Only one new lot may be created, both lots must meet the minimum size requirement, the parent lot cannot be the product of a prior split under this section, and the site must be in a residential zone. The applicant must propose a strategy to reduce renter displacement if a tenant is affected. Utilities must be available, and access and utility rights must be secured for the number of homes. Lots that are not buildable due to critical areas, shorelines, or similar limits do not qualify for this exemption.

Compliance timelines mirror those of SB 5559. Cities with a 2027 periodic update must include lot split provisions in that update. Other cities have two years from May 20, 2025. Local ordinances adopting these provisions are exempt from SEPA’s administrative or judicial appeals. The Department of Commerce will provide guidance to cities regarding implementation.

Why this matters

For local governments, these laws call for prompt code updates, standardized administrative reviews, and better public notice. For homeowners and builders, the changes open new paths to create additional homes on existing land while keeping reviews focused on clear and measurable rules. The result should be a faster, more predictable process that respects environmental and safety limits.

Washington is pushing for more housing by making land division simpler and clearer. SB 5559 strengthens the unit lot subdivision rules for GMA cities and towns. HB 1096 provides cities with a reliable administrative path to split residential lots when basic standards are met. Both laws set firm timelines and maintain protections for critical areas. To dive deeper into the details and citations, read the original MRSC article: https://mrsc.org/stay-informed/mrsc-insight/june-2025/subdivision-legislation. 
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Public safety is not merely a government service. It is the foundation that allows businesses to open their doors, hire workers, and serve customers with confidence. Our guiding principle is simple and straightforward. Public safety is essential for a high-quality life and secure community. We strive to balance empathy with the need to ensure a safe environment. Collaboration between local communities and service providers strengthens public safety and minimizes negative impacts on businesses. This principle helps us maintain our focus on both people and prosperity.


Safe streets and commercial areas help stores, restaurants, and offices to thrive. When crime is low and emergency response is strong, customers feel comfortable visiting local shops and attending events. Workers feel secure when commuting to and from their jobs. Insurance costs can be lower, property values can hold steady, and neighborhoods can remain active. In the Tri-Cities, this means more foot traffic in our downtowns, steady shifts at industrial sites, and a better experience for families and visitors to the area.


Collaboration is the means by which we achieve this. Businesses, law enforcement, firefighters, schools, service providers, and cities play important roles. Partnerships on issues such as lighting, security design, mental health response, and prevention programs reduce harm before it occurs. These efforts also help avoid rules that place extra burdens on employers without solving the root problems. When we sit at the same table, we find practical fixes that keep people safe and the economy moving.


This guiding principle also shapes how the Chamber evaluates the public policy. When a proposal is made, we ask clear questions. Does it improve safety outcomes in a measurable manner? Does it support fair enforcement? Does it coordinate with local partners? Does it avoid costly mandates that do not match risk? We weigh both empathy and accountability. We support policies that reduce crime, improve emergency readiness, and protect customers and workers while limiting unintended harm to businesses.
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Our message is straightforward: a safe community is a strong economy. By applying this principle, the Chamber works to ensure that public safety efforts are smart, balanced, and effective. We will continue to bring partners together, review proposals carefully, and advocate for solutions that protect people and help local businesses grow.

Washington is famous for not having a statewide income tax. That’s part of our story as a “business-friendly” state, and it is one reason many companies and workers choose to be here.

However, as the state looks for more stable funding for schools, roads, and services, the idea of a state income tax keeps coming back. For the business community, this is not just politics. It concerns costs, competitiveness, and long-term planning.
Here’s a more conversational, big-picture look at what a statewide income tax could mean for Washington’s businesses and local economies.

Why Some Support a State Income Tax

Supporters first focus on stability. Washington relies heavily on sales tax, the B&O tax, and other excise taxes. When the economy slows, people spend less, businesses pull back, and state revenue can drop rapidly. This often leads to budget gaps, rushed fixes, and sudden cuts to services.

A statewide income tax could smoothen these fluctuations by creating a more predictable revenue stream. This can help keep funding steady for schools, roads, transit, and healthcare —key systems that employers depend on. For businesses, fewer budget “crises” can mean more reliable investments in infrastructure and workforce development.

Finally, a new revenue source might give the state more flexibility to rethink other taxes that directly affect employers’ profits. With income tax revenue in place, legislators could have room to adjust the B&O or certain sales taxes. In theory, that could lead to a more balanced mix: less pressure on gross receipts and more focus on the ability to pay, while still funding the services that make it possible to operate and grow in Washington.

Why Others Are Worried
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Opponents focus on costs and competitiveness. A statewide income tax could increase the total tax bill for business owners and high-wage employees. This might cause some companies to rethink where they expand or place key staff. Employers may feel pressured to raise compensation to offset new taxes, which can be difficult for smaller firms with tight margins. Less cash on hand can mean fewer hires, slower wage growth or delayed investments.

There is also the risk that an income tax does not replace much; it just stacks on top of what already exists. If sales, business and occupation (B&O), and other taxes do not meaningfully decrease, the overall tax burden could rise for both residents and businesses. In a competitive landscape where states use tax policies to attract employers and talent, Washington may be less appealing than lower-tax states.

Design and administration are other concerns. A complicated income tax system can be hard and expensive to comply with, especially for small businesses, self-employed workers, and companies that operate in multiple states. Added complexity means more time spent with accountants and less time focused on running the business.

Finally, there is the issue of mobility. High-income individuals and some businesses can relocate. If they decide that Washington’s tax environment no longer makes sense, they may shift to states with lighter tax loads. If enough of them leave, the tax base shrinks, undercutting the stability the tax was meant to create. Local governments might then feel pressured to lean more on property taxes or local fees or cut services. Moreover, a new income tax would almost certainly generate political and public pushback, adding uncertainty to the business climate.

What This Could Mean for Your Business

If Washington adopts a statewide income tax, most businesses will need to revisit their numbers. Cost structures, budgets, hiring plans, and compensation strategies are all on the table. Companies might also take a fresh look at where they locate their offices, where they expand, and how they compete for talent.

However, the real impact would depend on the details. If an income tax came with real relief on B&O or sales taxes and the revenue was clearly invested in infrastructure, education, and workforce training, many employers could see long-term benefits, even if they paid more in one area. Stronger roads, better schools, and a skilled workforce are powerful assets for the country.

If, instead, the income tax simply layered new costs on top of existing taxes or reduced consumer spending, local businesses—especially in smaller communities—could feel the strain of reduced sales. Less disposable income for residents often results in slower retail sales and weaker demand for local services.

The Bottom Line
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A statewide income tax in Washington is not automatically good or bad for business. It is a tool, and like any tool, its impact depends on how it is designed and used.

On the upside, it could stabilize revenue, support fairer tax sharing, and fund public systems that businesses rely on. However, it could raise overall tax burdens, add complexity, and push some employers and high-income residents to look elsewhere.
For the business community, the key questions are simple but critical: Will other taxes really decrease? Will the new revenue clearly support infrastructure and talent? Will the system remain simple enough to manage without overwhelming compliance costs?
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As the debate continues, Washington’s employers should remain at the table. The final design—rates, exemptions, trade-offs with other taxes, and spending priorities—will decide whether a state income tax strengthens the state’s business climate or makes it harder to compete.

​References
“A Guide to Washington State Taxes 2025: Income, Property and Sales.” AARP.
“Washington Tax Rates & Rankings.” Tax Foundation.
“Income Tax.” Washington State Department of Revenue.
“Key Conclusions from the Evaluation of the Current Washington Tax Structure.” Washington State Department of Revenue.
“Are No Income Tax States Better to Live In?” Kiplinger.
“Pros and Cons of No State Income Tax.” SoFi.
“Washington May Not Have an Income Tax … But We Pay More Than You Think.” Washington Policy Center.
“Hidden Costs of Moving to a No‑Income‑Tax State.” Optima Tax Relief.

Welcome to the first part of our blog series on personal income tax in Washington State. In this article, we explore why Washington does not have a statewide personal income tax and what would be required to establish one. We also consider how this tax structure impacts businesses, local communities, and the broader economy. Future parts of the series will take a deeper look at the advantages and disadvantages of introducing an income tax, how much revenue it could generate, and what policy designs might look like.
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Washington is one of the few states that does not tax personal income. Instead, it relies heavily on sales and business and occupation (B&O) taxes. This unusual mix is rooted in old court decisions and policy choices, which shape how both residents and employers experience the cost of government. For business owners, understanding this history is important because any move toward an income tax would change the state’s overall tax landscape.
 
In 1932, voters approved a personal income tax, but in 1933, the Washington Supreme Court struck it down. The court stated that income should be treated as property under the state constitution, which requires uniform tax rates. A graduated income tax, where higher earners pay higher rates, was ruled to be unconstitutional. In response, lawmakers adopted the Revenue Act of 1935 and created the sales, use, and B&O taxes that still form the backbone of state revenue.
 
Consequently, Washington relies more on taxes paid at the cash register and gross business receipts rather than on income or profits. For households, this means that more of the tax load shows up in purchases and fees instead of paychecks. For businesses, especially small ones, the B&O tax can be challenging because it applies to gross receipts rather than net profit. A low-margin firm pays the same rate as a high-margin firm with the same revenue, which can squeeze cash flow when times are tight.
 
If Washington chooses to adopt a personal income tax, it must first address the constitutional barrier. This likely means a constitutional amendment approved by voters. Lawmakers must then decide which types of income to tax, such as wages, investment earnings, or business income, and whether to use a flat or progressive structure. They would also have to determine what exemptions, credits, or deductions to allow, which would influence both fairness and complexity.
 
For the business community, the key questions would focus on costs and competitiveness. How would an income tax interact with existing taxes, such as B&O and sales tax? Would it replace part of those taxes or simply add a new layer? How would it treat pass-through income for partnerships, LLCs, and sole proprietors? Depending on the design, some firms could face higher overall tax burdens, while others might benefit if income taxes allowed for reductions in other areas.
 
Any income tax proposal would also raise broader questions about how to use new revenue. Supporters might argue that it could stabilize funding for education, transportation, and public safety, which businesses rely on. Critics might worry about higher living costs, reduced disposable income, or the perception that Washington is less attractive for investment purposes. In the end, whether Washington keeps its current structure or considers an income tax, the business community will be central to the debate because employers feel the impact of tax changes in both their balance sheets and workforce.
 
As this series continues, we will look more closely at the pros and cons of implementing a personal income tax in Washington, including how it could be structured and what effects it could have on families, workers and the economy. By understanding the history and complexity of this issue, we can have better conversations about the future of our state’s tax system.

Washington’s new law, House Bill 1293, brings important changes to how plastic and paper bags are regulated in Washington, with new fees, penalties, and requirements that will impact both consumers and businesses, especially in regions like the Tri-Cities, where preparation and awareness are key to staying compliant and minimizing disruption.

What Is HB 1293 About?

House Bill 1293 was passed to reduce litter and improve the state’s bag regulations. It increased the fine for littering small amounts of trash from $103 to $125. If someone throws litter from a car or drops it on a state highway, the penalties are even higher.

The law also changes how stores can offer plastic and paper bags to customers. Currently, most stores charge at least 8 cents for each paper or reusable plastic bag. Starting in 2026, this charge will rise to 12 cents for reusable plastic bags. These bags are supposed to be at least 4 mils thick to be considered reusable, but the requirement has been delayed until 2028. Until then, thinner bags can still be used, but there is a catch. From 2026 to 2027, stores will have to charge an extra 4-cent penalty if they give out 4-mil plastic bags. This extra money goes to the state to support recycling and litter control.

The law makes it clear that stores cannot refund bag charges, and receipts must show the exact fee and any penalties. People using food assistance programs, such as WIC or SNAP, do not have to pay bag charges.

Why This Matters for Businesses

If you run a store or restaurant in the Tri-Cities, you must make some changes. Your cash register system must clearly show the new charges on receipts. You must also ensure that your bags are correctly labeled and comply with the state’s rules. This could involve updating supplies, training staff, and informing customers.

Larger businesses might find these changes easier to handle, but small shops could face higher costs and more paperwork than before. Some shoppers may also complain about the extra fees, especially if they are not expecting them.

How It Affects Shoppers

As HB 1293 begins to take effect, businesses and shoppers in the Tri-Cities will see noticeable changes at checkout lines and behind-the-scenes. While the goal is a cleaner environment and more consistent regulations across the state, the transition may come with added costs and confusion, especially for small businesses. By staying informed and taking early action, local businesses can adapt smoothly, and customers can make smarter choices about how they shop. To obtain a full breakdown of the rules and how to comply, visit the Washington State Department of Ecology’s plastic bag ban page at:
https://ecology.wa.gov/Waste-Toxics/Reducing-recycling-waste/Plastic-bag-ban
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References
1.Washington State Legislature. Engrossed Substitute House Bill 1293 – Final Bill Report (2025)
https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bill%20Reports/House/1293-S.E%20HBR%20PL%2025.pdf
2.Washington State Legislature. Engrossed Substitute House Bill 1293 – Passed Legislature Text
https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/House%20Passed%20Legislature/1293-S.PL.pdf
3.Washington State Department of Ecology. Plastic Bag Ban Resources for Businesses
https://ecology.wa.gov/Waste-Toxics/Reducing-recycling-waste/Plastic-bag-ban
4.Washington State Legislature. RCW 70A.530 – Sustainable Packaging Requirements
https://app.leg.wa.gov/rcw/default.aspx?cite=70A.530
Note: This blog article is written for general understanding and does not serve as legal advice. For specific compliance questions, consult the Washington State Department of Ecology or your legal advisor.
This article was written with contributions from AI to organize the information and improve its readability.
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​This three-part series explains how communities, employers, and policymakers can use clear, data-driven tools to discuss affordability and design better programs in Washington.

Each article will break down the core idea in plain language, show how it is calculated, and provide real-world examples of how it guides decisions on housing, wages, and local investment. Today’s focus is on the use of AMI and living wage calculations to drive policies. By the end, you will know what the metric means, why it varies by place and family size, and how it can help leaders match resources to need so families and businesses can thrive

The Area Median Income (AMI) is a benchmark built from what households actually earn in a region and ranked from lowest to highest. The median is the midpoint. Living wages are different. It is a cost-based estimate of what a full-time worker needs to cover basic needs in a place based on local prices for housing, food, childcare, health care, transportation, and taxes. In short, AMI measures income levels in a community, while living wage measures the cost to get by.

As the two metrics answer different questions, they are used in different ways. A living wage helps leaders and employers discuss affordability and the gap between paychecks and basic costs. AMI helps governments decide who qualifies for help, how much help is needed, and where to target the limited dollars. AMI is reported by household size and geography; therefore, a family of four in a high-cost county will have a higher AMI threshold than a single adult in a rural county.

Housing policies rely on AMI every day. The U.S. The Department of Housing and Urban Development (HUD) sets local income limits such as 30, 50, and 80 percent of AMI to define extremely low, very low, and low income, respectively. These limits set eligibility for vouchers and public housing, and they cap maximum rents and incomes in programs such as low-income housing tax credit and the HOME investment partnership program. Cities also peg inclusionary zoning rules, density bonuses, and fee waivers to AMI bands, creating a common and predictable framework for public benefits and private projects.

AMI also shapes the amount of help a voucher can buy. Housing authorities use AMI and local rent data to set payment standards; therefore, families are not locked out of neighborhoods with good schools, transit, and jobs. Without AMI-based standards, the value of a subsidy can fall behind market rents, reducing a family’s real choice of where to live.

Beyond housing, AMI guides community investments and fair lending. Federal block grants target “low and moderate income” areas defined with AMI. Banks are reviewed under the Community Reinvestment Act on how well they serve borrowers and neighborhoods under AMI thresholds. State and local programs use AMI to design anti-displacement tools, home repair aids, property tax relief, and first-time buyer support. Some mortgages and down-payment products cap eligibility at 80 or 100 percent of AMI to help first-time buyers and key workers in costly metros.

AMI is also a monitoring tool. Agencies track how many new homes are affordable at each AMI level, whether wages are keeping pace with local rents, and which groups are being served. If most new units are priced for households above 120 percent of AMI, leaders can adjust incentives to reach the 60 to 80 percent AMI range. Thus, the AMI is a practical scoreboard for progress.
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Bottom line. Use a living wage to ask whether a full-time worker can cover the basic needs of a place. Use AMI to set fair eligibility lines, cap rents, prices in housing programs, steer grants and lending, and measure results. Together, they provide a fuller picture of affordability and access; however, AMI is the standard tool for designing and delivering public policy.

​References

1. U.S. Department of Housing and Urban Development (HUD). “FY Income Limits and Methodology.”
2. HUD. “Housing Choice Voucher Program: Guidebook and Payment Standards.”
3. Internal Revenue Service. “Low-Income Housing Tax Credit (IRC Section 42) Program Guidance.”
4. HUD. “HOME Investment Partnerships Program: Income and Rent Limits.”
5. Board of Governors of the Federal Reserve System and Federal Financial Institutions Examination Council. “Community Reinvestment Act: Interagency Questions and Answers.”
6. Federal Housing Finance Agency; Fannie Mae. “HomeReady Mortgage: Income Eligibility Using Area Median Income.”
7. MIT Living Wage Calculator. “Methodology and FAQ.”

(All sources are official program pages or guidance documents that explain AMI definitions, income limits, and program uses.)
This article was written with contributions from AI to organize the information and improve its readability.
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This three-part series explains how communities, employers, and policymakers can use clear, data-driven tools to discuss affordability and design better programs in Washington. Each article breaks down the core idea in plain language, shows how it is calculated, and provides real-world examples of how it guides decisions on housing, wages, and local investment. Today’s focus is on the Area Median Income (AMI). By the end, you will know what the metric means, why it varies by place and family size, and how it can help leaders match resources to needs so families and businesses can thrive.

The Area Median Income is a simple idea with a significant impact. AMI is the midpoint of household income in a defined area. Half of the households earn more than the median, and half earn less. Federal and local programs use AMI to decide who qualifies for help, how much assistance is fair, and what price or rent limits should be set. In Washington, AMI anchors housing and community development decisions that affect families, builders, lenders, and local governments.

Each year the U.S. The Department of Housing and Urban Development estimates the AMI using federal survey data on local incomes. HUD starts with a four-person “median family income” for each county or metropolitan area. It then adjusts that figure for family size using standard multipliers so that the limits are fair to households of different sizes. HUD also applies technical rules to prevent extreme swings from year to year and to keep areas stable, even when federal metro boundaries change. The result is a set of income limits that programs can confidently use.

The programs translate the AMI into clear bands. Thresholds of 30, 50, 60, 80, 100, and 120 percent of AMI are often observed. These bands have practical significance. Housing Choice Vouchers and public housing use them to determine eligibility. The Low-Income Housing Tax Credit and the HOME program tie tenant incomes and maximum rents to specific AMI levels. Local governments use the same framework for inclusionary zoning, density bonuses, fee waivers, and tax abatements. The use of common AMI bands keeps the rules consistent across projects and agencies.

The AMI also guides how much help a voucher can buy. Housing authorities use AMI and local market data to set payment standards that reflect actual rents. When payment standards match local conditions, families have a better chance of finding homes near good schools, transit, and jobs. The AMI plays a similar role in homeownership efforts. Many down payment programs and special mortgage products cap eligibility at or below a set percentage of AMI to reach first-time buyers and key workers without overspending limited funds.

A major strength of the AMI is that it reflects regional differences within Washington. High-cost areas, such as the central Puget Sound, generally have higher AMI limits than Eastern Washington. This means that an apartment priced for households at 60 percent of AMI in Seattle will have a higher rent ceiling than a 60 percent AMI unit in the Tri-Cities or Spokane. The policy is the same, but the dollar amounts are adjusted to local incomes. This makes the programs more accurate and easier to administer.

Leaders also use AMI as a scorecard. Cities and counties track how many new homes are affordable at each AMI level and compare them to community needs. If most new units serve households above 100 percent of AMI, officials may increase incentives for homes affordable at 60–80 percent. Agencies map neighborhoods using the AMI to target block grants, home repair aid, and anti-displacement tools. Banks are reviewed under the Community Reinvestment Act to determine how well they serve borrowers and areas below the AMI thresholds. Together, these uses focus on measurable outcomes, not just intentions.
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In short, AMI is the common yardstick that turns goals into rules. It sets fair lines for who qualifies, helps price homes and rents at levels families can reach, and keeps programs aligned across jurisdictions. Because the AMI adjusts to family size and local income patterns, it provides Washington communities with a practical way to match resources with need and measure progress over time.

This three-part series explains how communities, employers, and policymakers can use clear, data-driven tools to discuss affordability and design better programs in Washington. Each article breaks down the core idea in plain language, shows how it is calculated, and provides real-world examples of how it guides decisions on housing, wages, and local investment. Today’s focus is on calculating Washington’s living wage. By the end, you will know what the metric means, why it varies by place and family size, and how it can help leaders match resources to need so families and businesses can thrive.

A living wage is the hourly pay a full-time worker needs to cover their basic needs in the place they live. The MIT Living Wage Calculator builds this number from the ground up using local costs for eight essentials and then adds income and payroll taxes. It reports figures for 12 family types and updates them on an annual basis. In short, it estimates what it really takes to get by without public assistance, not a comfort budget or a savings plan.

Here is how MIT calculates it. First, the model totals the annual costs of food, childcare, health care, housing, transportation, Internet and mobile, civic engagement, and other necessities, all adjusted to recent prices. It then estimates federal and state income and payroll taxes using the NBER TAXSIM model and adds those taxes to the family budget. Next, it is divided by the number of working adults in the household. Finally, it converts that annual amount to an hourly rate by assuming 2,080 work hours per year.

In Washington State, the statewide living wage for a single adult working full-time is $26.36 per hour. Because children incur high costs, a single adult with one child would need $47.96 per hour. In a two-adult household with both adults working and no children, each adult would need $17.96 per hour to meet the same basic standards. These statewide figures average county data; therefore, local numbers will vary. MIT publishes county and metro breakouts, so you can check places like King County or the Tri-Cities specifically.

This helps to compare the living wage with the legal wage floors. Washington’s state minimum wage in 2025 is $16.66 per hour, and some cities require higher wages. Seattle’s city minimum is higher, and several other jurisdictions have set their own rates. These laws set the lowest pay employers may legally offer, while the living wage is a benchmark of what it costs to meet basic needs of living. The gap between the two shows how far a minimum wage paycheck may fall short of a basic needs budget in a given location.

Governments use living wage estimates in various ways. Some counties and cities have incorporated living wage rules into their purchasing and contracting processes. For example, King County requires certain contractors to pay a county-set living wage that is adjusted over time. Living wage data also inform impact statements and policy debates about minimum wage changes, childcare support, housing policy, and transportation planning, as these are the cost drivers in the model. Policymakers and analysts use the calculator to test how proposed policies might narrow the gap between actual pay and basic costs.

Economic development and workforce programs lean on the same numbers. Agencies compare typical local wages by occupation with the living wage to determine which jobs reach self-sufficiency and which do not. This lens can guide training priorities, employer outreach, and incentives that aim to create higher-quality jobs. It can also flag “benefits cliffs” when small pay increases cause families to lose support but still do not reach a living wage.

In practice, the MIT calculator is a clear and transparent way to discuss affordability. It does not include savings, debt repayment, or vacations, and assumes full-time year-round work. Still, it provides a consistent baseline that communities, employers, and lawmakers can use to compare places and track whether paychecks are keeping up with the real cost of living. In many household types, the living wage is above the statewide minimum; therefore, policies that reduce major costs or raise take-home pay will have the biggest impact on family self-sufficiency.
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Bottom line: The living wage is a cost-based target and not a legal rule. MIT’s method adds local basic expenses and layers of taxes and converts the result to an hourly rate. In Washington, this translates to approximately $26 per hour for a single adult statewide, with increased needs for parents and variations by county. Leaders use this benchmark to shape contracts, test policy ideas, and evaluate job quality so that families can meet their basic needs where they live. 

​References

• MIT Living Wage Calculator. “What is a living wage and how is it estimated?” Living Wage Calculator
• MIT Living Wage Calculator. “Living Wage Calculation for Washington.” Living Wage Calculator
• MIT Living Wage Calculator. “Frequently Asked Questions.” Living Wage Calculator
• MIT Living Wage Calculator. “Counties and Metropolitan Statistical Areas in Washington.” Living Wage Calculator
• National Bureau of Economic Research. “TAXSIM.” NBER
• Washington State Department of Labor & Industries. “Minimum wage.” Washington L&I
• Washington State Department of Labor & Industries. “Local minimum wage rates.” Washington L&I
• City of Seattle, Office of Labor Standards. “Minimum Wage Ordinance.” Seattle
• King County, WA. “Living wage ordinance.” King County
• King County, WA. “Rules Implementing Living Wage Ordinance 17909 (CON 7-21-PR).” King County
• Washington State Department of Labor & Industries. “Washington’s minimum wage going up to $16.66 per hour in 2025” (News release 24-24). Washington L&I

This article was written with contributions from AI to organize the information and improve its readability.